- 4 months ago
Insightful perspectives from CIMB Group CEO, Novan Amirudin on ASEAN’s economic trajectory, digital transformation, and regional financial resilience.
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00:00Let's start with some of the key facts about ASEAN, which I'm pretty sure all of you guys
00:12are aware of in terms of ASEAN. Of course, ASEAN is the home for over 618 million people,
00:19more than European Union or EU itself. And of course, collectively, ASEAN is already
00:25the fifth largest economy in the world. And by 2030, it's projected to be the fourth largest economy in the world.
00:32It's very significant. And in terms of digital adoption, which will be touched about the topic,
00:39digital adoption is accelerating. Southeast Asia itself added over 100 million new internet users
00:48in just the last five years. Of course, this year, the region's digital economy is projected to hit
00:56about 300 billion US dollars. These are the numbers to show how significant it is in terms of ASEAN moving forward.
01:03And nearly 60% of ASEAN consumers now prefer digital banking over traditional branches.
01:10And one out of three businesses in the region are already demanding great financing solutions.
01:16We really touched about it from the next session as well. And of course, it is no surprise that banks are transforming fast.
01:26Nine out of ten ASEAN banks are now prioritizing digital strategies.
01:32CMP, of course, is at the forefront. And we are talking about AI-driven, we are talking also about financial,
01:40yeah, it's driven as a financial tool and short-compliant digital product as well.
01:45Of course, and ASEAN currently, just like any other region and any other countries,
01:50we are at the crossroads now in terms of facing geopolitical and geoeconomic tensions.
01:55And also, digitalization is basically redefining industries. And sustainability is no longer an option
02:03for most of the companies and business in this particular region.
02:07Having said that, let me introduce to you, Novan Amiruddin, the group CEO of CMP Group.
02:12Novan, thank you so much. It's a pleasure having you with us today.
02:16So, for the next one hour, we're going to split the session into two.
02:20So, we're going to have, Novan and I are going to speak, talk about the topics in regards to CMP.
02:26After that, we're going to open to Q&A, which I'm pretty sure all of the original members of the media
02:31would like to ask questions. So, just like when I told Tommy, Novan,
02:37I'm putting my moderator hat today rather than Julie's hat, but worry not.
02:45I supplied all my questions to Norman. So, Norman would be asking questions.
02:50So, I'm going to ask as a journalist.
02:52I want to ask first, because let's start with the easiest topic.
02:57The geopolitical and geoeconomic tensions.
03:01We've seen a lot of numbers being said in terms of tariffs that is impacting this region
03:08from 10% all the way to 45%. Of course, the number has changed depending on the trade deals now.
03:13But in terms of CMP, with raising geopolitical and geoeconomic tensions,
03:18how is CMP basically recalibrating its regional risk lands, especially in trade-exposed economies?
03:28Well, Najib, thank you so much for coming to our office today.
03:35Thank you for your time. And also to the media all across the region.
03:41Thank you for coming to CIMB and KL today.
03:46I'm not going to elaborate about the tariffs and the geopolitics.
03:50We all know that. Your question about how is CIMB recalibrating?
03:57I wouldn't use the word recalibrate.
04:01At the end of the day, we are a purpose-driven bank.
04:05And our purpose is to advance customers and societies in all the markets that we operate.
04:13In these times of heightened uncertainty and volatility, we are going to increase our focus to be with our clients.
04:27Because this is a time where there's a lot of uncertainty, it's difficult to predict, difficult to forecast, difficult to do business.
04:35This is the time where CIMB is double downing and going to spend more time with our customers.
04:41You know, we're going to be travelling more, we're going to be discussing more with our customers.
04:45We're going to be finding ways to provide better solutions in times like this.
04:50So if your question is about how are we recalibrating, I would say we are recalibrating by spending more time with our customers.
04:58Because ASEAN is our home, our purpose is the customers and society.
05:04And therefore, we're going to spend a lot more time in ASEAN with our customers.
05:10The trade is such intertwined in that sense, it's very complex.
05:14But in terms of tariffs and in terms of the uncertainties that are happening currently,
05:18how do you support your clients in navigating across border uncertainties?
05:23One thing, and also opportunity you see emerge from the whole situation in this particular region.
05:31So, there are a few areas in terms of how we are focused on supporting our clients,
05:39reducing uncertainties in times of heightened volatility that we're seeing.
05:44And I'll break this down into a few areas.
05:47One area is we need to reduce friction.
05:50And if we reduce friction, make it easier for our customers to conduct business,
05:56to conduct their payments, that would reduce some level of uncertainty.
06:01And with that, CIMB is extremely focused on our digital offerings.
06:06And we have digital offerings for every customer segment.
06:09For retail customers, we have our OctoApp that is extremely focused on the fastest and smoothest and safest customer journeys.
06:19For the larger mass retail market, including the underserved, here in Malaysia, we have Touch and Go,
06:28which is our wallet that serves 30 million customers.
06:32And, you know, we're going to launch in October a refreshed version of what we call OctoBase.
06:39And this is the equivalent of Octo for our consumers.
06:45This digital offering will be for companies.
06:49And we're going to launch OctoBase in October across the region.
06:53And OctoBase is going to be the digital way for our non-retail customers to basically operate.
07:00So that is in terms of reducing friction.
07:04Another example of how CIMB is reducing uncertainties for our customers is with regards to,
07:12whenever you do a lot of cross-border deals, you know, what is your biggest headache?
07:16It's FX, right?
07:17You know, you need to make payments in different currencies, collections in different currencies.
07:22You need to forecast, you know, how FX would change, how would you hedge those risks.
07:27That's an area where CIMB is basically one of the top players in ASEAN today.
07:32You know, we have an extremely strong wholesale and treasury markets team where, you know, FX is one of our main business pillars.
07:42I'll give you one example.
07:43For those of you in Singapore, I don't know if you're a CIMB customer, but what we do is we guarantee the best FX rate between Singapore and Malaysia.
07:54And it goes back to our purpose of advancing customers and society because we know that there's a lot of people in Singapore who actually send money to Malaysia.
08:06You could be a Malaysian working in Singapore, send money back home to your parents, you know, pay your mortgage, pay school fees for some of your family members.
08:15And you need to reduce that headache of uncertainty of what the FX rate would be.
08:20And we at CIMB guarantee the best FX rate.
08:23So there is one product that has been extremely successful for us.
08:28When it comes to investments, and when we talk about investments, one area that is discussed a lot is FDIs.
08:35We all heard about the Johor Singapore Special Economic Zone.
08:39A couple of months ago, Najib, I think when we were speaking in Johor during the launch of the event, CIMB made a commitment that we are going to mobilize 10 billion ringgit of financing over the next three years.
08:54And 10 billion ringgit, you know, it's roughly about slightly over 2 billion US dollars.
08:59We've also introduced what we call the ASEAN passport that allows accelerated onboarding for our ASEAN customers in other parts of the region to be able to onboard into Johor Singapore Special Economic Zone.
09:14So that also reduces uncertainties for our customers.
09:18I mean, one other area that we're a big champion of, I mean, CIMB, we're a big investment bank that focuses on, you know, deals that would benefit our clients.
09:30Earlier this year, we closed the first Malaysia-Indonesia mergers and acquisition.
09:40Excel ASEAN, which is controlled by ASEAN here in Malaysia, merged with SmartFriend in Indonesia.
09:50You know, and CIMB was working on that transaction, which merged those two telcos.
09:57And the merger of those two telcos were extremely important in the highly competitive telco industry in Indonesia.
10:04But that is one example of how we brought together, you know, two corporates, one from Indonesia, one from Malaysia together to form a stronger company.
10:13So, I mean, those are some examples of how, you know, we are assisting our clients to reduce uncertainties in this period of heightened volatility.
10:24I want to touch a little bit about the regional as well, because you mentioned, this is my experience.
10:29Because last month, I went to St. Petersburg.
10:32Obviously, you cannot use your card and everything in Russia.
10:35So, I cannot buy anything, I cannot pay anything.
10:38After that, straight away to Tianjin, China, where I can finally, you know, relax because there's touching going and I'll pay.
10:44So, that's the thing that I'm and us as, you know, a Malaysian in ASEAN can, you know, really feel what is it, what is ASEAN all about in terms of population, right?
10:55People as a whole.
10:56So, this is the kind of things that I think people would like to ask, what more can ASEAN, I mean, from your perspective of banking side, can provide to the people,
11:04around this region.
11:05But I want to ask, despite all these headlines and uncertainties, turbulence and all that, what are some of the deep fundamentals of ASEAN that you see,
11:17based on your point of view, that the investors should be looking at or watching?
11:23I mean, that's an interesting question.
11:28It's a, in fact, a question that's been asked a lot about, you know, what are the benefits of ASEAN?
11:37I think we all know the benefits of ASEAN.
11:39I think we all know that it's a young population, rising middle class, you know, fastest growing GDP, attracts the large amount of FDI globally.
11:49So we all know the benefits of ASEAN.
11:54But I think the one thing that ASEAN hasn't done enough, and it's something that we really need to focus on,
12:02and this is something that, you know, we're also looking at with our customers, ASEAN is probably not telling enough stories.
12:11And let me give you an example, and just compare between markets in ASEAN versus the United States, for example.
12:23Let's take Malaysia.
12:25Malaysia, we have 30 million people.
12:28US has about, what, 300?
12:30So the population is about 10x the size.
12:33But if you compare the market cap of Bursa Malaysia, which is the Malaysian Stock Exchange, versus the S&P 500, that's like 140 times.
12:45It just doesn't make sense.
12:46The size of the US financial capital markets versus any market in ASEAN, whether it's the Malaysian Stock Exchange, or the Singapore Stock Exchange, or even Thailand,
12:57it just doesn't correlate with the difference in population size between a country in ASEAN versus the United States.
13:08And the reason why there's such a big diversion, the US market is so large, is because there's a lot of capital parked there today.
13:17There's a lot of capital parked there.
13:19You could argue that it's, you know, being invested, and its value is a lot driven by, you know, the big seven companies that has a lot of stories to tell.
13:29But you compare and contrast that to ASEAN, where there's a lot of ideas, in my view.
13:36There's a lot of investment proposition, but we haven't been telling enough stories about what is available here.
13:47And I think it's extremely important that we now focus on it.
13:51Because I mentioned about how the US market is 140 times the size of, say, the Malaysian Stock Exchange.
13:58And if you just look up the numbers, and I've seen this being mentioned a number of times,
14:05about close to 30 trillion of US financial assets today, if you add up bond market, stock market, you know, private markets and whatnot, you just add all those up.
14:20About 30 trillion US dollars are held by foreigners.
14:24So US is a very big market, but 30 trillion of the financial assets are held by foreigners.
14:31Of that 30 trillion number, I recall seeing somewhere that 20% is owned by East Asian governments or East Asian economies.
14:41So whether it's in China, Korea, Japan, you know, they own about 6 trillion of US financial assets.
14:48Because of the current geopolitics, this capital needs to find a new home.
14:55And we in ASEAN need to make sure that we are able to seize the opportunity and get our fair share of that capital.
15:03So that's why we need to start to tell better stories.
15:07And that is something that we're working on with our customers.
15:10I think Thai media representative just joined us.
15:14They have a huge presence in this particular hall.
15:17I want to talk about specific countries' operations for CNB.
15:21Let's start off with CNB Thai first.
15:24Because CNB Thai, you know, has had to operate in a very competitive and also maturing market in that sense.
15:32So what is your strategy today on CNB Thai in terms of, you know, creating value direction for CNB Thai and also long term strategy?
15:44We've been in Thailand for a number of years.
15:47It's an important part of our overall ASEAN franchise, despite the challenges that, you know, we all know is facing Thailand today.
15:57I mean, Thailand is facing, you know, a number of economic headwinds due to, I guess, the last big investment cycle in Thailand was petrochemicals and automotive.
16:12It's been a while since large investment cycles were done.
16:18A lot of reliance on tourism.
16:21The tourism numbers have come back, but they're probably not spending like what they used to spend pre-COVID.
16:27And therefore, as a result, economic growth, GDP growth in Thailand, you know, is about 1% today.
16:35We are facing these issues as well, being an operator in Thailand.
16:42But Thailand remains an important part of our overall franchise because it completes the ASEAN proposition for us.
16:54So while Thailand is challenging in terms of local economy and economic growth at this point in time, there's a lot of Thai corporates that has been extremely active in terms of going out of Thailand.
17:06And we at CIMB, we've been playing an instrumental role in banking all these large Thai corporates in venturing out.
17:16I mean, for example, you have the SIPI group, you know, that is in Malaysia here today via Lotus.
17:22And we are, you know, a banker of a large group there.
17:27I mean, you see Siam Semen out in Indonesia via Barito Pacific.
17:32You see TCC group in Thailand in Malaysia and Singapore via Fraser.
17:38So you're seeing, you know, a lot of activity over the last many years where Thai corporates have been venturing out despite the challenges seen in the local market.
17:47We continue to play our role to facilitate all these cross-border flows.
17:55But having said that, we still play our role in the local Thai market just that because of the current headwinds that's being faced, you know, we're seeing a lot of, you know, more volume in terms of cross-border transactions.
18:08It is about Thailand.
18:10I'm pretty sure there's a lot of questions about CIMB Thai from the Thai representative, which you can ask later on during the Q&A sessions.
18:18But I want to talk about Indonesia market because this is very interesting because Indonesia is, of course, one of the major pillars for CIMB itself.
18:26And how are you positioning CIMB, Niagara, for the next decade in terms of, you know, growth, particularly in Indonesia, a growing middle class and also digital economy?
18:39Well, Indonesia is a large market for us. About 25% of our business today is in Indonesia.
18:49We are the, you know, fifth largest bank in Indonesia today.
18:53But I think one area that would be very exciting for Indonesia moving forward is on Islamic banking.
19:00I mean, it's the world's largest Muslim population, but Islamic banking penetration today is only about 8% of the market.
19:10Compare and contrast that to Malaysia, where Islamic banking penetration is 50% of the market.
19:16And we at CIMB, we've played an integral role in building that to 50%.
19:22A lot of lessons learned, a lot of innovation, a lot of, you know, new products introduced.
19:28We want to take a lot of that learnings into the Indonesian market where the penetration rate today is a lot lower.
19:36So I do see Islamic banking as being a very exciting area for Indonesia moving forward.
19:43You mentioned about Islamic banking. This is very interesting because share with us the vision of having, you know, Islamic banking or CIMB in that sense for the Malaysian market.
19:55But for Indonesia, in terms of the transformation and the vision of transformation also,
20:00vision for commercial and also institutionally for the Indonesian market.
20:05I mean, for the Islamic banking Indonesia because you mentioned that the pivot, I wouldn't, you know, I wouldn't use pivot as the word.
20:15But in terms of CIMB, Niaga Sharia, is that the correct name?
20:20How do you see the vision for CIMB Niaga Sharia in terms of, in terms of providing more transformation in the Indonesian market?
20:30So you're right, the word pivot is not right, because we've been growing the Sharia business significantly over the last few years in Indonesia.
20:41Islamic banking is extremely important as part of our entire group.
20:44I mean, where I see, you know, CIMB Niaga Sharia playing the role of the Indonesian market is in the product innovation, in the solutions that we can basically bring to Indonesia itself.
21:00I mean, there's a lot of lessons that we have learned from the Malaysian market, marry that together with the domestic nuances of operating in Indonesia.
21:10Different perspectives, different cultures, different requirements.
21:13You know, we want to provide, you know, Indonesians with a good alternative towards the banking products that are available today.
21:24So I do see a lot of, you know, areas for us to play at, because the penetration today is only 8%.
21:30The demand is high, world largest Muslim population, and we have the products and solutions to be brought over.
21:43I want to talk also about the, because you have experience in terms of, you know, operating digital banks in Vietnam, also Philippines.
21:50How, basically, has this, you know, operating model contributed to the growth of overall groups, overall growth, and also, how are you tannering your approach compared to, you know, other ASEAN markets, for these two particular markets especially?
22:08So, Vietnam, Philippines has been extremely important to us.
22:13You know, we have full banking licences in those two countries.
22:16We chose to operate digitally when we started about 5-6 years ago.
22:21Today, we allocate about 1-2% of our capital towards developing the digital banks in Vietnam and Philippines.
22:28But the benefit that we're getting from Vietnam and Philippines is not just from those digital banks alone.
22:34I mean, those digital banks alone, in the fastest growing markets in ASEAN, yes, that's exciting.
22:40But to me, what's more exciting is what the lessons that we're learning from Vietnam and Philippines, that we're applying it throughout the entire CIMP group.
22:49I mean, in Vietnam and Philippines, we learn exactly how to operate and to expand digitally, whether it is digital internal processes, digital ways of reaching out to customers, and we are then implementing them as we digitize the entire CIMP group.
23:06So, that's one of the first benefits.
23:09The second is the way we've expanded.
23:10So, we've expanded in Philippines via a very unique partnership model.
23:14We realized that when we first started in Philippines six years ago, if you want to grow organically on your own, it's extremely difficult.
23:21What we did was we partnered a number of e-commerce players.
23:26The e-commerce players have access to a lot of customers.
23:29We then partnered these e-commerce players by providing banking solutions to these e-commerce customers.
23:37That allowed us to scale a lot faster than if we would have done it organically.
23:42So, Philippines, for example, we now have eight million customers, of which six million were scaled via the partnership approach.
23:50We are using this same partnership model today to grow in our, you know, more conventional larger markets.
23:59So, for example, Malaysia, Indonesia, we're looking at partnership approaches to also grow our customer base.
24:05So, it's not just the benefit of the digital businesses in Vietnam and Philippines per se, but it's the learnings that we have developed to be applied across the entire group.
24:19All right, let's talk about digital journey because I mentioned just how we're going to touch a little bit about digital journey, especially AI, artificial intelligence and also innovation for CIB.
24:28There's a lot of initiatives under your group, but let's talk about AI because AI is such a thing now for every industry.
24:37But for CIB itself, how do you incorporate AI in terms of cooperation across, I mean, across the region itself, not just from Malaysia, for instance, but across the region?
24:46How does AI basically help in terms of the operation?
24:50Yes, we have started that journey. Of course, I want to ensure that we do more in terms of our investments into AI.
25:00Right, and it's not necessarily just AI in a front-facing app in terms of what customers see.
25:06It's also AI in terms of how we operate our business, the processes that we currently do, you know, things that are manual, how do we automate it?
25:14Things that used to take five steps, how do we reduce it to three steps?
25:18How do we make us more efficient? How do we make us a lot more resilient?
25:22That is, you know, how we are looking at AI across the entire organization.
25:27I mean, one example is in our risk models today.
25:30You know, a long time ago, we have a person building a risk model using the data, building a regression analysis and then, you know, building our risk models.
25:41But, you know, with AI, it allows us to use data from various sources a lot faster in order for us to drill our risk models.
25:51In terms of transaction monitoring, you know, how do we use AI to basically monitor transactions, monitor potential scam, fraud, mule accounts a lot faster, a lot quicker, you know, a lot more efficient and better.
26:06In terms of call center, when you call a call center, you want to, you know, inquire about your credit card points.
26:13In the past, you would have a call center operator navigating across six, seven screens to tell you how much points you have accumulated from your air mouse to your grocery shopping, you know, to do all sorts of stuff.
26:28But, you know, with AI and chatbots, it allows the customer service operator to give you a much faster answer.
26:37So, we're looking at AI holistically.
26:40So, apart from just what you see as a customer, it's what you don't see, but makes our processes a lot more efficient.
26:46We started on that journey, but, you know, we want to do a lot more.
26:51I want to open the floor for Q&A, but I have one last question.
26:57This is in regards to ESG.
27:00I mean, in terms of green financing for ASEAN, the transition is quite huge in terms of this particular region.
27:11But for CIMB, how does CIMB basically balance it out between, you know, environmental responsibility and also, at the same time, economic realities, if that makes sense,
27:20in terms of your risk assessment of giving out loans for ESG-related projects?
27:30So, when we embark on our ESG journey, and we've done extremely well, you know, we first made a commitment many years ago of 30 billion financing,
27:40we opted to 100 billion, and then just a couple of weeks ago, we announced a commitment of 300 billion of ESG financing over the next few years.
27:49But when we embarked on this journey, it was never about trying to follow a Fed.
27:55It was never about trying to win awards.
27:57It was never about, you know, just going out there as an IR exercise, you know, to tell everyone that we are focused on sustainability.
28:07But it was really driven by real business purpose.
28:12We see ESG as future-proofing our business and future-proofing our customers, whether is it their business or their own personal lives.
28:23Think about it. If we used to give financing to a company, and that company today relies on a global supply chain, you know, to run their business and to service our loan.
28:38Now, if that company gets cut off the global supply chain a few years down the road because they are not ESG compliant, what happens?
28:46You know, company will have an issue because they won't have enough cash flow to run the business.
28:53We will be left with bad loans.
28:55So while it is the right thing to do, and it coincides with our purpose of customers and society, you know, we went into ESG also because it is just good business sense.
29:05You know, it's the future-proof our business and our customers, we're helping our customers transition from, you know, less compliant or non-compliant to become compliant over time.
29:17So this is a, you know, ongoing discussions that we have with our customers all the time, because we do not want anyone to be left behind and to be cut off the global supply chain.
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