Dim sum market evolves and develops common sense
1 March, 2012IFR Asia: Koreans march to baht
1 March, 2012IFR Asia, March 2012
If the traumas in the western banking sector create an opportunity for local Asian names to build a regional presence, then Malaysians are at the forefront of taking advantage.
For many years, CIMB has been the most obvious example of this trend, building an ambitious pan-Asean bank. More recently, Maybank has made a potentially transformational acquisition of Kim Eng Holdings, while other banks are developing more organic expansion.
It’s a natural time to make such a move. “I don’t want to sound like a vulture fund taking advantage of other people’s weaknesses,” says Dato 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 southeast Asia. There will be opportunities for southeast Asian banks to step in.”
CIMB, of course, has been stepping in for years. It bought the Singapore broker GK Goh in 2005, giving it a presence among the leaders in Singapore broking, and it owns CIMB Niaga, the fifth-largest bank by assets in Indonesia. More recently it bought a 70% stake in SICCO Securities in September, to be built into the existing CIMB Thai Bank; while that doesn’t create anything like a GK Goh level of standing in local broking, it does create a platform for growth. And at the end of February it 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,” says Charon. “We can give regional solutions to clients. It’s surprising the number of southeast Asian companies that are investing elsewhere in southeast Asia. There is a lot of interest in regional investment flows.”
Charon says CIMB is active in eight of the 10 Asean countries – the Philippines would be the ninth, leaving only Laos. “Intra-Asian trade is a big number, and a growing number,” he says. “Clearly, we want to be there, growing with that.”
Then, on March 1 – after the interview with Charon – CIMB confirmed it had signed an MOU to buy some of the cash equities, ECM and corporate finance businesses of RBS in Asia. Although CIMB declined further comment, 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 has similar ambitions with a US$1.4 billion 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 stockbroking and investment banking outside Malaysia; the deal gave it heft not only in Singapore but Thailand, the Philippines, Indonesia and Vietnam.
By November, unveiling a new “Maybank Kim Eng” corporate identity, the bank was talking boldly about becoming the premier investment bank in southeast Asia, with Tengku Dato Zafrul Tengku Aziz, the CEO of the new entity, pledging to add 10% to its headcount annually until 2015, growing its assets under management from $2 billion to $20 billion over the same timeframe. And that may not be the end: in February the head of the Thai arm of the business 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 most sophisticated market for Islamic finance in the world, in terms of its regulatory environment, business framework, education, and range of product (although not yet in overall assets). It dominates sukuk issuance worldwide and has increasingly sought to make Kuala Lumpur a hub through which international Islamic capital is managed and transacted.
Naturally, then, the presence of the world’s most populous Islamic nation on its doorstep in Indonesia represents a great opportunity, the more so since Indonesian institutions have as yet not really grasped that opportunity themselves. 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 colient 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 RHB, which holds a stake in Bank Mestika Dharma.
Still, it’s not as straightforward as it looks; while Asean makes for a convenient acronym, and has increasingly free trade, it would be quite wrong to think of it 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 foreigner must feel their way gradually.
