Charting the way for Maybank’s CFS
Amid the doom and gloom surrounding the banking industry, Datuk John Chong, group CEO, community financial services (CFS) at the country’s largest lender remains optimistic that growth will persist.
WHEN Datuk John Chong Eng Chuan was just starting out in the finance industry, his team won an award.
The media found out and wanted to learn more about that award, so Chong and his team arranged for a meeting, “staging” a background at his office for photographers and TV crew to better re-enact the award-winning moment.
“We staged a trading background, made it look as if we were very busy, with telephones everywhere, and I was on one too,” he recalls.
As it turns out, Chong’s grandfather in his hometown Ipoh saw a picture of him the next day in the papers, with telephone snugly attached to his ear.
Chong, who was in his twenties then, was summoned back and asked why was he merely manning phones at the office, after spending so many years studying economics in Australia.
“He thought I was the phone receptionist...,” Chong chuckles.
Since then, Chong now 52, has gone on to do several things in the world of finance.
Still, for most of his career, he’s been with only one bank, namely Malayan Banking Bhd (Maybank) and has been primarily focused on investment banking (IB) with his last position in that sphere being CEO of Maybank Investment Bank & Maybank Kim Eng (MKE).
In the past one year though, it’s been a slightly different ballgame.
Chong made the transition last October to a more consumer banking-centric business, heading Maybank’s community financial services (CFS) business pillar, one of the three main divisions at the lender with the other two being, Group Global Banking and Group Insurance
In his current role as group CEO of CFS, Chong oversees Maybank’s entire wealth management, consumer and branch, retail SME, business banking and virtual banking operations located across the Asean region.
“To be frank, I enjoy both IB and CFS, I spent 25 1/2 years helping corporates tap capital markets and raise funding but here, I get to touch the lives of people.
“Here, I’m funding SMES and the man on the street which are the people who really require funds to start their businesses, however small,” he tells Starbizweek in his first exclusive interview since assuming his current role.
Growth will continue, NIMS seeing dent
Although the largest bank in the country and fourth largest in Asean by asset size, Maybank has not been spared the brunt of the current slowdown in economic growth and drop in consumer sentiment to which its lending business is closely tied to.
For its most recent quarter, it booked a marginally lower net profit of Rm1.94bil against a net profit of Rm1.96bil for the same period a year earlier, with gross impaired loans ratio for the period at 2.01%, higher than the 1.81% posted in the corresponding quarter of last year.
Clearly aware that times are tough, Chong remains optimistic that growth will continue although he does admit that the current lower interest rate environment will “obviously” have some impact on net interest margins (NIMS) of not only Maybank but also of its counterparts.
Central banks globally have been slashing key interest rates in recent times, stoked by concerns that a worse-than-expected global slowdown amid trade risks is on the cards.
In Malaysia, Bank Negara reduced its key rate in May to 3% while neighbour Singapore eased monetary policy for the first time in three years earlier this month, after it reportedly narrowly escaped a recession.
Generally, a lower key interest rate set by central banks means that
banks have to lower their charges when selling their loans which are benchmarked against the key rate, thereby putting a dent on their NIMS, a main indicator of their profitability.
“We need to focus on growth in the right areas, products, solutions and businesses, the advantage that we have is that we have multiple products in multiple geographies in a region that we are very familiar with,” says Chong.
Maybank, like most of the larger regional banks, is present in all 10 Asean countries with its group CFS business focused on eight countries namely Malaysia, Singapore, Indonesia, the Philippines, Cambodia, Laos, Brunei and Hong Kong, for its private wealth business.
Currently, group CFS contributes
about 57% to Maybank’s group pre-tax profit, making it the single largest contributor in that aspect.
Within group CFS, Malaysia is the largest contributor to revenue, making up 60%-65% of total sales, followed by Indonesia at 16%.
So, what exactly is Chong’s strategy to ensure that growth will continue, what with consumers worried about the rising costs of living which may affect their decisions to take on fresh loans?
“If you look at the first half of 2019, loan growth for group CFS was about 6% and for Malaysia, it was about 6.5%, overall profitability was up 5%, so we are growing and we are profitable.”
Specifically, in the first half of this year, retail SME loans for Malaysia grew 12%, mortgage grew 9% while auto increased by 4.5%, he adds.
To counter increasing competition, the bleak outlook held by markets as well as to ensure continued growth, he says Maybank will focus on one thing it is good at, which is servicing.
“In terms of pricing, our pricing is fair as we have a responsibility not just to customers but also stakeholders and our depositors, it is in our interest to lend but we need to grow responsibly,” Chong says.
NIMS seem to be “holding” for now, according to Chong. But there needs to be a balance, he adds.
“Obviously, NIMS are compressing a bit but generally we need to balance it out with products where NIMS are higher and also, we have to focus on fee-based income, things like wealth management.
“Wealth management gives you the fee-based income,” Chong adds, as opposed to income from interest-generating products like loans.
“We of course also look at cost, but ultimately, we must grow the top line.”
According to a report by Mckinsey released just earlier this month, global bank lending grew by 4.4%, which it points out “was the slowest rate over the past five years and well below nominal GDP growth of 5.9%”.
Margins have also been declining for some time, it said, but the pace of deterioration has “quickened recently”.
Expanding private banking
Still, Chong remains positive. While the goal is to ensure growth across all segments, Maybank’s wealth management segment which houses its premier, privilege and private banking businesses will be one of the key growth drivers within its CFS pillar because besides generating fee income, it brings in a lot of other opportunities, Chong says.
Its private banking clients comprising high net worth (HNW) individuals for instance, have the potential to do so much more with the bank beyond even what CFS offers, he says.
“People are getting more affluent especially in Asean and wealth is growing, it is about how we serve them and how we can grow together.”
However, going by recent data, it appears that even this segment dominated by the rich did not escape declines as recent market volatility kept the wealthy from investing their monies.
According to the latest information released by Hong Kong-based publication Asian Private Banker, total assets under management (AUM ) at the 20 biggest private banks in the Asian region ex China dropped 3.6% to US$1.63 trillion last year.
AUM across the Asian region, it added, “grounded to a halt” amid the turbulent markets.
Competition is also heating up everywhere and it goes without saying that Maybank will need to fight hard to fend off competitors in the private banking market which has predominantly been controlled by the big boys such as Swiss Bank UBS Group AG, which last year alone handled wealth amounting to a whopping Us$357bil.
Even so, this was a decline of around 7% as it managed even more money in 2017.
“Private banking is not just about the margins and products, it is about relationships and good advisers and, of course being Maybank, we’ve got the whole suite of solutions, end-toend basically,” Chong says.
“All our segments are important but I think what we are stepping up now is our private banking where we have teams in Malaysia, Singapore and Hong Kong,” says Chong.
He says there is an intention to grow the private banking teams in line with growth expectations.
Maybank currently manages some Us$12.7bil in total financial assets for its HNW clients.