REMEMBER the “AmBank ma” tagline?
Many years ago, it resonated with the Malaysian population who were looking to finance their vehicle purchase. But ask the younger generation now, and they have probably never heard of it.
The stickiness of the tagline was probably the reason AMMB Holdings Bhd’s (AmBank) had the biggest slice of the hire purchase (HP) loan business more than a decade ago.
Over the years, it has loosened its grip to sit in fourth position in terms of market share of HP loans.
Making up lost ground is important as HP loans are said to provide relatively higher margins than mortgage loans.
Recognising the importance of growing its HP loans, AmBank group chief executive officer Jamie Ling tells StarBizWeek that the group hopes to regain pole position in a segment over time.
“We are no longer No. 1. But we are trying to gain back the market share, by going back to the dealers.
“I think we are number four now. AmBank was known as a HP bank. We had brand recall. Why don’t we just stick to what we are known for and to be very good at it,” says Ling, who took over the helm on Nov 23 last year following the retirement of Datuk Sulaiman Mohd Tahir.
He adds that HP loans made up about 10% of AmBank’s total loans worth some RM15bil currently.
To regain the top spot is easier said than done, as the HP loans segment can be very competitive, with many non-bank lenders taking a piece of the pie in the used car financing market.
But Ling has plans on how to regain market share in the HP loans segment and he has started the ball rolling a few years ago.
“We have to build up our dealer network. It is still an agency model. Dealers are our main source of securing customers for HP loans,” he says.
Ling adds that AmBank has been growing this segment in the last three years after experiencing a decline in this segment a decade ago.
“Ten years ago, this HP business was too concentrated and difficult, therefore they went on a reduction strategy.
“When you do that, your partners, that is, the dealers will go to other banks. So it took about three to five years to sort of gain back the dealer network while competing with other banks, which stepped in,” he explains.
Ling says AmBank is now back on the Perodua dealer network.
As for Proton cars, he shares that it needs to adopt a different approach to get on the dealer network as the national carmaker is “well-banked” with China’s Geely Automobile Holdings as its major shareholder.
Proton is 49.9% owned by Geely while its Malaysian partner DRB-Hicom Bhd owns the remainder.
“Trying to get in there (Proton), it will be more on the supply chain side, where we help them set up a plant in Tanjung Malim. From that relationship, you can then say ‘hey, give us a chance into your main dealers.’“Those are the competitive positioning for us on how we are able to bank an auto manufacturer, which is very well banked. We have to get into their supply chain,” he adds.
While re-establishing itself as the market leader in the HP loan segment remains key, Ling does not expect a surge in new car sales.
“Car registration or new car sales probably would have peaked when you have all these duty waivers and all that (during Covid-19 pandemic times). The next refresh cycle would be in three to five years time.
“We don’t expect a lot of new car registrations and I think electric vehicles that are priced competitively may be the switch but people are also not sure about electrification yet.
“You must be there so that if it booms, you are there to capture it. But at the moment, the switch from combustion to electrification is still at a very early stage and the new car sales will refresh in three to five years, I don’t think there will be a fast growth there (in car loan),” Ling says.
He believes this is an important sector for the banking group to be in given that industrialisation is also automotive-led.
For now, analysts, too, are not painting a rosy picture for HP loan growth this year.
CGS-CIMB Research has projected a slower loan growth of 4% to 5% in 2024, noting a potential slowdown in automotive loan growth from 9.7% in 2023 to low single-digit rates this year, on the back of expected weaker car sales.
The local automotive sector is expected to see lower sales volume and higher operating costs as competition intensifies.
As it is, Hong Leong Investment Bank Research is keeping its “neutral” call on the sector as the current order backlogs have continued to soften, and expect earnings for the sector to dip this year due to slower sales volume in coming quarters.
It also noticed more aggressive new launches by new Chinese original equipment manufacturers (OEMs) with attractive pricings, which will provide stiff competition towards incumbent OEMs.
Recently, the Malaysian Automotive Association reported a total industry volume (TIV) of 68,700 units as at May.
The TIV number showed a robust growth of 7.4% year-on-year and 7.9% year-to-date to 328,900 units, mainly driven by improved supply chain and deliveries for Perodua models for the year – the national OEM still has relatively high backlog orders.
As AmBank turns 50 next year, it is certainly looking to tick the right boxes; identify which of its pioneering products could still be relevant but with a brand refresh to have a modern representation to capture the younger generation market.
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