House of the year, Malaysia: CIMB

Asia Risk Awards 2019

Chu Kok Wei, CIMB

Over the past year, CIMB Malaysia has proven it has a strong capacity for managing risk, helping its clients to weather the most turbulent of storms.

Although the bank characterised the start of 2018 as positive, it ended on a far more bearish note, in no small part because trade tensions between the US and China were undermining investor confidence. Investors were especially cautious in Malaysia, where rocky markets were cast against the backdrop of a national election, which was held in May 2018.

“Last year, post the general election, a lot of clients were holding back, so the second half of 2018 was extremely challenging,” says Chu Kok Wei, head of treasury and markets with group wholesale banking. “We had to come up with solutions to support clients, particularly in foreign exchange, but it picked up at the start of this year. We had to fight for more deals but we did well, thanks to our capacity to innovate.”

Of course greater market volatility also provides hedging and investment opportunities, with certain asset classes and products – such as gold – performing very well during times of heightened volatility. CIMB’s breadth of product offering has also allowed the Malaysian bank to jump on some of these opportunities.

This capacity was supported by a moderate loosening of regulation by Bank Negara, the country’s central bank, which allowed firms to offer more derivative structures to their clients for non-hedging purposes. Bank Negara also allowed the use of ringgit-denominated interest rate derivatives by non-resident corporates through its appointed overseas offices.

Implied volatility for the Malaysian ringgit rose prior to the election but fell sharply back afterwards, which made the sale of vanilla structured products harder.

Leaning on its capacity to warehouse complex foreign exchange option risks, CIMB was able to drive up volumes of exotic forex options that it wrote – with currency accumulators, target redemption forwards and cancellable currency forwards proving particularly popular with corporates.

The bank also introduced the ‘instalment option’ to the market, in which the option holder pays the premium in instalments over time, with the right to terminate remaining payments at each instalment date. This significantly helped corporates hedge currency exposures despite low budgets and uncertain cashflows. CIMB also launched a sharia-compliant version of the dual-currency investment.

The bank’s interest rates business remained strong, with particular success in supporting small- and medium-sized enterprises in the export space, who are reliant on trade financing for funding. By providing trade financing in foreign currencies – combined with cross-currency swap structures in order to move the loan back into ringgit – CIMB gave its clients the possibility of accessing the cheaper implied cost of the ringgit from points along the dollar/ringgit swap curve. This led to major growth in client numbers and the amount of business being conducted. CIMB also assisted Bank Negara in building a sharia-compliant framework for short-selling government investment issues.

We had to come up with solutions to support clients, particularly in foreign exchange, but it picked up at the start of this year. We had to fight for more deals but we did well, thanks to our capacity to innovate

Chu Kok Wei, CIMB

The bank additionally saw notable successes in its credit and commodity businesses, while innovating to develop new hybrid structured products to provide clients with an upside on currency hedging tools. New tools to support sharia-compliant investment and equity-focused clients also proved successful.

“We were expecting a slower year for equities but it has been holding up quite well this year. Despite Malaysia being one of the underperforming equity markets in the region, we are seeing good traction in equity structured products,” says Wei.

Driving this considerable breadth of product development forward not only requires innovative investment tools but also the ability to continually invest in technology, says Wei.

“We have plans to invest in better efficiency as we look to consolidate what we have in order to improve delivery to our clients, enhance the platform and promote cross-border dealing on a global and regional scale,” he says.

The bank is especially looking at how it can broaden the number of channels through which clients can get hold of its products so that, for example balancing out the access that private banking clients and investment banking clients have to structured solutions.

Technological innovations that CIMB has rolled out recently include Speedsend payments, which use a blockchain framework to send money abroad; a new eWallet phone app, set up along with Ant Financial, Alibaba’s financial arm; and some technological collaboration with equities securities broker China Galaxy.

“From a technology front, we are moving towards providing a better fintech experience for our investors and clients,” says Wei.