Synopsis:

This case is about SnF Bank, a locally incorporated bank, that is listed on Bursa Malaysia. Started its operations in January 2001 following the merger of two other banks, currently SnF Bank is a wholly owned subsidiary of SnF Holdings Berhad after the merger of the bank and SnF Finance Berhad in 2005. It offers a wide range of retail and corporate banking services to customers through more than 100 branches nationwide.

Historically, SnF Bank had very high NPLs. It was reported that in 2005, the bank gross impaired loans were RM3 billions. Nevertheless, it managed to reduce the figure to RM865 millions after some write offs and loan recoveries. Hire purchase loan had become an important portfolio in the bank. Hire purchase loan constituted about 30 percent of the bank's total loan portfolio and 60 percent of its consumer loan. Specifically, the bank’s default account (defined as 2 and 3 months in arrears) was 18.3 percent in 2007 against industry average of 10.0 percent, while the NPL ratio was 4.81 percent which was higher than the industry average of 2.7 percent.

In view of the inherent risk of hire purchase loan, the bank had emphasised on asset quality and had undertaken a transformation in more stringent credit underwriting and change of focus from financing used cars to new higher end cars (Yap & Lee, 2012). The management was determined to reduce its NPL further to be better than the industry. These changes had yielded favourable results for the bank in term of NPL ratio. As of March 30, 2012 the Bank had successfully managed to achieve a net NPL of 0.8 percent. As of December 31, 2013 the net NPL of the bank was 0.71 percent and the default rate had decreased to only 5 percent compared to 18 percent in 2007.