Business

Tuesday September 1, 2009

Local banks gear up to seize opportunities abroad

BY DALJIT DHESI


PETALING JAYA: With the economy picking up steam, Malaysian banks are marching forward to strengthen their foreign operations to be more competitive globally.

There are six local banking groups operating in 19 countries. Some of them are building their capabilities to boost various business portfolios while others are scouting for immediate opportunities to further expand their reach.

The six are CIMB Group, Malayan Banking Bhd (Maybank), Hong Leong Bank Bhd, Public Bank Bhd, RHB Banking group and AmBank Group.

Kenny Kim says CIMB will would focus on integrating its banks in the region

An analyst with an investment bank said due to the improved economy, the time was right for banks to make further inroads into the region, especially in Indonesia and Vietnam.

“In Indonesia, Malaysian banks can further tap into Islamic banking as this market is still relatively small. Vietnam’s economy is slowly picking up and banks should take the opportunity to enlarge their presence there as there are still not many players,’’ she said.

CIMB Group chief financial officer Kenny Kim said each of its operations in the region had achieved market leadership in various areas.

“For example, CIMB Niaga is dominant in capital market franchise, Bank Niaga is strong in retail and corporate banking and Bank Lippo is a leader in transaction banking.

“Now that this is in place, we want to extract synergies by leveraging on our strengths across borders,’’ he said in an e-mail reply to StarBiz.

In the short to medium term, Kim said the group would focus on integrating its banks in the region by leveraging on their strengths to build a leading universal banking franchise in South-East Asia.

He said it would implement a comprehensive transformation programme for its unit CIMB Thai this year. “We have set targets for leadership in select market segments for CIMB Thai and we are confident of attaining them in the short to medium term,” he said.

The group has completed a thorough review of CIMB Thai’s operations and has started to roll out new products and services for the Thai market.

CIMB Group has about 36,000 employees in 11 countries. It has presence in New York, London, Bahrain, Hong Kong, Shanghai and Brunei. In April, it completed the acquisition of a 20% stake in Bank of Yingkou, a regional commercial bank operating in the Liaoning Province, China.

In the first half, overseas operations contributed 22% to CIMB Group’s pre-tax profit compared with 12% in the previous corresponding period.

Meanwhile, Hong Leong Bank Bhd group managing director Yvonne Chia said the group would strengthen and expand its full-fledged banking business abroad to secure future growth and sustainability.

On its Singapore branch, Chia said that as a niche boutique investment bank, it was now building new platforms in asset management and Islamic banking.

This was to enhance flows of deals in the region and complement Hong Leong Islamic Bank’s international currency business unit status and its operations in Malaysia, she said.

The Singapore branch had been the leading initial public offering bank for several years and was now integrating this success with private banking, she added.

Apart from private and investment banking, Hong Leong Bank’s overseas strength also lies in treasury and wealth management via its Hong Kong branch.

Chia noted that the branch recently became the first bank in Hong Kong to launch an Islamic banking window.

“Profits from overseas operations, including our associate company Bank of Chengdu Co Ltd, make up just over 10% of our pre-tax profit now compared with 6.5% last year.

“This contribution will expand over time, and we are transforming those businesses into market-oriented, sustainable and more scalable operations. The upside potential is tremendous,’’ Chia added.

Maybank head of international Abdul Farid Alias said the group would continue to seek viable growth opportunities in Cambodia, Vietnam, the Philippines and China.

Farid said the bank was also now developing Islamic capital market capabilities in the Middle East through its branch in Bahrain.

Maybank has presence in 13 countries, including Britain and the United States.

He said the group planned to increase its overseas staff, which now totalled about 9,500.

International operations currently contributed about 30% of Maybank’s loans and about 12% of group profit before tax and impairment.

“We expect Bank Internasional Indonesia (BII) to outstrip all our other markets in the future,” he said. BII is among the top 10 largest banks in Indonesia in terms of assets.

An analyst with another investment bank said he did not expect Maybank’s overseas contribution to pick up soon.

This was due to the expensive acquisition of BII, as it would take a few years before the return-on-equity ratio, which stood at 10% last year, could go back to pre-acquisition level of about 14%, he said.

AMMB Holdings Bhd deputy group managing director and group chief financial officer Ashok Ramamurthy said the group’s overseas expansion plans were now centred on its newly set up footprints in Brunei.

He said it was currently building capacity and branding to ensure the business there was fully operational by next year.

“We target to grow asset management, build new businesses including sukuk issuance and advisory solutions, and secure an Islamic banking licence there.

“Long-term strategies and plans to grow the foreign operations will be finalised over the next 12 months once the recovery in global and regional economies is deemed more sustainable,’’ Ashok added.

RHB Banking group managing director Datuk Tajuddin Atan said the group would focus on seeking second-home markets across Asean and the rest of the Asia-Pacific.

This was in line with its aspiration to be among the top three financial services groups in Asean by 2020, he said.

“For organic expansion, the key focus will be in areas where we can build on our core competencies – retail and Islamic banking, corporate investment banking and capital markets.

“The group’s aspiration to be a major player in Asean will be achieved by leveraging on organic and inorganic opportunities for growth,” Tajuddin said.

RHB Banking group now has operations in Singapore, Thailand, Brunei and Vietnam.

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