If the trauma international banks are undergoing creates an opportunity for local Asian names to build a regional presence, then Malaysian banks are at the forefront of taking advantage.
Source: Reuters/Zainal Abd Halim
A Yellow-vented Bulbul bird returns to its nest to feed its young at a garden in Kuala Lumpur
For many years, CIMB has been the most obvious example of a Malaysian bank set on building an ambitious pan-Asean presence. More recently, though, Maybank has made a potentially transformational acquisition of Kim Eng Holdings, while some of the country’s other banks are also expanding, albeit organically.
It is a natural time for banks to make such a move. “I don’t want to sound like a vulture fund taking advantage of other people’s weaknesses,” said Charon Wardini Mokhzani, deputy CEO, corporate and investment banking at CIMB. “But you would imagine that, as people have issues back in core domestic markets, they would retreat to some extend from South-East Asia. There will be opportunities for South-East Asian banks to step in.”
CIMB, of course, has been stepping in for years. It bought Singapore broker GK Goh in 2005, which gave it a presence among the leaders in Singapore broking, and it owns CIMB Niaga, Indonesia’s fifth-largest bank in terms of assets. Last September, it bought a 70% stake in SICCO Securities, to be built into the existing CIMB Thai Bank. That does not create anything like a GK Goh level of standing in Thai broking, but it does create a platform for growth. At the end of February, CIMB was believed to be in the final stages of a deal to buy Bank of Commerce, in the Philippines, from San Miguel – again creating a platform for further expansion.
“We are positioning ourselves as an Asean regional bank,” said Charon. “We can give regional solutions to clients. It’s surprising the number of South-East Asian companies that are investing elsewhere in South-East Asia. There is a lot of interest in regional investment flows.”
Charon said CIMB was active in eight of the 10 Asean countries – the Philippines would be the ninth, leaving only Laos in which it does not have a presence. “Intra-Asian trade is a big number, and a growing number,” he said. “Clearly, we want to be there, growing with that.”
Then, on March 1 – after IFR Asia interviewed Charon for this report – CIMB confirmed it had signed a memorandum of understanding to buy some of the cash equities, ECM and corporate finance businesses of RBS in Asia. The bank declined to comment further, but it appears the combined business would operate investment banking, institutional and retail equities in Australia, Malaysia, Thailand, Indonesia, India, Singapore, Hong Kong, China, Taiwan and Korea, with global equities distribution capabilities stretching to Europe and North America. It would create a true competitor to the western multinationals in ECM in the region. This would be a transformative acquisition.
For a while, CIMB seemed to be the only Malaysian bank to see the market this way, but, last year Maybank showed it had similar ambitions with a US$1.4bn general offer for Kim Eng Holdings, the Singapore-based regional brokerage. Maybank had already grown a commercial banking presence in the region organically, but had lacked broking and investment banking outside Malaysia. This deal gave it heft not only in Singapore, but Thailand, the Philippines, Indonesia and Vietnam.
Last November, unveiling a new “Maybank Kim Eng” corporate identity, the bank was talking boldly about becoming the premier investment bank in South-East Asia, with Tengku Dato Zafrul Tengku Aziz, the new entity’s CEO, pledging to add 10% to its headcount annually until 2015, growing its assets under management from S$2bn to S$20bn over the same timeframe. That probably was not the end – in February, the head of the Thai arm said Maybank was keen to buy a local bank in Thailand, if possible.
Other banks, without the headline acquisitions, have also sought to grow in the region. Public Bank has a presence in Cambodia, Vietnam, Laos, Hong Kong, China and Sri Lanka. AmBank’s stated ambition is to be “Malaysia’s preferred banking group with international connectivity.” RHB is active in Singapore, Thailand, Brunei and Vietnam.
One natural area for regional expansion from Malaysia is Islamic finance. Malaysia is already the world’s most sophisticated Islamic finance market in terms of its regulatory environment, business framework, education, and range of products (although not yet in overall assets). It dominates global sukuk issuance and has increasingly sought to make Kuala Lumpur a hub through which international Islamic capital is managed and transacted.
It is natural, then, that the presence of Indonesia, the world’s most populous Islamic nation, on its doorstep represents a great opportunity; the more so since Indonesian institutions have not, as yet, really grasped that opportunity. Again, CIMB is the clear example here. Through its ownership of Niaga, CIMB Islamic CEO Badlisyah Abdul Ghani has put a lot of effort into building that business, as well as trying to increase fund flows from the Middle East to Malaysia (among other things, he is head of corporate client solutions for the Middle East and Brunei at CIMB Group overall). The same potential is there for Maybank, whose Indonesia unit is Bank Internasional Indonesia, and it is for RHB, which holds a stake in Bank Mestika Dharma.
Still, it is not as straightforward as it looks. While Asean is a convenient acronym, and has increasingly free trade, it will be wrong to think of it as being homogenous on a host of levels – culturally, linguistically, in regulation or in markets. Even in more culturally similar Indonesia, Malaysian banks are still foreigners, and like any other foreigners must feel their way gradually.
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