Insight - Banks dealing with pandemic challenges

Financial institutions coping well with new norms, adjustments

THE prolonged Covid-19 pandemic had created a wide range of challenges for banks in terms of financial difficulties faced by many, and the management of overall health and safety.

Banks had to balance the need to maintain business continuity while remaining focused on helping their customers through the tough times, and balance health and safety concerns.

Public Bank Bhd said the pandemic had allowed it to be introspective, taking stock of what works and what perhaps, may not work, following changes in the current operating conditions.

While quickly adapting to the new norms, the banking group has also taken the opportunity to improve on its delivery systems, including intensifying its initiatives on digitalisation but more importantly, to remain sensitive to (and to appropriately address) the needs of its customers.

Public Bank had provided funding assistance of more than RM3.4bil to over 16,000 small and medium scale enterprises (SMEs) under the special financing schemes initiated by the government and Bank Negara.

This is on top of the six-month loan moratorium, the targeted repayment assistance (TRA) and expanded TRA to the B40 group.

About 1.8 million customers have benefitted from the bank’s loan moratorium, loan repayment assistance programs, and special financing schemes that it actively participates in.

“It has not been an easy 12 to 15 months; we believe we are coming out of this pandemic somewhat stronger despite the drop in earnings last year, ’’ said CEO Tan Sri Tay Ah Lek.(pic below)

Looking after the interests of stakeholders during the pandemic is a challenge by itself.

“It is a delicate balancing act when we provide financial assistance to affected customers due to the Covid-19 pandemic, while making sure that we uphold our responsibility as a custodian of public funds, and that the depositors interest is protected, ’’ said Tay.

CIMB Group Holdings Bhd had to manage the impact on its business as the pandemic had resulted in elevated provisions.

“Our immediate priority was on cost management; through rigorous cost optimisation, we successfully surpassed our cost reduction target of 5% for financial year 2020, ’’ said CIMB.

CIMB also recalibrated its strategy, resulting in its Forward23+ mid-term plan, under which it began to reshape its portfolio.

This is to ensure that the banking group is well-positioned to accelerate growth in key segments and deliver sustainable financial returns.

The recalibrated strategy is beginning to bear fruit; in the fourth quarter of financial year (FY) 2020, the group saw improvement in net interest income and non-interest income in its core markets.

Its consumer banking operations focused on wealth management and deposit growth.

Meanwhile, group wholesale banking at CIMB was able to leverage on market volatility and liquidity, with improved revenue from Treasury and markets, as well as increased investment banking activities.

CIMB’s underlying business also remains resilient, with the group achieving its highest common equity tier 1 CET1 ratio of 13.3% in FY20.

(CET1 is a capital measure that shows a bank’s ability to weather a financial downturn).

“We will build on this momentum to bounce back stronger and more resilient; we are confident that we are firmly n track to deliver on our ambition, ’’ said CIMB.

The pandemic had brought a radical change in the business environment, marked by a positive shift in customer preferences from physical to online transactions.

“This resulted in a significant growth across all our digital channels, ’’ said group managing director of RHB Banking Group, Datuk Khairussaleh Ramli.Pic above)

As digitalization continues to gather pace due to the change in customer behaviour, RHB had reprioritised its FIT22 strategies by accelerating its investments in digital capabilities as well as information technology infrastructure and modernisation.

To support local businesses, RHB had launched an online marketing platform for small and medium scale enterprises (SMEs) called #JomSapot.

Alliance Bank Malaysia Bhd improved the bandwidth at the bank, configured over 300 laptop units, enabled email mobility access for over one-third of its employees, and bought more than 1,500 virtual private network licences and close to 200 video conferencing licences for its employees’ full use.

Relationship managers at Alliance Bank Malaysia applied a structured portfolio management approach to understand customers’ financial situation.

It launched a business Whatsapp, and posted frequent messages to explain the payment relief assistance packages available, and introduced phone bidding and two-way SMS to obtain customer consent.

The bank has extended RM5.5bil in payment relief assistance packages, and RM1.6bil in extended moratorium.

It also disbursed more than RM600mil in Bank Negara’s special relief fund to help SMEs, and is one of the banks to have fully utilized the allocation of Bank Negara’s targeted relief and recovery facility of RM120mil.

In terms of helping local businesses, Alliance Bank Malaysia’s #SupportLokal initiative drove over 70,000 online traffic to its SME clients’ web stores.

Alliance Bank Malaysia’s SocioBiz crowdfunding platform raised close to RM800,000 to support micro SMEs.

Its BizSmart solution, a business-to-business ecosystem, enables business owners to expand their network, obtain products and services at preferred rates and acquire training on how to navigate the current tough conditions.

The government has done a lot to aid recovery; however, business confidence is also sensitive to politics.

“It remains my hope that politicians will bear this in mind as the recovery process remains fragile and cannot be isolated from this reality, ’’ said OCBC Bank (Malaysia) CEO Datuk Ong Eng Bin.(pic below)

CIMB hopes that the 12th Malaysia Plan will provide foreign investors with a clearer view of the long term direction of the economy.

Malaysia can also provide a greater push to address climate-related risks and support an orderly transition towards a green economy.

“A welcome development would be a ‘Green New Deal’ that would combine public and private initiatives to develop and invest in green technology, ’’ said CIMB.

In the coming year, the banking industry will work closely with regulatory authorities to further strengthen climate risk management.

These will be in the decision-making process and disclosure practices in accordance with the task force on climate-related financial disclosures.

“A key priority will be the implementation of the climate change and principle-based taxonomy, and ongoing development of sectoral guides for the manufacturing, oil and gas, infrastructure and construction sectors, ’’ said Khairussaleh.

Stability is paramount, as we look forward to new green developments and a better operating environment.

Yap Leng Kuen is a former StarBiz editor. The views expressed here are the writer’s own.

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