Focus on wealth management | The star

SOME 16 months later, CIMB Group Holdings Bhd The CEO of the group, Datuk Abdul Rahman Ahmad, is no less sure that the days to come will bring fewer challenges. Still, the banking group has a solid plan and is prepared to tackle these issues.

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

SBW: How has it been for you so far, overall? Abdul Rahman: I have not yet visited our operations in Malaysia and the region.

In that sense, it was extremely difficult.

At the same time, when I arrived last year, we were faced with the reality of our weakest results of the year because of the pandemic, but also because we had to take specific provisions on some of our old accounts, so it was extremely difficult.

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

In that sense, I am extremely grateful to the team and the board of directors. It’s been a roller coaster ride, but I think we’re on a positive course.

How do you plan to continue to optimize costs? The segments that we wanted to release, that was done, so there are no more areas that we need to release.

I think we fixed this problem with the business operations in Thailand and we have optimized or resized our business in Singapore.

When it comes to people, in general, natural attrition is already high within the banking industry.

However, we are very focused on good attrition management so that we know the areas that we can streamline.

We are investing in the right areas, for example in wealth management where we are very determined to want to add more relationship and sales managers to be able to better serve our clients.

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.

The size of the wealth management market is estimated to be close to RM40 billion and is expected to grow in double digits until 2025. So it is a significant market.

Due to the pandemic, liquidity has become extremely strong. CASAs (Current Account Savings Accounts) in all economies have grown due to spending constraints.

People who haven’t lost their jobs have seen their wealth increase because they can’t spend due to the lockdowns, so because of that cash flow has increased.

Coupled with the impact of low interest rates, the demand for wealth management will grow stronger and this is the fundamental reason why we and many other financial institutions are focusing on wealth management.

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

We are also seeing growth in Islamic wealth management, which is more relevant to Malaysia and Indonesia. As these two economies become not only richer but also more religiously aware, the demand for Islamic services becomes extremely large and increasing.

How important is consumer banking? The consumer banking sector is closely linked to wealth management, so on our side, consumption is extremely important.

In terms of ratio, personal banking currently accounts for 50% of our lending base in the region and we expect it to continue to grow on an asset basis.

While the growth in our loans this year shows that we are practically stable and that we have lowered our forecast to 2%, consumption continues to grow strongly in some markets.

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

We expect Indonesia as a market to grow faster in the next few years as it is part of a large growing economy.

Malaysia will probably be a little watered down by that point, but to be fair historically it (Indonesia) has been 30% and we would expect it to come back close to the 30% mark, at the future.

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

We have a mix of the existing team and new people.

We also have a succession plan in place.

CIMB has traditionally implemented very solid succession planning and we continue to improve it.

Are you going to make any changes to your dividend payments? No, it stays the same, 40-60% of our base profit.

I am happy that we can maintain this despite the difficult environment.

However, we remain vigilant on the strength of our capital and I am very happy that we were able to strengthen our CET-1 ratio to a high of 13.4%. In the past, we were below 13%.

We continue to optimize and balance the payment of dividends with the need to further strengthen our capital in order to be robust and able to meet any challenges.

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

How do you manage the expectations of your shareholders?

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

I think as long as we are clear enough with them and show progress in executing the plans, they will understand. This has been our approach, but we have to keep our promises.

Could you share with us some of CIMB’s sustainability efforts? Beyond the numbers, we understand that as a goal-driven organization our goal is to move customers forward in society.

The subject of sustainability really comes to the fore and this is where CIMB is probably one of the first organizations to take the lead. We were one of the first to announce our exit from coal (funding) and we continue to make sustainable development a priority.

This year is our third year of hosting the CIMB Cooler Earth Sustainability Summit, where we bring together a large number of think tanks and leaders to discuss how we can advance the sustainability agenda.

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Michael J. Birnbaum

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