Malaysia’s top three domestic banks have trade finance at the core of their strategies for regional expansion. Rupert Sayer caught up with the heads of the banks responsible for trade to find out more.
Nowhere can Malaysia’s economic development and ambition be seen more than when one looks at the country’s biggest banks: Maybank, CIMB and RHB. Comfortably sitting on the list of the biggest 150 banks in the world, all three have placed trade finance at the centre of their strategies to expand aggressively throughout Asia.
“The group’s immediate-to-medium-term strategy for trade finance is to solidify its foothold in key Asean (Association of Southeast Asian Nations) markets, leveraging on its presence in Malaysia, Indonesia, Singapore and Thailand to deliver attractive transaction banking offerings to the emerging markets,” says W Adji Wibowo, regional head of transaction banking at the CIMB Group. “With around 1,100 branches, CIMB Group has the largest branch network in Asean and we intend to tap into our network to support our transaction banking business. The trade finance strategy is aligned with the group’s vision − to become the leading universal bank in Southeast Asia.”
Wibowo is based in Jakarta, Indonesia, not Malaysia − a reflection of the bank’s pan-Asean ethos when it comes to its trade and transaction banking strategy. CIMB took over and merged PT Bank Niaga and Lippo in 2008 to form PT Bank CIMB Niaga, which has helped grow its presence in Indonesia.
CIMB is also present in Malaysia, Singapore, Hong Kong, China, Bahrain, Brunei, the US, the UK, Cambodia, Thailand and Myanmar.
“Banking is a business that requires significant economies of scale; Malaysia’s population of 28 million is not going to give us that,” adds Wibowo. “There are three basic models – either you are a domestic player, regional player or a global player. You have to pick one – you cannot be ambiguous about where you stand. Scale is needed for advertising, systems, product origination, etc. If we manufacture a product today and distribute it across the region rather than only in Malaysia, we can spend a lot more on design and manufacturing.
“We need to consolidate our business and increase market share in the transaction banking industry which presents a US$15bn opportunity in our main markets (Malaysia, Indonesia, Singapore and Thailand). The bank estimates that its growth in these markets to be about 7 to 9% in the next five years and it has yet to capture its natural market share in transaction banking based on its size in terms of lending assets, branch network, customer base.”
Maybank also sees itself as an Asean-centric bank with an eye on regional expansion. It is present already in 14 countries: Malaysia, Singapore, Hong Kong, China, Vietnam, Bahrain, Brunei, the US, the UK, Cambodia, Indonesia, Pakistan, Papua New Guinea and the Philippines. RHB has offices in Brunei and Thailand.
“With our extended international presence our customers can now have broader access into these new markets which translates into enhanced business opportunities. Our wide network of correspondent banks and strategic alliance with premier players in the global market has enabled us to be active in the global trade financing scene, be it in traditional or non-traditional markets,” says John Wong, managing director, transaction banking, global wholesale banking, at Maybank.
We see trade settlement in Rmb as a significant recent market development.”
“To support this, we are continuously enhancing capabilities and competencies at our international branches, especially within the Asean region, to tap into the tremendous growth opportunities in the region, particularly in Singapore, Hong Kong/China and Indonesia, where we are able to offer a structured end-to-end service to customers.”
Whereas the bank has 300 branches in Indonesia alone, through its subsidiary Bank Internasional Indonesia (BII), underlying the importance of that particular market, it has a firm eye on China and the potential of the renminbi (Rmb) settlement markets.
“We see trade settlement in Rmb as a significant recent market development. Trade between China and regional economies has been expanding at a phenomenal rate and Maybank has established relationships with selected Chinese banks to facilitate trade settlements directly in Rmb,” says Wong.
China is Asean’s biggest trading partner, and CIMB has the widest reach within Asean.”
CIMB too has China firmly in its sights since the deregulation of the Rmb market by the People’s Bank of China. For US dollar settlements into China, the bank offers ChinaPay, where it helps clients make US dollar payments to the entire China payment system within 24 hours. Last year the bank launched RenminbiPay, which allows customers to make payments in Rmb into China. CIMB also allowed customers to open Rmb-denominated deposit accounts in 2010.
“CIMB is very well positioned to handle our client’s requirements for settlement to and from China, for trade as well as investment purposes,” says Wibowo. “This would include both buying and selling of Rmb yuan against Malaysian ringgit (RM) directly. In addition, we are able to do this onshore and offshore outside China. And based on customers’ requirements, we can assist in the hedging of their forward yuan exposure.
“Our reach on this currency pair has grown tremendously in recent times and we want to position ourselves to grow this segment even more. China is Asean’s biggest trading partner, and CIMB has the widest reach within Asean. We want to position CIMB as the gateway between China and Asean.”
Seamless client offerings
2010 was a defining year for all three banks in their drive to enhance capabilities and competencies for clients. Taking a cue from what the leading international banks have been doing for a while, all three have brought trade finance services under a transaction banking umbrella, recognising the synergy between cash management and trade.
We combined three business units into one, group transaction banking, and restructured the whole team.”
RHB formed its group transaction banking (GTB) department in January 2010, tasking Michael Lim, previously head of international banking, to restructure the business and unite the various relevant bank units.
“The issue we faced was that the businesses we needed to integrate were all siloed. We combined three business units into one, group transaction banking, and restructured the whole team,” says Lim, director of GTB.
Crisis or no crisis, there are still flows and trade to be captured out there.”
“It’s a very lucrative and sustainable business. Crisis or no crisis, there are still flows and trade to be captured out there.
“We have put in place a lot of plans for the business. Our distribution channels used to be very centralised but we have now regionalised these all over Malaysia to be closer to the clients, and each regional cluster has transaction banking specialists that cross-sell or offer all five products within the group: trade finance, cash management, deposits, trade FX and online payment.” 2011 will see the launch of an online transaction banking system.
For CIMB, its transaction banking group was established in early 2010, merging both the trade and cash management businesses. A regional office was set up that works closely with local offices in Malaysia, Indonesia, Singapore and Thailand to unify its transaction banking sales force and efforts across the four countries.
CIMB employs what it calls a “multi-local” model. “While it is one organisation across Southeast Asia, in each market, CIMB is local, in the composition of its people and products,” says Wibowo. “The management team strives to give that local feel, while at the same time still upholding its regional identity and presence.
“So far, the integration is working well. We see a lot of synergy in having our sales people selling not just a single product, but cross-selling trade finance and cash management, as well as offering more customised solutions to our customers rather than just selling pure products.”
Maybank is the first Malaysian bank to offer a comprehensive suite of web-based trade finance solutions on a par or better, it claims, with international peers, considering the range of products available and that it covers the full cycle of a trade transaction.
Maybank TradeConnex is a web-based trade finance front-end system with capabilities for customers to submit and communicate with Maybank via the internet (Maybank2e.net) on their trade finance transactions and/or other trade-related requirements.
Launched in August 2010, the solution covers major conventional trade finance products such as import and export letters of credit (LCs); banker’s guarantees/counter guarantees; import and export collection and import and export financing.
TradeConnex also offers other features such as a trade message centre, trade calendar, business requests, data maintenance and email alerts.
According to Malaysian government figures, total exports in December 2010 increased by 4.6% to RM57.16bn year-on-year.
This was the highest exports value ever recorded for December. Imports expanded by 11.5% to RM47.48bn, resulting in a total trade of RM104.64bn, an increase of 7.6% from the corresponding month in 2009. A trade surplus of RM9.69 billion was registered, making it the 158th consecutive month of trade surplus since November 1997.
With statistics like this coming hot on the heels of a global recession that arguably only grazed Asia, there should be much for the top domestic banks to feel optimistic about for 2011. GTR