ICB Global Management replies to
queries by Malaysian Business.
THE International Commercial Bank Group (ICB), with a
string of banks in Eastern Europe and Africa, has come a long way since its
first bank was set up in the Czech Republic in 1993. But its acquisition of PT
Bank Bumiputera in Indonesia marks its entry into the big league of
international banking.
With the successful penetration of the Indonesian market,
the group looks set to expand beyond the non-traditional financial markets into
Southeast Asia or where it sees opportunities for growth. Harith Harun, general
manager of ICB Global Management Sdn Bhd, has been tasked with the job of
ensuring that plans are being put in place, in line with ICB’s aim of being
identified as a key player in the emerging markets.
ICB founder Tun Daim Zainuddin has declined a request by Malaysian
Business for an interview. However, we caught up with Harith to get some
insights into the group’s operations.
Harith, 49, started his banking career in 1981 at United
Malayan Banking Corporation and remained with the bank until 1993. In 1994, he
joined the ICB Group to set up ICB Budapest.
Harith was general manager of the bank for three years,
after which he came back to Malaysia to establish ICB banks in other countries.
Following are excerpts of the interview:
Eastern Europe and Africa are not exactly the traditional
financial centres. Except for the global European and United States banks, none
of the Malaysian or regional banks are in these countries. What do you see that
others don’t?
Our focus has always been on the emerging markets. These
markets provide relatively greater opportunities for growth in the long-term.
We entered the Eastern European market (Hungary and the Czech Republic) in
1993, at the early stage of the political and economic transition of countries
in the region following the collapse of the Soviet Union.
The transition from a closed, centrally planned economy
to a market ‘western-modelled’ economy had opened up new opportunities to
foreign investors in all fields. The establishment of banks, particularly foreign
banks, was very much welcomed by the various governments, not only to provide
the much-needed funds to rebuild the economy but also as a way to modernise the
old banking system, which hitherto was controlled by the state.
We went to Africa in 1996, at a time when our government
was actively encouraging Malaysian companies and businessmen to invest in
Africa - in line with the policy on South-South Cooperation. Petronas and
Telekom Malaysia are among the companies that have established a strong presence
on the continent. In the banking sector, there was a big scope, and there still
is, for new banks to set up operations.
With the rise in education and income level, customers
are demanding wider, more sophisticated and efficient banking services. You will
be surprised that even basic banking needs such as housing loans are not easily
available in some of these countries. Here is where Malaysian bankers can
impart their experience and skills to develop suitable and attractive products
to meet the customers’ needs.
Does ICB have what it takes to succeed in these markets?
We have been in these markets for 10 years now and have
acquired a fairly good knowledge of the local business conditions and
practices. We have invested substantially in people and systems. Our customer
base is growing every year. Each country is different and as such ICB strives
to ensure tailor-made and differentiated products to suit customer needs. We
want to be identified as a progressive bank, and committed towards excellence
in the provision of banking services to our customers.
Where and what will be the thrust of ICB’s expansion
plan?
The thrust of our expansion will be in Africa. We will be
commencing operations in Sierra Leone this month; and the next, in The Gambia,
is planned for November this year.
We expect to receive approval of banking licences in
three other countries in Africa later this year.?
What are the priority areas of focus at present?
Our group recognises that the key to penetrating the
emerging markets is to focus on capacity building. In this respect, we have
dedicated substantial investments to ensure that the best people are employed;
the operating systems are technologically superior; proven systems and methods
are implemented consistent with best practices; strong internal controls are
entrenched; and proactive risk management is implemented and respected.
Which market is the most profitable for the group?
It is difficult to compare the financial performance of
our banks in the two markets as the various banks are at different stages of
growth. Further, the banking environment is different not only between the two
markets but also among countries in the same market.?Having said that, based on
the performance of the group in recent years, we see that growth will be more
significant from our African operations.
What has ICB’s financial performance been like over the
past three years?
We are unable to provide the figures on group basis as
the accounts of the various banks are not consolidated.?Overall, growth in
assets, revenue and income has been within expectations. Total assets have
grown at an average rate of 60% a year. ROE of the respective banks on average
ranged from 5%-20% over the past three years.
What has contributed to the growth?
A significant portion of the growth was contributed by
lending activities. Our target segments are the middle market, SMEs and the
consumers. Trade finance business is also growing rapidly. It has to be noted
that the loan growth was funded entirely by customers’ deposits. Hence, the
substantial increase in deposits indicates that the public has confidence in
us.
ICB recently spread its wings to Indonesia. How important
is the market to the group? Is it the start of similar investments in Southeast
Asia?
Indonesia is an important market for us. The country has
gradually recovered from the Asian financial crisis, and has enjoyed political
and economic stability in the last few years. GDP has rebounded to pre-crisis
level. Over the next three years, GDP is forecast to grow at 4%-5% a year.
The banking sector is cleaner and leaner now following a
spate of mergers and consolidation. We see tremendous potential in the banking
sector considering the huge market. Indonesia is our first investment in
Southeast Asia. We however are not limiting our expansion to Southeast Asia but
are also looking for opportunities in other parts of Asia.
There is a view that the sale of Langkah Bahagia’s stake
in Malaysian Plantations marks Daim’s exit from the local banking sector so as
to concentrate on ICB’s operations overseas. Is this true?
Langkah Bahagia is not part of ICB and Daim sold his
interest a long time ago.
How would you describe your partnership with Temasek
Holdings?
A good partner to have.
( This article appeared in the September 2004 issue of Malaysian
Business magazine. )
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