Hurdle for CIMB
It may face problem in retaining RBS staff after acquisitions
SHORTLY after CIMB Group Holdings Bhd’s official announcement early this month that it was acquiring certain assets of Royal Bank of Scotland (RBS) in the AsiaPacific region, there were several reports that staff in the acquired units may start leaving.
A Wall Street Journal (WSJ) blog of March 2 and a more recent efinancial careers website report noted that a top priority of CIMB would be to retain key people in order that the acquisition, when it comes through, remains meaningful.
After all, with the little information that CIMB group chief executive Datuk Seri Nazir Razak had given out on the deal, most analysts in town have been either neutral or if they have any opinion at all, believe that this acquisition was to strengthen the bank’s presence outside Asean.
CIMB already has varying degrees of presence in most parts of Asean, the bank’s region of focus, and is in talks with San Miguel Corp to buy a 60% stake in the Manila-based Bank of Commerce as well as seeking a banking license in Laos.
The reports of a possible brain drain in RBS stem from investment bankers’ misgivings that CIMB might not offer them the platform to do the big deals with their big-name clients.
“There is an impression among many front-office and equivalent people within RBS that CIMB does not offer a good enough brand name from which to continue doing business with top-tier clients,” Warwick Pearmund, a Hong Kong-based senior consultant with Advantage Professional, said in the efinancial careers report.
Just as a comparison, CIMB is the second-largest bank in the country with assets of Rm300.2bil but compared with Singapore’s DBS Bank Ltd, the largest bank in South-east Asia with assets totalling S$340.84bil (Rm828.72bil), the former appears not to have the size or reach.
The WSJ said CIMB could face the same problems as when Japan’s Nomura Holdings Inc, which bought the Asian arm of Lehman Brothers and took in around 3,000 employees, saw its plans to turn into a global investment bank derailed after senior Lehman executives left due to differences in culture and Nomura’s smaller global presence.
RBS employees could also be motivated by a Bloomberg report quoting sources which said that some might be let go, with only two-thirds of the 600 workers to be kept, after the takeover and that CIMB was negotiating guaranteed compensation packages for those the bank wanted to retain.
However, CIMB might not be as generous, according to an unnamed source in the efinancial careers report, while in Nomura’s experience, former Lehman employees left after the bonuses were given out, a fact that CIMB might well take note off.
Another motivating factor could be that employees, already facing the prospect of more job insecurity (a common feature in the financial services industry in the past few years), might choose to leave first since RBS has shed more than 30,000 jobs over the last two years, with more to come after chief executive officer Stephen Hester said the Edinburgh-based bank would be selling overseas assets following an unexpected loss of Us$3.2bil for 2011.
There is an impression among many front-office and equivalent people within RBS that CIMB does not offer a good enough brand name from which to continue doing business with top-tier clients. — WARWICK PEARMUND
The Wall Street Journal said headhunters’ inboxes had been flooded with applications from RBS bankers looking for jobs in Hong Kong but given the volatility in the industry over the past five years, finding jobs might not be as easy, especially when these bankers were looking for jobs with other Western banks instead of Asian banks.
But CIMB might even benefit from the exodus of RBS employees since this would allow the bank to have the flexibility to plan for the future without having to carry the baggage of the past.
As analysts, who continue to speculate over CIMB’S move to acquire the RBS assets, pointed out, the bank’s strategy could be simply to reinforce its distribution channels and add value to its Asean clientele base.
Since it’s always the most marketable employees that leave first, CIMB might not even be at the losing end should more decide to go, as long as Nazir is willing to pay top dollar to lure others who want to have the opportunity to work with an up-and-coming regional player whose footprint in Asean, one of the most dynamic regions, is growing.