The sale of structured products in Malaysia has only been permitted since 2004, but in that short time CIMB has established itself as a market leader. Bumiputra Commerce Holdings, the Malaysian subsidiary's official title, distributes retail products through CIMB's 362 nationwide branches as well as selling wholesale to institutional, private bank and corporate clients. Its structured investment sales in 2007 have so far reached M$2.547 billion ($755 million), putting it firmly at the top of the distribution tree in Malaysia.
While CIMB's statistics are impressive, the bank this year proved that it has more to offer than simply size. Distributors were particularly complimentary about CIMB's attention to detail, its range of investments and its rigorous sales process, and also approved of the aggressive style in which it conducts its business.
"The mission of the bank is to bring structured investments' minimum investment denomination down to 1,000 ringgits so it is affordable to the masses," says Chu Kok Wei, vice-president of structured products and derivatives at CIMB. To further this ambitious aim, CIMB has sponsored a public education programme that is designed to raise investor awareness of structured investments. "By the sheer size of our distribution network, we feel we have a social responsibility to bring structured investment to the man on the street," says Chu.
This is congruent with the distributor's strong emphasis on in-house education. Unlike the regulatory arrangements on minimum investments, there are no obligations for the level of education that sales staff must have in order to sell products. CIMB has voluntarily implemented a training scheme that requires any staff involved in sales to undergo exams and make their way through a certification procedure.
Each deal incorporates a due diligence checklist which has to be signed off at the end of the sale, ensuring that risk has been fully disclosed and that product features have been understood by investors. This is part of the superior end-to-end service offered to all its clients, one of whom said that CIMB will always help clients when they require assistance at any stage of a deal.
One of its 2007 product success stories was the Islamic Global All-Stars product. This was a sharia-compliant version of the All-Stars Global FRNID (floating-rate negotiable instrument of deposit) that the bank issued and distributed in August 2006. Non-sharia stocks were replaced with different companies in a new index and the 100% capital guarantee restructured in a mudharabah style to suit Islamic law. The product was launched in Malaysia in February 2007, and issuance has amounted to M$713 million, which has made the deal the largest aggregate structured investment issue in the country.
Islamic investments are a key part of the Malaysian financial services marketplace, where 52% of the population are Muslim. CIMB, however, tries to structure products that are interesting to investors in their own right. "We don't believe we should sell sharia-compliant products solely for religious purposes, where the investor should have to settle for a second-class product because it satisfies religious principles," says Chu. "Whenever we innovate a sharia-compliant structure, it has to be equal to, if not better than, conventional investments."
CIMB built on this approach by launching the Islamic Structured Growth Fund in May, a sharia-compliant structured unit trust. Evidence that the strategy has been successful is again shown in the sales that followed - the fund has achieved sales of M$577 million to date.
The bank's final trump card is the range of products it has offered that have included innovative payout structures and underlyings. Distributors commented that it is continuously launching new and innovative products, particularly those offering foreign exposure, which has only recently been permitted by the Securities Commission.
Twin Win is just one example of such an offering. The principal protected investment is a five-year FRNID that was launched this May. Linked to the S&P 500, it pays a guaranteed coupon of 8% in the first year and then works on a series of thresholds and safety levels, allowing investors to profit from both bull and bear market scenarios. This was followed in June with a sharia product in an insurance wrapper - the Takaful Global Giants - ample evidence that the bank caters for all sectors of the local market.
CIMB is planning ambitious growth for the development of its Malaysian structured products business and is placed exceptionally well to succeed, having boosted sales by 77% since last year. "We are bullish about market size, but want to do it in a long-term, viable manner," says Chu.
The week on Risk.net, September 8-14, 2018Receive this by email