CIMB Group has made a number of acquisitions in Malaysia, Indonesia, Singapore and Thailand and is extending its cash and trade services throughout Southeast Asia. Can you explain your strategy for this year?
We have completed the integration of our transaction banking franchise across all countries last year. In 2011, we will continue to grow our new regional transaction banking organisation structure and drive a unified transaction banking sales culture across the Group supported by both regional and in-country specific product suites. Our focus is to continue building a cross-border coverage model to serve our increasingly regional and global customers, and tap into the intra-Asean cash and trade flows. This means further development of capabilities to grow the Group’s liabilities and fee income. In 2011, as part of our commitment, we will also ensure a high standard of implementation and post sales service level to our clients.
Have you identified any cash and trade trends for 2011?
We expect to see Asia becoming even more self-sufficient this year, with continuing growth in intra-Asia trade volumes. With global markets eyeing the region, we foresee large inflows of liquidity as well as increased intra-regional trade activities.
Freeing-up trapped cash, consolidating cash through pooling and sweeping, and cost efficiency should continue to be the priorities of many corporations and SMEs in 2011.
The liberalisation of the Chinese renminbi will change the landscape for trade finance and banking in the region. In the coming years, we expect to see more trade settlement in renminbi in China.
Can you comment on the take-up rate of open account trading among SMEs and local companies in the region? Are banks like CIMB doing enough to extend insurance and risk mitigation products to SMEs to help them migrate to open account and away from LCs?
At CIMB, we have always been serving clients with a wide range of trade products and payment solutions that address their risk mitigation needs.
While open account transactions in the region have been increasingly favoured by businesses, demand for letter of credit (LC) had revived during the crisis when confidence levels were challenged by looming uncertainties. Looking ahead, we believe that the majority of transactions would be bank-backed to mitigate potential risks.
How have corporate demands of banks changed with regard to structured trade? What are their key requirements?
The recent downturn had emphasised the importance of effective working capital management for SMEs and corporations alike. There is the constant challenge of extending payment terms without diminishing suppliers’ sustainability, and this draws down to effective supply chain management. Having identified these potential areas for better efficiency, large corporations had approached CIMB for supply chain financing solutions to address the gap.
Corporations have also recognised the importance of cash flow visibility and liquidity management. Participating accounts in CIMB’s liquidity management offering have been growing strongly as clients are keen to source for internal liquidity and gain control over their cash flows.
What are the most important product innovations you are introducing to the market? Have you strengthened your cash and trade teams?
Leveraging on local expertise and cross-sharing of best practices in the region, CIMB continues to develop tailored solutions for its clients. In 2010, it enabled efficient processes which provide clients with relatively quicker access to trade products and financing.
By late 2010, CIMB increased its transaction banking staff strength by over 30%, attracting talents from both local and foreign banks. We have successfully built the foundation of a unified culture across the region and set the stage for active cross-sharing of knowledge and best practices among our staff in all our footprint countries.
Small and medium-size companies largely require traditional trade products focusing on liquidity and cheap pricing. How are smaller banks competing with international and local banks for this market?
As a key success factor for banks to provide excellent transaction banking services to customers, significant investment in technology is required. Smaller-sized banks are often disadvantaged but would be able to form strategic partnerships with larger or international banks for white-labelling services. In a win-win relationship, the international banks would provide the capabilities to local or smaller banks in return for domestic market knowledge and intelligence.
At CIMB, we are leveraging on our extensive 1,100 regional branch network and over 3,700 automatic teller machines (ATMs) as our competitive advantage.
Many companies are now multi-banked. Does this work for or against local banks, and for or against international banks?
Given the increasing emphasis by corporate clients on streamlining their treasury, trade and payments processes, corporations are seeking for standard interface. While many corporations maintain accounts with several banks, we observed that clients aspire to enhance relationships with their main bankers. While our relationships with clients has increasingly evolved towards a partnering role, where clients view us as their advisors, as well as banker that can provide added-value to their business beyond transactional processing, we have not forgotten that we are in the business of service.