By TK Tamby
When asked if there was enough room for more players in the local banking industry, CIMB Group Chief Executive Officer Dato‘ Sri Mohd Nazir bin Tun Abdul Razak said that the local industry would actually benefit from having fewer – but bigger – banks.
“Such players would be better positioned to benefit from the resulting economies of scale and also be strong enough to cope with today’s competitive environment as well as global economic pressures,” he said during an interview with Business Circle. The interview was held at the recent Global Malaysia Series event organised by the Performance Management Delivery Unit (PEMANDU) and Business Radio Station (BFM) at the Securities Commission.
Dato’ Sri Nazir pointed out that his response was derived from pertinent lessons learnt in recent decades – and especially after the 1997 financial crisis – which prompted Bank Negara Malaysia to lead the banking sector reform through a banking merger programme in 1999.
“The need to be both efficient and highly competitive has become more critical in today’s financial markets,” he said. “We have a situation whereby non-banking entities are aggressively usurping traditional banking roles. While it’s good news for consumer convenience, it means a shrinking market for banks.”
The need to find a bigger market was crucial for the long term survival of CIMB, said Dato’ Sri Nazir, and this was a key driver behind its transformation from a being just a Malaysian investment bank into a regional player. “The transformation, which started in 2005, was a move that strengthened the Group and ensured its presence in 17 markets globally.”
Since then, CIMB has grown to become the largest investment bank in Asia-Pacific with staff strength growing from 1,000 to 42,000 employees today. The Group’s retail banking branch network is the widest in the region, with a total of 1,080 retail branches in Malaysia, Indonesia, Singapore, Thailand and Cambodia.
CIMB: “ASEAN for you”
CIMB’s core market is in Malaysia, Indonesia, Singapore and Thailand and the Group is currently focusing on strengthening its presence throughout the rest of the ASEAN region.
“We have aligned our business model to the ASEAN Economic Community’s regional economic integration by pushing for CIMB’s presence in every regional market.” He added that the Group’s commitment to the region is reflected in its “ASEAN for you” tagline.
Dato’ Sri Nazir said that CIMB’s regional strategic approach and market presence has deepened the Group’s understanding of the prevailing financial cultures and conditions in various ASEAN countries.
“Malaysia’s diverse and multicultural society is also a significant business plus point,” he said. “This helps home-grown institutions like CIMB to use its inherent diversity to better access ASEAN’s diverse markets.”
This regional market know-how has allowed the Group to evolve business strategies, which address needs, requirements and cultures across the different regional markets. “For example, to gain access into more established market like Thailand, Philippines and Indonesia, we needed to acquire a local financial institution; whereas for emerging markets like Cambodia, we were able to apply for a banking licence.”
Regarding the widely-debated acquisition of the Royal Bank of Scotland (RBS)’s regional equity and corporate finance businesses, Dato’ Sri Nazir said that the acquisition has paved the way for the CIMB Group to build significant presence in developed markets, such as Hong Kong and Australia, that trade with ASEAN countries. It has also enabled the flow of investment into the ASEAN region, he added.
“More importantly, the purchase of RBS has allowed CIMB access to a bigger slice of fast-growing intra-Asian capital flows which tend to be dominated by western institutions,” he said. “The time has come for institutions in this region to gain some control over the intra- Asian capital flow, which is currently routed through western intermediaries.”
CIMB’s transformation into a universal investment bank is a continuous evolution, as the Group is constantly on the alert for opportunities in both fast growing and emerging markets throughout ASEAN and beyond.
To ensure that CIMB remains a truly universal entity, Dato’ Sri Nazir has ensured that its regional workforce is given a voice in determining the direction of the Group through a management strategy that embraces diversity, he later said at a Q & A session with PEMANDU CEO Dato’ Sri Idris Jala and BFM Managing Director Malek Ali.