Titien Ahmad in Kuala
Lumpur talks to Peter England, head of retail banking at Malaysia’s
CIMB Bank. After a relatively strong trading year, he says he is
now looking to turn CIMB into a pan-Asia regional retail banking
player – and that Malaysia should escape the worst of the global
financial crisis
Speak to any Malaysian banking executive and you would not know
that the world is going through a major financial crisis.
Conversations are more focused on endless traffic woes and the
peccadilloes of local politicians.
Go deeper with GlobalData
Official estimates of GDP growth in 2009 are still optimistic,
at between 3 and 5 percent. The Malaysian banking sector has been
relatively sheltered from the crisis with 90 percent of the banks’
investment in domestic instruments and assets.
Malaysia’s CIMB Bank, the second-biggest after
Maybank, is targeting deposit growth of 18 percent in 2009, a bold
target compared to those in other markets that are weighed down by
the current financial crisis. Peter England, CIMB’s head of retail
banking, is optimistic.
“For us there has not been any impact
actually,” he said.
“Last year, total group profits after tax went
down to just above MYR2 billion [$563 million], but after
accounting for some one-off gains in 2007, and some one-off
expenses in 2008, the drop in profits was just 2.6 percent. This
was because the consumer bank performance improved significantly to
fill the gap from the drop in investment banking profits.”
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataInvestment banking income for Malaysian banks
in 2008 dropped by up to 60 percent as the local capital market was
hit by developments in the global economy.
When England joined CIMB, he had a mandate to
build a consumer banking franchise as a counterweight to CIMB’s
better-known investment banking business. “We set out to really
lift consumer banking and have started to generate strong profits
to fill the times when investment banking profits are not as good.
We have since achieved it as last year, 25 percent of profits came
from retail and in the last quarter it was 35 percent. Two years
ago consumer banking was a loss-making division.”
Commenting on the relatively cushioned impact
of the crisis on Malaysian banks, he said: “Everyone, and not just
CIMB, is waiting for the ball to drop. We expected delinquency and
NPLs to rise but it has been a spike one month and back to normal
the next. We keep expecting something to happen but it hasn’t.
“The general feeling is that it all comes down
to how long this recession will last. We are more likely to see
stress next year if the recession is going to be prolonged. If
things improve and settle down a bit, Malaysia should be fine. To
me there is no point to try to predict economic growth – all you
can do is do the best you can and ride it out.”
He told RBI that, in his opinion, while growth
in Malaysia has been more gradual than in Singapore and Hong Kong,
where stock markets have gone up and down “like a roller coaster”,
Malaysian economic output has been more steady, at least since the
economic crisis in the late 1990s.
“Property prices [in Malaysia] inch up 5
percent to 10 percent here or there and the stock market has gone
up around 30 percent over that period so if people need to unwind
their position, it’s not as bad,” he added.
“I think the countries that were badly
affected are those that got way out of touch with reality, with
property prices and multiples on stock. Obviously, having said
that, if the whole world stops buying palm oil, petroleum and
electronics, Malaysia will be affected.”
Bullish on growth
prospects
England continues to be bullish on
growth prospects for the bank in 2009. “If you look at our
strategy, I don’t think we have actually changed. 2008 was a
fantastic year with strong loans growth and good, strong deposits
growth. Loans growth for retail was about 27 percent and deposit
growth about 19 percent so that was good,” he said.
“The only thing that suffered in 2008 was
wealth management as it was very hard to structure suitable
investment products for clients. So we sort of slowed down in terms
of product launches, especially structured products, towards the
end of the year.”
England, a veteran of the Malaysian banking
industry having worked for two local banks and one foreign bank in
the country before joining CIMB, believes it will be business as
usual this year. He says his team will still push loan growth as
long as the quality of credit is there.
“We see that the credit quality of
applications has dropped but we are still getting the lion’s share
of the mortgage business. Even though the quality has dropped we
have still kept our standards where they were, we haven’t made them
tighter or looser, and yet the numbers are still coming in
strongly.
“The plan for us is still good, solid loan
growth. Deposit growth will be a bit harder because there may be
less money in the system and there are fewer products that could
really attract customers.”
He has launched a number of deposit products
since he joined the bank although the more recent offerings are
targeted at specific market segments. The Air Asia Savers product,
for instance, was a tie-up with a local budget airline offering an
online savings account that offers account holders travel-related
benefits and a complimentary prepaid Air Asia Visa card.
It is harder, he says, to get a migration of
depositors so he has started to look at very specific product
groups. For example, Air Asia Savers was meant to attract a group
of customers that might not have gone to CIMB but think the Air
Asia association makes the product “a bit more groovy”.
“We also had a deposit product called Eco-save
where there were no paper statements. We do not advertise it in
newspapers and are modifying ATMs so customers do not get a
receipt. Every year we will give away 20 basis points of the
balances to eco-friendly activities. Also if you keep more than
MYR5,000 a month we pay you MYR5 for not coming into the bank which
has not been done before.”
He feels that “specific differentiation” is
necessary for new deposit products.
“I don’t think customers care as much with
loans having as many bells and whistles. Our Flexi-loans product
has been wildly successful. They make up about 80 percent of our
business and we just launched an Islamic version of that last
year.”
“Product development in Malaysia has been
pretty standardised around rewards and rates. It is important to
find an angle as there is no point in selling a one-size-fits-all
unless you are in an environment where interest rates are buoyant
and you can pay a bit extra to get people excited,” he said.
Uproar
CIMB has been in the headlines
recently because of an announcement from its CEO offering up to six
months’ unpaid leave to the bank’s employees. It caused an uproar
in Malaysia as the move was seen as a precursor to future
retrenchments.
With unfortunate timing, the closure of 60
branches was announced a few days later. England countered that the
move was part of a branch rationalisation plan since the Southern
Bank-CIMB merger in 2006.
“The branch closures were part of our ordinary
course of business, and we had already decided to do so when we
bought Southern Bank more than two years ago. The last thing you
should do when you merge is to shut down all branches immediately
but there are major overlaps that we are addressing.”
He added: “We need to go to the next level
with our branch transformation exercise. The next phase is service
transformation as it has been a one-horse race focusing on queue
times. Now it is about overall service quality. We are putting CRM
systems in place, have retrained a range of staff and re-defined
the roles. We have also opened branches which do nothing but open
accounts for high-value clients.”
However, the biggest channels for CIMB are
ATMs and CDMs. According to England, 80 percent of branch
transactions go through these channels and investment is likely to
continue. The next major channel will be internet banking and a new
red octopus mascot, Octo, has been making its mark across the city.
He believes that internet will still take precedence over mobile
banking although the bank has recently launched its mobile banking
service.
“Internet banking is a major push for us and
always has been,” England added. “The only place mobile banking has
been hugely successful is the Philippines where everyone uses SMS
and money transfers, but in Malaysia there are too many ways in
which you can do things for you to be sending an SMS through a
complex process.”
Going forward, the challenge for England is to
build a pan-Asia-Pacific regional retail bank. CIMB currently has a
significant presence built through acquisitions in the past few
years in neighbouring Singapore, Thailand and Indonesia.
“We are shifting our mindset from being a
local to a regional bank. We still operate in most areas on a
country-specific basis for retail banking but we are looking at
opportunities for regional synergy,” he pointed out.
“The biggest challenge is translating the
concept of a regional Southeast Asian bank into reality.
Conceptually, that is where we are heading. We have been talking
about it a lot but the challenge is how do we deliver this to the
customers. I think it is a very powerful proposition but the
customers have to feel there is value in being part of a regional
bank rather than a local bank or a big global bank.
“It is a new thought but it is something that
we are now positioned to translate into action and at the same time
remain competitive and successful in the domestic
markets.”
