Asian focus keeps CIMB ahead of the competition

Rather than the global orientation of banks such as JP Morgan and Citi, CIMB, one of South East Asia’s rising stars, seeks to implement a regional focus in its portfolio construction, something clients can relate to.

“Investors in this part of the world prefer an Asian-centric portfolio,” confirms Carolyn Leng, chief executive of CIMB Private Banking, who set up the operation 12 years ago.

“They understand these investments, which are close by and they can hear that pulse beating.”

But initially, she struggled with brand recognition. “We were under the umbrella of Commerce International Merchant Bank. People did not know the name and marketing was difficult,” says Ms Leng.

Word of mouth referrals helped attract clients, as did ownership by Malaysian sovereign wealth fund Khazanah. “You can lend on their rating and give peace of mind to investors. If high net worth individuals are putting money with you, they want to know who is backing you as an organisation.”

Since setting up in 2002, assets at the private banking division of CIMB have risen to MYR16.2bn (€3.8bn) and Ms Leng hopes to breach the MYR20bn barrier by 2015, with funds flowing in from entrepreneurs.

“Malaysia is a country with a small and medium enterprise culture. That segment is a sweet spot for us,” she says. “We are talking to people building their business and already taking enough day-to-day risk. They come to us for wealth preservation. We can help them to not only protect what they have made, but to beat inflation with the consistency of our returns.”

Ms Leng talks engagingly about the benefits and challenges of doing business in a country with a strong community-based ethos, with much tighter ties holding people together than some Western private banking arenas.

“Wealthy individuals typically hang out in a network, focusing on their association or their town and they tend to stick together,” she says. “You break through to one of them and they will introduce you to their friends and contacts. But just one bad incident, and your reputation for integrity has gone.”

As long as her bank can keep this trust, the future is bright, believes Ms Leng, as there are not currently huge numbers of Malaysian banks competing in this sphere. “Onshore wise, there are not a whole lot of institutions that offer these sort of private banking services,” she says. “So our clients tend to put a fair bit with us. We have been attracting more money from the ultra high net worth segment over the last couple of years.”

Yet she acknowledges sharper domestic competition from the likes of Maybank, which has focused more on the mass affluent market to date. “It is good to have this competition, as you can become complacent.”

Indeed, she also plans to encroach further into the territory of Maybank, which has championed Islamic investments in Malaysia. “The Islamic side has catered more for Muslim clients, who cannot receive interest, only profit sharing. But Islamic wealth management is increasingly appealing to Chinese customers, who appreciate the ethical dimension. Many like to buy companies that are socially responsible and prohibit investments in alcohol production or gambling.”

She dismisses foreign institutions, even those from neighbouring Asean countries, as having a lack of commitment to infrastructure and onshore branch banking, a must for Malaysian clients.

The greater danger, believes Ms Leng, will come from within Malaysia, where banks such as RHB, which has completed a merger with OSK, are gearing up for onshore expansion.

“The foreign shops come and go,” she says. “Things don’t work out, they need to rationalise and they move on. Our clients are very well aware of that. You need to be really committed to set up shop and clients will want to be with you for three or four years before they invest serious money.”

That said, Ms Leng expects CIMB’s own private banking business to become an increasingly cross-border operation. But this does not mean setting up networks to woo local clients in Indonesia or Thailand. Rather, an expanding Singapore-based hub will cater to the regional orientation of businesses owned by Malaysian customers.

Last year’s group buyout of RBS Asia Pacific investment banking operations will also give CIMB a “touch-point” in North Asia. “This will transcend into private banking,” believes Ms Leng. “We will be able to deliver and leverage investment research and fund buys relating to North Asia for our private clients.”    

CIMB Private Banking was judged ‘Best Private Bank in Malaysia’ for 2013. See Cover Story p14