Malaysian banks have been told to be more proactive in their trade and export finance offerings, rather than relying on servicing companies with standard, non-bespoke services.
Speaking at the GTR Malaysia Trade and Export Finance Conference in Kuala Lumpur, Srinivasan Venkita Padmanabhan, global head of finance products at Olam Group said that multinational companies working in Malaysia would be happy to pay higher pricing for lending and credit services that were more suited to their requirements.
“We do not need lots of new products, rather shades of services. Banks wait for companies to tell them what they need – they offer them standard products such as standby letters of credit. Why not offer them something better? How many of them are on the road getting to know their customers? If you know, you can offer something different,” he said.
He added that Malaysian banks need to better understand how their customers operate and what they require.
In an audience poll, 70% said that bank pricing had not increased over the past 12 months, and it is often said that multinational banks do not have a footprint in Malaysia because they are priced out by the leading local banks.
Tan Chin Aun, senior general manager for transaction banking at Ambank, which lends exclusively to the domestic market, admitted that despite the macroeconomic challenges facing Malaysia and its banks, pricing remains relatively low.
His counterpart at Maybank Mahadir Manap cited five major challenges that the sector is facing: Basel III regulations, disruptive technology, regional economic integration, rising customer expectations and the appearance of “newly global banks” such as DBS on the scene.
Despite this, banks have not raised pricing, nor developed their product or service offering. “They need to differentiate to serve their clients better,” Padmanabhan said.
After another audience poll revealed that 47% are concerned about the volatility of the ringgit (by some distance the biggest worry), another schism between the corporate and banking sectors was revealed.
The Malaysian ringgit has lost 20% of its value in 2015 and while it seems to have stabilised somewhat in recent weeks, it is still clearly the major issue on the mind of traders.
Maybank encouraged companies to hedge on foreign currencies and said that this is the advice that they have been passing on to clients. Hedging will, Manap said, help preserve profit margins.
Padmanabhan at Olam, however, rubbished the idea, saying that companies should, where possible, borrow in local currency, even if the interest rate is higher. Hedging creates too much volatility for exporters and exposes them to multiple interest rate fluctuations.