Bank CEOs see better year ahead


  • Business
  • Tuesday, 09 Dec 2003

DATUK AMIRSHAM A AZIZ President/CEO MALAYAN BANKING BHD

THE outlook for the global economy appears to be much brighter currently than it was a year ago. What do you see are the challenges and prospects for the Malaysian economy for 2004? 

In my opinion, there are two major challenges facing our economy. First, the urgency to enhance the level of competitiveness, both in the production of goods and services for the world market as well as in attracting investment in the knowledge-based industry. Second, to strengthen our country’s position in the global production and supply chain, thus ensuring the continuing relevancy of our economy in the face of globalisation.  

With our substantial investment in human capital and physical infrastructure, I am confident that we are able to respond to these challenges and place our economy on a more sustainable growth path. Judging from the strengthening of the domestic growth momentum thus far and increasingly stronger impetus from the external sector, I believe a 6% GDP growth for next year is attainable. 

Datuk Amirsham A. Aziz

The Malaysian financial sector has undergone considerable consolidation since the Asian financial crisis. What’s the outlook for the industry for 2004? 

We started from a relatively solid platform as the consolidation process in the past years has enhanced the sector’s overall capital base and riding on the successful debt restructuring exercises, the quality of assets of the banking system showed a substantial improvement.  

Lately, the global economic recovery has become more entrenched and this will strengthen further the economic and business conditions in our country. Hence, the implication to me is obvious. Malaysia's financial sector, judging from a host of performance parameters, will be among the strongest in Asia. In fact, this expectation is shared by global rating agencies, which in the last few months, have begun to upgrade their ratings on Malaysian financial institutions. 

Your company/group focus for 2004 

We will continue with our commitment of meeting and exceeding the expectations of our customers. By this, what we really mean is offering excellent service and products with strong value propositions.  

We have been on this mission for many years and the public may have realised this from our growth in the breadth and depth of our delivery network, particularly electronic-based network and the lay-out of our physical branches, which now provides a conducive environment for customers to conduct a wide range of financial transactions and dealings.  

We have also placed our staff on a continuing programme to improve the standard and quality of customer interfacing. I am confident that given this strategic focus, Maybank will remain as the leading financial solutions provider in the region.  

Do you expect your company/ group to be better or worse in 2004, compared with 2003? Why?  

With the prospects of a stronger economic growth for next year and greater political and economic stability worldwide, I am confident that Maybank’s performance will show further improvement next year. In fact, during the first quarter of our current financial year, the annualised loan growth for our commercial banking Malaysian operations was 6.1% against 5.2% during the previous financial year.  

The equity market, which had a dismal performance before, is now recovering very well and this will strengthen the performance of our investment banking and fund management activities. Our insurance business, on the other hand, should be able to record improved performance in the light of higher domestic economic activities. 

Is China an important factor in the management of your operations? 

To a broader extent, the vibrancy of the Chinese economy is relevant to our business. Directly, quite a substantial number of our customers have business interests in China or trade relationship with the country. We have a long and established presence in Hong Kong, which serves the southern part of China and a branch in Shanghai that serves the banking needs of our customers for their investment in greater China. Indirectly, China's economy has a major influence on the economic growth of this region especially with increasing share of intra-regional trade with Asean and through its exchange rate policy. It is on this realisation that in the management of our business, we always monitor the development in China.  

Datuk Seri Abdullah Ahmad Badawi has taken over as Malaysia’s fifth Prime Minister. In your view, what should be his priorities? 

Our country is indeed on a very strong footing, both from the economic as well as social angles. What is needed is to ensure that this strength remains intact. For that, I think the present leadership needs to give strong focus on the efficiency of the Government's administrative machinery and to ensure a high level of governance in the public sector. 

On the economic development front, the dual-track growth strategy introduced recently would require close monitoring as there is still a strong culture and tendency among the public to look for the opportunity of a quick gain, so much so it could derail the success of the development strategy. 

PIYUSH GUPTA Citigroup Country Officer Citigroup Malaysia

Challenges and prospects for the Malaysian economy for 2004? 

Piyush Gupta

2004 should be a very good year for the Malaysian economy. Quite clearly, the global economic rebound is fuelling a resurgence in the electrical and electronics sector (semiconductors and other computer related peripherals), and this should help provide impetus to our exports.  

The strong demand from countries like China and India is leading to extremely firm commodity prices, and a general uptick in the global commodity cycles; this is additional good news for our primary commodity industries. A continuing easy monetary policy, coupled with the spending that accompanies an election year should lead to strong consumer demand. Overall, I am confident that gross domestic product rates of 5.5%-6% are achievable. 

The key challenges facing the economy are structural in the medium term ? how do we face the challenge created by the China manufacturing monolith, and related to that, how do we transition to a services economy. However, both these challenges bring opportunities with them ... it is up to us to capitalise on these. 

The Malaysian financial sector has undergone considerable consolidation since the Asian financial crisis. What’s the outlook for the industry for 2004? 

I think the priority for the industry has to be growth rather than consolidation at this stage. With relatively cleaned-up balance sheets and strong capital adequacy, the local players will focus on entrenching their positions ahead of the financial services liberalisation. 

Frankly, I don’t anticipate any ground-breaking mergers to happen any time soon. Consumer finance will continue to be the principal growth engine. I do believe it would be prudent to temper growth with caution, though ? bad loans are made in good times, and we need to learn from the experience of other Asian economies where uncontrolled consumer finance has led to problems. 

What will be the focus for your company/group for 2004? 

Our focus for the coming year will be very similar to this year, which has been quite a successful one for us. Home loans and credit cards will continue to be the mainstay of our activities. On the retail front, these will be complemented by our focus on wealth management banking and investments.  

On the corporate and investment banking front, the fixed income business will clearly be slow, given where we are in the interest rate cycle. We hope to leverage our transactional banking and exposure management businesses to make up for this. We will continue to retain our strong niche position in structured finance, leading to capital markets transactions. 

Do you expect your company/group to do better or worse in 2004, compared with 2003? Why? 

We hope to be able to repeat our 2003 performance, which has been quite good. The improved economy should help on the one hand; however, increasing competition will continue to put margins under pressure. We will be happy to retain our market shares while improving asset quality as we go forward. 

The Chinese economy continues to power ahead. Is China an important factor in the management of your operations? 

China is clearly an important consideration for Citigroup in the region, and we continue to invest in that country. From Citibank Bhd’s standpoint, we are looking to focus on trying to intermediate both the trade and investment flows between the two countries. In some cases, we are looking at following our Malaysian customers to China as they add capacity there. 

Datuk Seri Abdullah Ahmad Badawi has taken over as Malaysia’s fifth Prime Minister. In your view, what should be his priorities? 

I guess the first order of the day has to be to create domestic and international confidence in his regime through a fresh mandate under his leadership. However, close on the heels of this, I would argue that image building/PR is probably as important a priority as any other.  

Malaysia tends to suffer from a “poorly told story,” and this would be a good time to address this issue. Beyond this, a focus on further economic liberalisation and eliminating bureaucratic processes would be laudable as well, particularly in various service industries. This is obviously an area that he has already embarked on! 

TAN SRI TEH HONG PIOWChairman Public Bank group

Challenges and prospects for the Malaysian economy for 2004 

To my mind, our economy has two major challenges. First, there is an urgent need to further strengthen our domestic economy through the promotion of the private sector. Since the Asian financial crisis in 1997/98, our economic growth has been driven principally by the public sector. We need to turn to greater investments by the private sector to sustain our long-term growth. This will also allow the Government to hasten its process of fiscal consolidation.  

Tan Sri Teh Hong Piow

The other challenge is to further strengthen our international competitiveness by harnessing our strengths, particularly our educated and skilled human resources, and modern technology. As a major trading nation, Malaysia will continue to face competitive threats from other emerging markets such as China. We need to enhance our competitive advantage through modern technology, product innovation and higher productivity.  

We are optimistic the economy will overcome these challenges and grow further in 2004 and beyond. In the second half of 2003, private sector investment activity has improved. Domestic investments have shown an upward trend while foreign direct investments have remained stable. The present high capacity utilisation of domestic and export-oriented industries is likely to boost private sector investment in 2004.  

Measures to boost international competitiveness have also been introduced. In particular, the Government continues to provide generous fiscal incentives to encourage research and development activity, reduce cost of doing business, and encourage businesses to upgrade their technology. There have been concerted efforts to ensure an adequate supply of skilled human resources and efficient government delivery systems, complemented by modern infrastructure facilities.  

There are also pro-growth economic policies and measures such as the Budget 2004 and the Economic Stimulus Package introduced in May 2003 to support future growth. Strong economic fundamentals such as low inflation, high national savings, healthy current account position, and high international reserves are conducive for economic growth. 

The ringgit peg is stable and will continue to facilitate trade and investment. A stronger banking system is a plus for the economy. In addition, there have been many positive developments in the external environment as shown by healthy growth in the US economy and recent positive developments in Japan and Europe. All these will have a positive impact on the Malaysian economy. 

Outlook for the financial sector for 2004 

We expect the banking industry will further strengthen and record a healthy growth in 2004. Domestic banks are likely to remain active with measures to further strengthen their capability and capacity to compete with the incumbent foreign-controlled banks in Malaysia in a more liberal business environment as provided for in the Financial Sector Master Plan, which will enter its second phase of implementation next year. 

Although the competition in consumer and retail financing markets will remain stiff, demand for loans is likely to be stronger next year on the back of competitive interest rates, high capacity utilisation in manufacturing industries, sustained demand for new passenger cars, and strong business confidence.  

In fact, the amount of new loans applied for by consumers and businesses in the third quarter of 2003 has increased significantly. While the highly competitive environment will likely result in margin pressures, banks are likely to continue to remain aggressive in marketing strategies, pricing and product innovation. This will benefit consumers and businesses at large.  

The banking industry is also expected to see further improvement in asset quality, supported by stable employment conditions, positive economic outlook and low interest rates. Coupled with strong capitalisation and high levels of provisioning coverage, the banking industry will not only remain stable but will be stronger in meeting the challenge of 2004.  

Your company/group focus for 2004 

Our main focus will be to sustain our lending growth and profitability based on our competitive advantage in consumer and retail financing. In particular, the group will continue to leverage on its competitive products (under both conventional and Islamic banking) for housing loans, SME loans, hire-purchase financing and credit cards.  

On liability management, the group will continue to mobilise lower cost current account and savings deposits. To complement its retail banking operations, the group will also pursue corporate lending activity and further promote fee-based activity.  

The group will also drive efforts to further distinguish itself from competitors through new high value-added products and services and superior delivery standards. To increase customer convenience, the group will further develop its multiple delivery channels, particularly its e-banking channel, and install more self-service machines at branches.  

As a continuous effort, the group will further tap on business synergies and improve operational efficiency from the expected completion of the integration of Public Finance’s businesses and branches into Public Bank in the first quarter of 2004. Our priority is to ensure that the group’s optimal network of around 250 branches in 2004 will run efficiently in line with our business goals.  

Do you expect your company/group to do better or worse in 2004 compared with 2003? Why? 

Barring any unforeseen circumstances, the group expects to do better in 2004. The positive economic outlook will support sustainable loan demand from consumers and SMEs. Car sales and property transactions for residential and non-residential properties are expected to gain from the positive economic outlook.  

Furthermore, the group will not only achieve an optimum number of branches by the first quarter of next year, but also a wider range of competitive products to meet its customer demands.  

With increasing customer sophistication, the group will continue to meet their needs based on a product-solution or product-bundling approach for consumer and business loans. To complement this, the group will continue to ensure that it maintains its superior standard of service delivery such as the 2-minute customer waiting time and fast loan turnaround time.  

The group will also work to achieve further ISO certification for new processes such as hire-purchase and trade finance processes. In line with the positive outlook for the economy and stable employment condition, the group expects to see a further improvement in its asset quality.  

Is China an important factor in the management of your operations?  

The group has no banking business in China, other than its full licensed branch and its consumer financing subsidiary in Hong Kong. Any significant development in China will only affect the group through its Hong Kong operations. 

Having said that, we recognise the potential of China to be a major world economic powerhouse in the near future. More Malaysian businesses will benefit from increasing trade flows between China and Malaysia. The group will play an active role to support these businesses.  

What do you think should be the new Prime Minister's priorities? 

I am particularly pleased that the Prime Minister will continue to implement policies that have contributed to the country’s success and prosperity. I am confident that his focus to strengthen the domestic economy through developing new sources of economic growth such as services will go a long way to support Malaysia’s future growth.  

He has also made pledged to wipe out corruption, improve service delivery, solidify social harmony, elevate education and maintain economic justice, all of which I think are very appropriate. He is committed to Malaysia’s Vision 2020. I am confident that our Prime Minister will take Malaysia to greater heights. 

 


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