Banking on wealth management


Abdul Rahman At the same time, when I came in last year, we were faced with the reality of our weakest results for the year because of the pandemic, and also because we had to take on specific provisions on some of our legacy accounts, so it was extremely challenging. I think we quickly identified the issues and then rolled up our sleeves and focused on executing.

SOME 16 months down the road, CIMB Group Holdings Bhd group CEO Datuk Abdul Rahman Ahmad is no less sure that the days ahead will bring on fewer challenges. Still, the banking group has a solid plan and has been preparing itself to take on these issues.

Below are excerpts of StarBizWeek’s (SBW) exclusive interview with Abdul Rahman:

SBW: How has it been for you so far, on the whole?Abdul Rahman: I’ve yet to visit our operations across Malaysia and the region.

In that sense, it has been extremely challenging.

At the same time, when I came in last year, we were faced with the reality of our weakest results for the year because of the pandemic, and also because we had to take on specific provisions on some of our legacy accounts, so it was extremely challenging.

I think we quickly identified the issues and then rolled up our sleeves and focused on executing.

In that sense, I am extremely thankful to the team and the board. It’s been a roller coaster journey but I think we are on a positive trajectory.

How do you plan to continue optimising costs?The segments that we wanted to exit, that has been done so there are no more areas that we need to exit.

I think we have addressed that with the commercial business in Thailand and we have optimised or right-sized our business in Singapore.

On the area of people, generally, natural attrition is already high within the banking industry.

However, we are very focused on managing attrition well so that we know the areas that we can rationalise.

We are investing in the right areas, for instance, in wealth management where we are very firm in wanting to add more relationship and sales managers to be able to service our customers better.

Wealth management is a very competitive business and you remain a relatively small player in the region. How do you plan to compete?

Yes, we are relatively small but from where we are today, we are already very strong in our franchise within Asean.

It is estimated that the market size for wealth management is close to RM40bil and it is forecast to grow by double-digits up to 2025. So, it is a sizeable market.

As a consequence of the pandemic, liquidity has become extremely strong. CASAs (current account savings accounts) in all economies have grown because of the constraint of spending.

People who have not lost their jobs have seen their wealth grow because they cannot spend due to the lockdowns, so because of this, liquidity has increased.

Coupled with the impact of low interest rates, the demand for wealth management will become continually stronger and that is the fundamental reason why we and a lot of other financial institutions are focusing on wealth management.

Malaysia and Singapore are a big part of this simply because Malaysia is our domestic market and Singapore is the hub.

We also see growth in Islamic wealth management whereby this is more for Malaysia and Indonesia. As these two economies not only become more affluent but also more religiously aware, the demand for Islamic services is becoming extremely important and it is growing.

How important is consumer banking?The consumer banking sector is intertwined with wealth management so on our side, consumer is extremely important.

In terms of ratio, consumer banking comprises 50% of our loan base across the region at the moment and we expect it to continue to grow on an asset basis.

While our loan growth this year shows that we are virtually flat and we have lowered our guidance to 2%, consumer continues to grow strongly in some markets.

In terms of revenue, the Malaysian market contributes about 60%, Indonesia about 20% and Singapore and Thailand about 10% each.

We expect Indonesia as a market to grow faster over the next few years because it is in a big economy which is growing.

Malaysia will probably be diluted a bit then but to be fair, historically it (Indonesia) has been 30% and we do expect it to go back close to that 30% mark, going forward.

Is your entire senior management team in place and are you happy about it?Yes, it is in place and I am very happy.

We have a mixture from the existing team and new people.

We also have a succession plan in place.

CIMB traditionally has very robust succession planning in place and we continue to improve on it.

Will you be making any changes to your dividend payouts?No, it remains the same, 40%-60% of our core profits.

I am happy that we are able to maintain this despite the challenging environment.

However, we continue to be vigilant about our capital strength and I am very pleased that we have been able to strengthen our CET-1 ratio to a high of 13.4%. In the past, we were below 13%.

We continue to optimise and balance between the payment of dividends and the need to further strengthen our capital so that we are robust and able to absorb any challenges.

There is no need to raise further capital at this point, we are comfortable.

How do you manage the expectations of your shareholders?

Just be transparent and really articulate what the plans are. At the same time, also highlight what the challenges and risks are.

I believe that as long as we are quite clear with them and show progress in terms of executing the plans, they will understand. That has been our approach but we must deliver on our promises.

Could you share with us some of CIMB’s sustainability efforts?Beyond the numbers, we are aware that as a purpose-driven organisation, our aim is to advance customers in society.

The topic of sustainability is really at the forefront and this is where CIMB is probably one of the earliest organisations that has taken the lead. We were one of the first to announce that we are exiting coal (financing) and we continue to make sustainability a priority.

This year is our third year of organising the CIMB Cooler Earth Sustainability Summit, where we gather a lot of thought agencies and leaders to talk on how we can promote the sustainability agenda.

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