Thai unit at heart of CIMB's plans for region

Betting on deepening Asean integration, CIMB Group, the fifth largest bank in the region, is striving to become the first true Asean enterprise and plans to use CIMB Thai as a vehicle to expand into the new frontiers of Myanmar and Laos.
Many rounds of mergers and acquisitions have turned CIMB Group into a regional powerhouse with assets of about US$95 billion, and put it in a better position to take advantage of the Asean Economic Community when it arrives in 2015 with a single market of 600 million consumers.
“Our ‘Ambition 2015’ is to be a leading Asean franchise. When I say franchise it is beyond banking. We want to be the first true Asean company,” CEO Nazir Razak said in Kuala Lumpur last week in an interview with Thai reporters.
To do that, the group needs platforms in all markets in Asean. Now the bank has the capability to do universal banking, providing commercial and investment services, in all five major markets – Indonesia, Thailand, Malaysia, Singapore and the Philippines.
About 60 per cent of its business is in its home base, Malaysia, while 30 per cent is in Indonesia and 10 per cent in the rest of Asean.
The group already has a representative office in Myanmar and is waiting for clear rules for foreign bank operations in the country before submitting an application to open a bank branch or obtain a banking licence.
The group recently acquired Asia Pacific Investment Bank and the equities operation of RBS to gain a strong investment banking presence in key markets – India, Australia, Greater China, the United States and the United Kingdom – that interact with Asean.
The group’s businesses in the US and UK are marketing offices for distributing shares of listed firms in the Asean market to fund managers in those two countries.
“CIMB in terms of platform, |it is complete but what is incom-plete is the leveraging of the plat-form in an individual country |and creating synergy between |various operations,” he said.
The group’s business in Malaysia is mature and in Indonesia is relatively mature, while its presence in Thailand, Singapore and the Philippines is still small but shows potential for high growth.
The investment banking operation is well positioned but consumer banking has yet to find the right strategy. The group wants to increase its consumer banking business in Thailand but it will take time. The group also face legacy problems as CIMB acquired a Thai bank in 2008 because the local bank was in trouble.
To get a fresh start, the group has installed a new core banking system for CIMB Thai Bank and embarked on rebranding.
The other obstacle is environmental surprises – political conflicts and the devastating floods last year. This kind of surprise does not help.
Having been in Thailand for three years, the group has demonstrated that it can do business here, especially supporting Thai corporations to do business in other Asean countries.
“More Thai businesses today are operating in Indonesia because of CIMB,’’ he said.
As the group can send business records from CIMB Thai to CIMB Niaga in Indonesia, relationships between Thai and Indonesian investors can be built quickly.
There is a relatively high language barrier for Thais compared to their counterparts in Malaysia, Singapore and Indonesia, so Thais feel comfortable when they are accompanied by CIMB staff who often also act as their interpreter.
Nazir ruled out any new M&A in Thailand in the near to medium term.
CIMB is very committed to Asean economic integration. It has set up the Asean Research Institute and has been a promoter of the Asean Business Club.
However, leadership to implement Asean integration might be lacking.
“We’re very supportive of the Asean Economic Community agenda of 2015. We’re concerned about the readiness of Asean people and businesses for 2015. And we’re concerned about the political will to fully execute Asean,” he said.
Economic integration brings many winners but also some losers. The worry is that the losers become very loud. And politicians only hear the losers. And they get nervous. Then they’ll slow down Asean economic integration.
“That is my big worry. So if you focus on the few losers, you would never get this done. If you focus on the big winners, it is beneficial for Asean as a whole and it’s a key to survival in terms of the economic relevance of our region,” he said.
The future belongs to large economies like China, India, Europe and the United States.
CIMB Group does not aim to be largest bank in Asean but wants to attain a certain scale and achieve efficiency.
Banks in the United States and Europe have got into trouble – bankruptcy and large losses from risk trading – because the West is over-sophisticated in their banking activities.
“It’ s easier to govern when your businesses are not complicated,” he added.