CIMB Islamic is the name of the bank that most non-Malaysian players are familiar with, but staying at the head of the pack is a full time job, as Badlisyah Abdul Ghani, chief executive officer of the bank tells Paul McNamara
When an observer looks at the Islamic banking scene in Malaysia then CIMB Islamic's name pops up more often than just about any other player in the market. The reasons for this stem not just from having all the best deals, it has a lot to do with simply never giving up and plugging away on a constant basis.
CIMB Islamic's offering covers the range from investment banking, asset management and retail banking. To these traditional offerings has recently been added private banking.
The CIMB Group is set to launch Malaysia's first fully fledged private banking service based on Shari'ah principles this year and it will be made available through its private banking unit. The new offering is targeted at high net worth individuals who have in excess of $300,000 in investable assets and want personalized wealth management services, advisory and investment products that conform to Shari'ah principles.
We caught up with Badlisyah Abdul Ghani recently to discuss the strategy and focus of the bank.
What was the strategy behind the launch of CIMB Islamic and how has the vision changed since then?
The CIMB Group started in Islamic banking back in 1996 and we grew into the business from a product perspective meaning that if there was a demand out there for an Islamic finance product from our customers then we should meet that need. We went through the whole process of initiating the difference first with Islamic debt capital market products; we never bothered with anything else at that time. In those early days because we did not have the skill sets in-house we decided to tie up with a Middle Eastern group and set up an organisation as a JV.
We ran than business for about two years and it didn't work purely from a clash of management styles point of view. Around 2000 we split away and went on our own still on a product by product basis.
In 2002 the management decided that there was something not quite right in the way were doing things and we discovered that by doing things on a product-by-product basis that we were unable to have a sustainable approach to the business. This is because products vary in their popularity from time to time and it makes it difficult to plan. So we decided to look at the business in a comprehensive manner and consolidate the whole infrastructure into one and we would call it CIMB Islamic.
We pooled all the products together and looked at it as a pure business. The CIMB Islamic brand was established in 2002 and from there we expanded our portfolio from debt capital markets into equity capital markets, treasury operations, development of Islamic derivatives, the development of Islamic structure products and the like.
As the group grows into a bugger animal from a mere merchant bank into an investment bank or from an investment bank into a universal bank so too would CIMB Islamic emerge as a universal Islamic bank. So we have commercial and retail banking as part of the mix as well as Takaful so it is the approach to the business that has made the difference for us.
Where do you consider to be your marketplace for products?
In general our wish is to be the most valued universal bank in South East Asia. The group now has a presence in most countries in South East Asia and in those countries we will undertake both investment banking and consumer banking. Predominantly investment banking because we were in the investment banking market much earlier than consumer banking and so we are established as the biggest investment bank in South East Asia.
In terms of consumer banking we have a subsidiary in Indonesia called PT Bank Niaga and this is one of the top seven banks in Indonesia. In Singapore we have a fully fledged bank in Singapore that offers consumer banking as well as investment banking under two licenses but in other countries we only offer investment banking at the moment. In line with those activities that we have under the group the CIMB Islamic will be operating in a similar manner. In Indonesia we have what we call Shari'ah Niaga and this is involved in consumer banking and we have also been involved in Islamic investment banking.
We also look at the rest of the world and in the GCC we have an office in Bahrain. We also have a presence in London and Hong Kong and we will be introducing Islamic products there. For instance our license in London is a full license and allows us to do both investment banking as well as retail banking.
How do you find the Indonesian market compared to the domestic market in Malaysia?
Indonesia is a very exciting market for Islamic banking. I look at Indonesia as being rather like Malaysia back in 1983. Back then the market share was about 1 per cent and subject to the introduction of Sukuk law that is being debated in parliament. Once it is out I see that the market will boom. That was the Malaysian experience between 1983 and 1993. You will see an exodus of funds and new products being issued into the market in Indonesia.
Are you equally involved in the domestic Malaysian capital market and the international capital market?
We are in both markets. As a group CIMB has been active in the capital market on the conventional side for a long, long time. When the Islamic capital market started we also delved into that in the early days. We became involved in the Qatar Global Sukuk. We did the IDB Sukuk. We did the Tabreed Sukuk but our involvement there is not as aggressive as we have wanted it to be because we went through a very vigorous expansion drive for two to three years.
The industry started sometime in 2001 and we became involved sometime in 2003 and then we went into the expansion plan exercise to convert ourselves into a universal bank and we got slightly sidetracked in doing that. But now those exercises are complete and we started our Bahrain office early this year to prepare for our next stage of development within the Islamic capital market globally.
The Malaysian Islamic capital market is much more active than any other in terms of secondary trading. Does this put CIMB Islamic in a stronger position than banks in the GCC as the global market develops?
To a certain degree then track record does help when it comes to winning new mandates. If you look at statistics of Sukuk deals in Malaysia, yes the documentation is similar but at least 50 per cent is still different. Understanding what investors need and matching that with what we can offer is where the key to success lies. Documentation is irrelevant.
What was the strategy behind opening in Bahrain?
Bahrain was our first port of call for dealing with the GCC. From 2002 we took the time to learn the market and get acquainted with investors. We decided that we would not go into the market in the GCC without having someone local along with us. We too some time to find the right partner and we found that in the Kanoo Group.
We got into a 50/50 JV with them where we provide the relevant financial experience and muscle and they provide us with the local contacts. People ask us why we didn't do it with another financial institution but we felt that synergies can be derived from many areas. If we tied up with a financial group then we may have found that we have the same strengths and this doesn't lead to synergy.
From Bahrain we looked at growing our business in stages. Predominantly our license in Bahrain allows us to do Islamic investment banking so we will focus on debt capital markets, equity capital markets, asset management and at the same time growing the business and expanding our network into Qatar, Kuwait, UAE and eventually our main target market which is Saudi Arabia.
Why Bahrain and not DIFC?
We explored all avenues and we found that Bahrain had a more established legal framework for Islamic financial institutions. From a logistical perspective it is also closer to Saudi, Kuwait and Qatar than other centres. There are also historical ties on a financial transaction basis between Bahrain and those other countries within the GCC. This does not mean that we won't use other financial markets in the region.
Did you look at the Maybank experience in Bahrain?
We were active in Bahrain long before Maybank.
How well established do you need the Bahrain business to be before you look to the next area to set up, like Europe for instance?
We are already in London and have an office there to cover any business we might do in Europe. We look at this in the long term and eventually we will be present in all GCC markets.
How do you plan business development across business lines?
We go in stages but our core businesses are consumer banking, investment banking, asset management, private banking and Takaful. In Malaysia we have the full spectrum in that market and we have established each area. When we go into a new area typically we need to establish what sells best in that market. You need to ask how well prepared you are to offer that product in that market. When we look at Bahrain, for example, we see the need for debt capital markets products and Shari'ah compliant expertise. So we have made that a priority.
At the same time we also have skill sets in asset management and we manage over 50 Islamic funds in Malaysia. We can bring this to the GCC and quite a number of our funds in Malaysia are being invested by GCC investors anyway.
Are you under pressure to move more into private equity?
If you look at our group structure you will see that private equity is a separate entity. We have a holding. Essentially CIMB Islamic is a franchise and is anchored by CIMB Islamic Bank Berhad which is the licensed Islamic bank. But all the CIMB Islamic asset management activity for instance is not run it under CIMB Islamic. We will run it under CIMB-Principal, CIMB Private Equity, under CIMB Mapletree and so on. Each one will have Islamic operations. Our activity is not confined to CIMB Islamic Bank Berhad.
© Banker Middle East 2007
