Year: 2011

Enhancing service without sacrificing security

Posted on by

Itautec’s success in the financial industry is directly linked to the competitive advantages of the solutions it offers to the market. After more than three decades of operation, the company has been able to provide clients with a comprehensive range of banking automation solutions designed to improve transactions at the highest levels of customer service.

This year, World Finance has awarded Itautec three prestigious accolades: Automated Banking Branch Technology of the Year, Latin America; Retail Banking Systems Technology Provider of the Year, Latin America; and Security Technology Provider of the Year, Latin America.

To achieve this technological leadership position, the company invested in a development area capable of creating solutions that are highly competitive worldwide, supported by two pillars in which they have great expertise: the transactional environment in a financial organisation, and a friendly interaction with bank account holders and end users at the bank teller counter or self-service terminal.

Itautec reached the forefront of technology for the transactional environment by developing solutions that offer speed, efficiency, lower operating costs, and flexibility in line with business needs and processes – all focused on providing security across the value chain related to operations with clients. Additionally, by focusing efforts on these aspects, it has created solutions that optimise the work of customer service staff in bank branches while contributing to operating earnings and increased customer satisfaction.

Customer-focused design
Itautec’s understanding of the importance of a friendly interaction with the end user is based on the company’s deep knowledge of the relationship between customer and financial institution. As a result, it can provide solutions that significantly improve the customer experience in terms of accessibility, responsiveness, convenience, and interactivity, offering customers recognition in order to create a personalised service.

This maturity is only possible because of Itautec’s close relationships with major financial industry clients in Brazil, in other Latin American countries, and in Europe – a commitment strongly linked with a dedication to customer service and development areas, in line with the most advanced market trends.

Understanding the specifics of the financial market, the internal processes of a branch and the level of demand for each element of this chain enabled Itautec to offer solutions with a strong adherence to the needs of the financial market and thus receive the World Finance awards in 2011.

Automated banking
The award for Automated Banking Branch Technology of the Year, Latin America, acknowledges Itautec’s ability to provide service in a bank environment, including all points of contact with customers, from the moment they walk into the branch to when service is made available, using solutions such as SIGA – Itautec Queue Management System. A touchscreen linked to software manages queues, providing faster service to account holders, be it with a cashier, customer service officer, investment advisor, insurance agent, or the branch manager.

Itautec offers several solutions for cashier stations, such as operator keyboards with proven ergonomics acknowledged by design awards; sturdy, high-performance CPUs and cash registers; and note recyclers that speed cash count, reduce errors and improve security. At peak times, attendants using mobile devices can expedite service following customer service policies previously defined by the financial organisation strategic planning.

In addition, Itautec lines of ATMs have a modular architecture that enables implementation of various functions widely used by the financial industry, which facilitates the incorporation of new features according to each market’s demand. In the Latin American context, there is a strong trend to adopt the recognition and validation of checks with the help of image processing systems. The same goes for note recyclers, among other transactions. The key to commercial success of these products is an architecture that allows great flexibility when customising the equipment according to the customer’s needs, resulting in robust products that help to expand the bank’s business.

In addition to the prominent position that Itautec holds in Brazil, the company has a significant stake in several Latin American countries and a growing presence in the Americas as a whole, where the company has been developing projects based on the flexibility of its platform. Importantly, clients in these markets have subtle differences, and Itautec’s future growth relies on adapting its products according to specific needs, customising solutions and equipment in accordance with the processes in which they will be immersed.

Retail banking
The award of Retail Banking Systems Technology Provider of the Year, Latin America, highlights Itautec’s expertise to develop solutions focused on the processes of the company’s clients. In Latin America, Itautec serves large financial organisations, including major retail banks, which are constantly concerned with improving their operational efficiency in handling large volumes of transactions, which tend to grow further in the region thanks to the bankarisation process – a strong element linked to the growing economic activities of Latin American countries. Therefore, the award recognises Itautec’s ability to support retail banks in expanding their service channels, improving processes, and promoting business growth.

Given this context of expansion, a strong retake on investments in technology is noticeable, benefited from the resumption of investment postponed by banks due to the global economic crisis. In response to this challenge, Itautec has invested in research and development to prepare for the opportunities brought by this expansion; working on innovative processes to improve ATM productivity and convenience, and helping to increase clients’ profitability.

It is also interesting to note that the specific requirements of the Brazilian market helped Itautec learn lessons applicable in other Latin American countries. In Brazil, although there are ATMs with specific functions, it is more common to find multifunctional equipment which allows for banking enquiries, transfers, withdrawals, deposits and bill payments. Some units even integrate note recyclers that, by their nature, can lower costs with money transport and cash replenishment in environments with a balanced flow of withdrawals and deposits.

In other Latin-American countries, the most commonly found ATMs provide just the basic transactions: banking enquiries, transfers and withdrawals. Itautec’s value proposition is to show to clients in these markets the opportunities that exist in offering a wider range of transactions. This would increase convenience for bank account holders, while making the ATM a business platform. Itautec has successful stories in the Brazilian market where the offer of financial products like loans, insurance or investments made through ATMs presents significant results.

Security technology
As the company demonstrates a consistent position regarding experience in the transactional aspect and familiarity in customer service in the branch and self-service environments, the strategic and operational importance of the security aspect, recognised by the award for Security Technology Provider of the Year, Latin America, cannot be ignored.

Security is essential for prevention of fraud and theft in branches and self-service terminals, bringing tangible benefits and greater reliability for the bank operations and for the customer’s relationship with the financial institution. There is a clear trend for other countries to adopt the purchase profile currently practised in Brazil, where financial organisations are focused on the incorporation of systems and technologies that increase equipment security and availability. This can include resources such as monitoring, biometrics and contactless card systems, designed to protect the user and combat fraud, in order to preserve the client’s return on investment.

Financial institutions want to ensure security for bank account holders and, at the same time, preserve the integrity of their self-service platforms. Accordingly, security in this context translates into availability management functions, which Itautec provides with software solutions that monitor in real time the operational status of equipment.

This is the purpose of Itautec’s AutoManager: it monitors self-service equipment, servers and networking devices in a branch, detecting problems that may require replenishment of cash and supplies or replacement of parts; creating corrective and preventive maintenance routines according to rules determined by the bank. All this combined brings reliability to operations, while resulting in increased returns for Itautec’s clients on their IT investments.

Itautec believes that the boundary between client and supplier has become increasingly permeable – i.e. the company becomes a stakeholder in the success of the client’s operations, playing a progressively more important role that goes beyond that of a simple technology provider. Acting as a partner truly committed to clients’ success is a principle that is bound in the company’s operations, having been a key element to acquire and retain clients by providing a positive experience for financial organisations and their end customers.

For more information: www.itautec.com; contactus@itautec.com

“Solvency II is here to stay”

Posted on by

A golden rule in management indicates that changes should ideally take place before problems emerge, anticipating them and ensuring a timely response, thus enhancing effectiveness. In order to do so, changes need to be thought and discussed when the existing environment is still functioning correctly. This is exactly how Solvency II was designed.

It is now over a decade since the European Commission triggered a fully comprehensive project that would bring risk-based regulation and supervision to the field of insurance. It was not only ambitious, but also revolutionary, and it has taken some time for all stakeholders, from supervisors to insurers, to acknowledge that Solvency II was on its way and that the change would be significant – and lasting.

Lots of relevant strategic decisions have been taken, shaping Solvency II in the way we see it now. Such decisions have implied risks, and have addressed them, but also have allowed building upon opportunities that the project brings to insurance.

It is worth focusing on some of these strategic areas, and look at the decisions made and their implications.

Timing of the project
Solvency II will come into force on 1 January, 2013. However, its design started in 2000 and will not conclude with the implementation date. On the contrary, after 2013 further refinements and improvements will be made to the system. This is one of the opportunities streaming from a principle-based first-level directive, which is complemented and developed with detailed second level implementing measures. It is our task and obligation to make the best out of it.

The project has been designed with sufficient time to create a framework aimed to be a regulatory reference for the next few decades. It has certainly benefited from continuous testing of the different alternatives considered, improving its technical quality and ensuring all options were tested before implementation. A series of quantitative impact exercises have ensured the appropriateness of the system, with more than 95 percent of technical provisions or 85 percent in terms of premiums of the EU insurance sector participating in the last study.

As important as it is to look back, it is now vital to look forward to 2013 – and beyond. The scope of Solvency II is such that there needs to be a smooth shift from the current regime to the new risk based regulation, and it cannot imply artificial or unjustified disruptions. There are two ways to do so: either by deviating from the principles of Solvency II (i.e. watering down the project), or by setting up appropriate transitional measures.

The choice seems clear but there is a risk to be addressed: phased steps make sense provided they assist a smooth transition, but it is paramount that they are not prolonged unduly, or they will lose their positive effect. In other words, it is not about bringing old problems to the new framework, but about avoiding creating new problems.

Design of the project
Solvency II brings risk-based supervision to European insurers. By doing so, insurers will need to hold regulatory capital according to the risks that they are facing and the way they are managing them, and to do so in a fully transparent manner. It is a risk-based, principle-based, economic-based system, and has the right elements and incentives to become a regulatory reference throughout and beyond the field of insurance.

Following the approach set up in the banking regulatory environment, it includes three pillars, covering quantitative requirements, qualitative requirements, and transparency and disclosure rules. Two main risks emerged from day one: the risk of simply transplanting banking regulation onto the insurance sector without recognising their differences; and the risk of  giving more weight to one of the pillars, particularly to quantitative issues, than the others.

If we look at the insurance business, it relies strongly on the liability side of the balance sheet, demands sound Application Lifestyle Management practices, and presents long-term commitments. None of these elements are present in the banking sector, where risks such as credit and liquidity are the primary focus. A simple copy-and-paste of the banking framework therefore would make no sense. The insurance sector must be differentiated from the banking sector – and this best way of doing this is by starting from areas of similarity, such as ensuring quality of capital requirements. By doing so, insurers will be in a position to explain and justify that banking measures regarding, for example, liquidity risk, simply do not make any sense when it comes to insurance.

Risk-based supervision is built on a very basic premise, by which the regulatory framework has to introduce sufficient incentives to foster good risk management within companies. If we look at Solvency II, the recognition of internal models, both partial and full, indicate that the regulator had this premise in mind and has been ambitious enough to give an extra step compared to banking, so as to allow for both full modelling and recognition – in terms of effective capital requirements – of diversification effects.

Just as important as the capital and risk management requirements is the commitment that Solvency II makes in terms of market valuation of assets and liabilities, and enhanced transparency of the system. Market consistent valuation is one of the cornerstones of Solvency II. Insurance can only benefit from a better understanding by all its stakeholders of how it operates and the solvency situation of the different undertakings. This will become particularly important in the upcoming years, where both countries and other areas of the financial sector, and in particular banking, will have to refinance significant amounts of money.

Last but not least, Solvency II will not only enhance transparency and disclosure, but will also address one of the main concerns with the current regulatory regime: the lack of comparability among insurance companies operating and doing business in different countries, particularly due to the fact that technical provisions are calculated with completely different discount rates within Europe. EIOPA calculates that at present, for every 100 basis points added to (or subtracted from) the discount rate, it affects the total amount of technical provisions by 10 percent – a colossal impact.

Implications of the project
Solvency II will affect the insurance world in different ways, and will demand changes both from supervisors and supervised companies. The question that remains in the air is whether it will also bring changes with regards to consumers, in particular regarding access to products, cost of products or amount of offer.

The main change to consumers will be a positive and fundamental one: Solvency II will improve the management of risks within insurers. Recent years have demonstrated how weak risk management, soft internal controls and excessive risk appetite can lie dormat for years before building to an almighty crisis. From that perspective, Solvency II emerges as the right regulation at the right time. Everything that has a positive effect on the way risks are managed will be of benefit to consumers.

When it comes to supervisors, they will have to undertake radical operational change. Areas such as validation of internal models will certainly change the way supervision is undertaken, and the enhanced focus on qualitative issues that the second pillar of the system demands should also mean a new way to supervise.

All these changes come at a time when there is a complex debate regarding how supervision should be undertaken and how intrusive it should be; and also when supervisory authorities are facing a big risk of losing some of their experts to industry, with the risks that it implies. Therefore we can conclude that Solvency II will not be less challenging to supervisors than to supervised entities.

What about insurers? Will they be able to meet the new requirements and, more importantly, will they be able to adapt their risk management to what is expected out of Solvency II? We have to be positive.

Of course it will be challenging. The system will demand changes: in terms of how to manage the business, and in terms of practices that made sense in the past but do not necessarily fit with Solvency II in terms of reporting. Yet the insurance sector is doing excellent work to be ready for the implementation date. The solvency situation of insurers under the new Solvency II rules is also a sound one, as demonstrated by the recent quantitative impact exercise that showed an excess of capital over regulatory requirements of €400bn.

Perhaps we should address openly another question that many may have: will Solvency II lead to concentration in insurance? The answer is that the system provides good incentives for all companies, big or small, that appropriately manage their risks. Therefore, small companies with sound management and a good business model that aims to provide added value to their customers will certainly reinforce their position after the implementation of the framework. How could it be different if, ultimately, Solvency II is about understanding risk, managing risk, and making the best out of the underlying opportunities that come with those risks?
I started by saying that Solvency II is here to stay. After reading this, I hope you agree that it is also here for good.

A journey of transformation

Posted on by

The story of Cairo Amman Bank (CAB) has been described as a corporate rebirth – one in which a small financial institution with humble foundations completely reinvented itself by tapping the potential in the Jordanian banking landscape to redefine its brand position.

In the 1990s, the prognosis for CAB’s growth in the market was fairly poor, with a relatively small branch network and a financial foundation that was wavering under the weight of substantial non-performing corporate loans. Today CAB is a shining model of innovation and growth, thanks to the intelligent transformation strategies that the bank initiated in 1998. By focusing its attention on the Jordanian retail sector – at the time an under-serviced, untapped market segment – and by adopting a strategy in 2002 of cooperating with its defaulting clients instead of alienating them, CAB successfully reversed its fortunes.

Back then the ratio of the bank’s non-performing loans amounted to 26.2 percent of its total portfolio – this has since dropped to an impressive four percent in an industry that averages 7.2 percent. In 2009, a year of marked transformation for CAB, the bank’s net profits reached JOD 25.5m ($36m) – a 25.8 percent year-on-year increase. This was a particularly impressive feat because the industry’s average for the same period had dropped 16 percent.

“The revolution that swept through Cairo Amman Bank over the last decade is more than just another corporate success story,” says CAB’s General Manager, Kamal Al Bakri. Mr Bakri first joined the bank in 2002 as the head of its legal department and was a key element in its internal overhaul. After spearheading the process of settling the bank’s financials, the bank’s management quickly realised that he was just the type of executive they needed to steer the bank’s aggressive reentry into the market. In 2006, he was named Deputy General Manager to Khaled Masri, CAB’s Chairman and CEO. In 2008, he was again promoted to his current position of General Manager.

Repositioning the CAB brand required fundamental changes. Upon assuming his role as Deputy General Manager in 2006, Mr Bakri presented to the management his rather ambitious plan for reinventing CAB. The plan, which was eventually set in motion, identified key transformational pillars that would later allow the bank to make a true turnaround.

Building strong foundations
The first such pillar was human resources, which has always been a key focus for CAB. Mr Bakri’s prime objective was to retool the bank’s employees; to foster the morale and skills required to meet the bank’s new objectives. He saw that the bank’s entire culture had to change, and this called for younger, more adaptable employees and for grassroots capacity-building approaches. The result was the bank’s famed Future Banker programme; an in-house, salary-paid, eight-month training programme that helped fresh Jordanian graduates find work anywhere inside and outside Jordan.

At the time, the local banking industry was calling back many of the Jordanian talents that had previously travelled to the Gulf, which ultimately resulted in a host of incentive campaigns designed by CAB to retain its most competent trainees. CAB has shown an unwavering commitment to invest in and develop its human resources, even long after recruitment, with a plethora of training programmes that help them realise their full potential.

IT innovation
Another integral pillar of CAB’s development is its revolutionary IT infrastructure, which was also substantially overhauled during the bank’s recent transformation. “I wanted to reestablish the bank as an IT and technology driven entity,” explains Mr Bakri. This approach culminated in the introduction of several infrastructural changes and technologies that would forever redefine both the way the bank operates and its corporate image.

Key examples of such services are CABfx – a powerful web-based currency trading platform – and IrisGuard, which facilitates banking transactions by allowing customers to validate their identities through on-site ocular scans. The latter was a pioneering achievement on a global level – up until that point, the technology had only ever been implemented in airports. The technology also spared customers the longstanding inconvenience of ATM cards and PIN codes, further underscoring the potential effect of technology on the conventions of banking.

“The recreation of CAB’s IT infrastructure was crucial to its eventual turnaround in the market,” says Mr Bakri. “The technologies we introduced substantially influenced the way customers made transactions and the way they perceived the CAB brand.

“With IrisGuard, for example, we reduced client-identification time from three minutes or more to less than 50 seconds. Cutting edge technology is now an inseparable element from our brand image and will continue to be among our top priorities where future growth and development are concerned.”

Growing the brand
Of course, one marked area of transformation for CAB was geographical penetration. Today, the bank operates a total of 90 branches, 21 of which are in Palestine. This was made possible through an aggressive expansion campaign that saw the bank address the high costs and limitations of a network expansion by integrating manned points of sale in 90 post offices around Jordan. This allowed the bank to secure a presence at key public interaction spaces, not to mention reach remote areas in governorates nationwide. According to Mr Bakri, geographical penetration will remain an integral pillar of the bank’s long-term development strategy.

Last but not least was CAB’s relentless approach to product development, which was an area in which the bank had created a solid foundation over the years, particularly in the arena of retail banking. With a diverse product portfolio that caters to a multitude of consumer segments, innovation became CAB’s central focus. This movement was perhaps rooted in the bank’s earlier success with government salary transfers, having successfully persuaded the Jordanian government in 1998 to transfer the salaries of its employees into CAB employee accounts instead of paying them directly. This was arguably the retail turning point for the bank.

Today, roughly 65 percent of the bank’s business comes from retail, which remains Jordan’s largest market segment.

Pioneering online banking and cardless identity verification was only the beginning of a long streak of product innovation. Next in line was cardless access to ATMs, a service that allows a client to request cash via mobile phone. The client sends a text message to the bank, which automatically responds with a number to be keyed into any of the bank’s ATMs – the client can then access their account and withdraw cash. “If you forget your wallet somewhere or lose it, you can still access cash through any of our ATMs around the Kingdom,” explains Mr Bakri. This innovation streak was further expanded with the introduction of CAB’s instant loans via ATMs, which allowed prequalified customers to request instant automated loans via ATMs based on their credit worthiness.

This unwavering commitment to innovation fundamentally influenced customer experience and thus redefined CAB’s brand perception. “Our transformation strategy was ultimately all about customers,” says Mr Bakri. “We simply wanted to improve our customer experience, and upon focusing on that singular objective, we found massive untapped potential in the industry that allowed us to innovate. We are fully committed to maintaining the streak of innovations we began with IrisGuard and to forever transform the global banking landscape.”

Modern markets demand constant connectivity

Posted on by

Trading dynamics have changed radically in the last decade. Investors used to wait months or years for investment prospects. Today, technology allows traders and investors to seize opportunities instantly and manage risks directly. The $4trn daily foreign exchange market offers what other markets failed to attain, and is now easily accessible and affordable for everyone.

IronFX Financial Services Limited developed a vision to challenge and recreate one of the most attractive trading environments in the industry. The result was IronFX, developed with cutting-edge in-house technology to provide an exclusive, best of market product range, equally suitable for the most serious of investors as well as people just beginning their trading path.

The company’s goal is to become one of the world’s major brokerage firms. IronFX chose Cyprus for its headquarters, seeking regulatory bodies that provide protection to investors as well as secure European standards. IronFX Financial Services is authorised and regulated by CySEC under licence no 125/10.

The philosophy of the IronFX strategy does not end there. A team of IT professionals constantly enhance the quality of its product and financial services range, and produce advanced yet user friendly platforms to give clients easy and reliable access to their investments from anywhere in the world. From their work comes IronFX’s ‘One Account, Seven Trading Platforms’ offering – providing access to the markets 24 hours a day, five days a week through platforms available for PC (MetaTrader4, MultiTerminal and download-free WebTrader), Android, Blackberry, and iPhone/iPad OS.

The IronFX product range covers a comprehensive spectrum of investors: from new starters, to expert traders, to the professional institutional investor raising the standards of online financial services:

– Standard accounts, which are specifically designed for new traders, start from only $500. Standard accounts help new traders gain experience easily, without a high exposure to risk.
– Premium accounts start from $5,000, and are designed for experienced active traders who are looking to seize opportunities on a daily basis. With better trading conditions, they tend to reduce risks and increase profitability.
– Institutional accounts start from $25,000, and offer the best trading conditions and unbeatable advantages, including dedicated market analyst support and market views around the clock, as well as breaking news with instant feedback on how they will affect the market.

Leverage and flexibility
With as little as $5,000, IronFX clients can invest as much as $2.5m, leveraging their investment to obtain optimum performance at a reasonable risk. Traders are allowed to modify their leverage at any time to manage the psychology of risk that goes through every investor’s mind in today’s markets. The state-of-the-art client portal also allows clients to modify any account feature or conduct any operation in an automated and instantaneous manner.

This flexibility is key to IronFX’s philosophy – the firm believes that constant access is crucial to success in today’s highly dynamic and fast moving markets. IronFX’s robust platforms for the three major smartphone systems give traders access to live streaming prices, charts, news and current trades – so constant access to the markets is not only simple, but trades can be executed in an informed way. It’s the new frontier in online financial services, and positions IronFX with the best players in the market.

Similarly, transparency is more than a mantra for IronFX: traders are totally aware of their costs, without any hidden fees or opaque charges.

Accuracy in prices and excellent execution for clients’ orders is another vital consideration when choosing to invest with a broker. IronFX managed successfully to bring the lowest spreads on the market starting from only 0.4 pips on a major forex cross. Similarly features like free hedging and micro lots only add value to a trader’s experience.

Portfolio diversification
Conventional investment wisdom advocates investments that combine multiple financial products. IronFX has studied its investment proposal and is offering multi-purpose investment accounts that grant access to more than 130 financial instruments, ranging from forex to commodities and equities, fulfilling the majority of the investment spectrum, all from the comfort of the client’s office or home.

Security of funds is another concern. IronFX has achieved a first by offering SSL technology capabilities for secure transactions and order execution. Security is further enhanced with the use of the encrypted ‘One Account, Seven Trading Platforms’ trading functionality and secure access to the client portal for account management. The level of security is common on all platforms to protect clients’ funds from any fraudulent behaviour.

When investors scrutinise a broker, their first impression often comes from the support offered by the customer service department. With round-the-clock support in more than 20 languages provided by professional account managers, IronFX offers instantaneous fulfilment of clients’ needs – opening an account can take less than five minutes, and is accomplished in three easy steps.

Client support also extends to analysis: IronFX employs experienced market analysts to provide accurate and timely financial news and market analysis for its clients. This can be accessed through a range of products: from daily newsletters to market views, on both the fundamental and technical front. The broker also offers forex directions on major crosses along with a weekly and monthly snapshot on opportunities in the markets. The latter should certainly help investors seize profits while being exposed to the smallest risk possible.

Educational programmes are also available from market professionals to develop new traders’ skills: training sessions include an understanding of forex trading as well as a snapshot on both fundamental and technical analysis, including studies on market behaviour and types of currency in respect to their dynamics and profitability.

The forex market is the most popular and most liquid financial market in the world – with the right account support and comprehensive training, it’s no wonder more people are switching to trading currencies.

Taking the LATAM lead

Posted on by

For Celfin Capital, 2010 was a year of consolidation and looking to new horizons. In the Chilean market, Celfin strengthened its leadership position across all its business areas; while in the Peruvian market, the company’s brokerage, wealth management and corporate finance operations achieved significant positions and broke even in their second year of operation.

At the same time Celfin has started to expand into new markets. It received authorisation for brokerage in Colombia and began the process of application to US regulators, which will enable further expansion of Celfin’s operations and complement their geographical presence in the Andean region by the end of 2011.

Pole position
The past year has proven very successful for Celfin’s specific business areas. In Chile, brokerage was placed first in equity trading – by a measure that includes proprietary trading (by its corporate definition Celfin does not engage in proprietary trading, making this leadership position all the more impressive).

The fixed income team maintained the company’s liquidity position and created a distribution desk to serve Latin American clients with fixed income, foreign exchange and structured products. In corporate finance the team was once again a significant player in transactions and issues by non-Chilean entities in Chile, and by Chilean entities abroad; it also managed the first local transaction in Peru, and launched an infrastructure business.

In asset management, Celfin AUM grew by 34 percent and completed an important restructuring process that resulted in the adoption of the industry’s highest standards. The institutional distribution division maintained its lead as the principal distributor of funds to institutional clients in Chile, Peru and Colombia.

Wealth management assets grew by 73 percent, in part due to the strength of the private clients unit. The research team also expanded its coverage to Peru and Colombia, and now covers more than 45 companies in the region.

Industry recognition
In acknowledgement for its impressive results, Celfin has been recognised by a range of leading industry groups. Both Latin Finance and Diario Financiero/Deloitte voted for Celfin Capital as Best Financial Institution in Chile; Bolsa de Comercio ranked Celfin as the Number One Broker in Chile; and the company was named Advisory Broker of the Year in Latin America by World Finance.

“We know that our leadership position is difficult to maintain – and that we will only be able to do so if we go on making the same effort, day after day, to deliver excellent service through innovative products that satisfy our clients’ financial needs,” says Alejandro Montero, CEO of Celfin.

“To achieve this, we have embarked on a five-year plan, charting a course that will position us as one of the principal financial players in the Latin American market,” he says. “Our aim is to maintain a solid position of leadership in the Andean region and a significant presence in the rest of Latin America, delivering the best service and financial advice, so as to be the preferred choice of clients seeking to operate in those markets.”
Among other aims in Celfin’s five year plan is the goal to more than double the size of the company. To achieve this, it has the commitment of every single member of the organisation. “It is our people who make Celfin a company with a unique, innovative, meritocratic, daring culture, focused on results, working as a team that will continue to be the best,” says Juan Andres Camus, President of Celfin Capital.

“We have a great challenge ahead,” he says, “but we are confident that we can meet it, knowing that what has brought us to our present point of achievement is the same thing that will enable us to continue to grow: attention to detail in service to our clients, our close and personal relationship with them, impeccable execution of each transaction and the support and commitment of each one of the members of our team.”

Celfin Capital in figures
– Celfin Capital was created in 1988 as a financial institution with an entrepreneurial spirit
– Leader in third party equity trading volume in Chile (December 2010 market share: 23.21 percent); significant player in Peru (December 2010 market share: 7.1 percent)
– Corporate finance transactions of more than $5bn in Equity, $3bn in debt business and M&A transaction in excess of $3bn (total volume 2006-10)
– Largest distributor of international mutual funds, closed-end investment funds and private equity funds, to institutional clients in Chile, Peru and Colombia, with total volume in excess of $12bn (as of December 2010)
– More than $5.5bn under asset management as of December 2010
– Leading Research department in the Andean region, with coverage in Chile, Peru and Colombia. Operational processes have SAS700 certification
– More than 5.4bn AUM in Wealth Management

Clients demand new technology

Posted on by

Just a few decades ago, Mifel was a small company servicing small and medium size businesses on their financial strategies. Later on, it began to grow a small fund to operate with and eventually obtained the first private concession for an exchange house in Mexico back in the tumultuous 1980s.

In 1993 Mifel set up a leasing company, and in that same year Grupo Financiero Mifel was born, a step that paved the way for the concession of one of the first new private banking licences to be granted since the Mexican banking industry was nationalised back in 1982.

Mifel’s name was formed from the first letters in the given and family names of its founder: Mike Feldman, a well-known entrepreneur and philanthropist. Three generations later, the companies he set to build are solidly growing and still run by the family (although they are now fully institutionalised).

Since its beginnings Mifel has been a customer service oriented company. Today of course this is the talk of all the service industries; but back in those days when it was practised at Mifel it was a rather odd gospel to preach.
Today the group is led by CEO Daniel Becker and several very talented members of a new generation. The institution has been in a period of change to keep it at the forefront of Mexico’s financial sector in terms of the quality of its products, services and standards of excellence. “It is a privilege for us at Mifel that our clientele are Mexico’s most demanding by far,” says  Mr Becker: “Something very much appreciated by the team since it keeps us persevering at what we do best, so as to constantly improve it.”

Organic growth
Mifel is a full service bank with a complete array of products and services. It consists of a bank, a factoring company, a leasing company and a Mutual Fund company.

Mifel’s factoring company was created to provide liquidity to the suppliers of retail chains through any bank, which together with its strategy of innovation and service quality has allowed it to become a leader in the field.
On the leasing side Mifel has been steadily growing, thanks to its widely diversified portfolio of customers. Its investment manager role is supported by 20 proprietary funds and 32 funds that Mifel co-distributes from eight other financial firms. This allows Mifel to offer satisfactory returns to its clients and help them pursue their investment objectives.

On the banking side, Mifel has a strong and innovative physical presence in 38 banking outlets in the country, many of them in Mexico City, the country’s economic and financial centre. It also operates 18 bank modules distributed across the country, focused on specifically serving the agro-business sector – an area of great success and even greater potential. Today Mifel is the seventh largest distributor of federal farm funding in the country, after steadily rising through the ranks of its competition over the last few years.

A loyal customer base
Overall, Mifel Financial Group’s assets for the end of 2010 stood at $3.2bn, of which the majority is supported by deposits provided by its demanding but stable and loyal customer base from its private banking area and well-located and efficient branches throughout the country – they all have an average deposit base well above the level of Mifel’s competitors.

The group’s portfolio, meanwhile, has been growing steadily in the areas where Mifel has been concentrating its placement efforts. A very efficient distribution across several sectors diminishes risk substantially: states and municipalities, construction developers, mortgage, factoring, corporative, small and medium size companies, agro-business and leasing are just some of the key sectors where Mifel works intensively to diversify its assets.
This portfolio represents roughly 80 percent of Mifel’s banking activities; 15 percent is in factoring and five percent is in the leasing businesses, well guarded by a capital base that as of the end of last year stood at 15 percent. This is well above the regulatory minimum required by the authorities, giving the bank a good base from which to grow in the future.

Investing in people
An enthusiastic and positive working atmosphere is vital to good service and succesful change. “At Grupo Financiero Mifel we are distinguished by an energetic team, able to differentiate and provide our customers with everything they expect from a first rate financial institution,” says Mr Becker: “An unwavering commitment to service and quality.”

Mifel’s team always strives to communicate to its customers the concept of the value it provides them with, which stems from a five pillar design: human capital, first rate service, banking wisdom, best available technology, and always updated infrastructure. “This has allowed Mifel not only to grow in a healthy manner over the last few years but also to weather the storms that the global financial sector has faced,” says Mr Becker. “Further, our business model allows us to look into the future with the confidence that we have the tools to continue that success.”

To maintain the commitment to provide customers with quality financial products and services that offer security and confidence, in 2011 Mifel made an alliance with RSA, one of the world’s leading insurance groups. The main objective: to continue having the best banking products and services in Mexico, including the best insurance scheme to cover the security, safety and welfare needs of Mifel’s customers.

Transforming infrastructure
Mifel is now in the middle of developing its new technological coordinates: ones that represent quite an institutional revolution, as it is vital, says Mr Becker, that growth does not adversely affect the bank’s distinguished service. On the contrary: “Service ought to be a more tangible asset for Mifel’s customer base as the institution grows,” he says. In this regard, technological changes might not be perceived by customers from day one of their inception, but they are nevertheless key going forward.

Mifel’s new information system will transform its banking core from scratch, a type of decision which is often shyed away from by larger, more consolidated institutions. “This, however, was not something that we could refrain from pursuing,” says Mr Becker.

All processes that in one way or another directly affect Mifel’s client exposure have been readily analysed with the objective of ‘making life easier for the customer.’

 Mifel is now in the 15th month of development of its new platform, which should be delivered by the fourth quarter of 2011. “Our coordinates in working with our clients will be forever changed [upon launch],” says Mr Becker, “placing us in the lead in terms of quality, innovation and flexible services.”

It is in the light of this major breakthrough that Mifel receives, for the third year in a row, World Finance’s prestigious award for Best Private Bank, Mexico, 2011.

“The results speak for themselves,” says Mr Becker. “Mifel has its mission well in focus: to be recognised by our capability to understand and care for our unique and irreplaceable base of customers, for generations to come.”
When the new platform is delivered, Mifel will be well positioned to deliver its quality service for another three generations.

For more information: Francisco López Jiménez, Chief Operative Officer, Banca Mifel; 0052 55 5282 7800; www.mifel.com.mx

Water technology advances

Posted on by

Puncak Niaga is the leading provider of integrated water, wastewater and environmental solutions in Malaysia. The company was founded in 1997 and that year became the first of its kind to be fully listed on the Malaysian stock exchange, the Main Board of Bursa Malaysia Securities Berhad. At the end of December 2010 its market capitalisation stood at RM945m ($319.2m).

The company has been operating for 15 years, but business is about to go into overdrive. In the next 12-18 months, Malaysia is expected to see a growth in industry as well as an increase in population from 28 to 29 million – these combined forces have led the company to adopt a strategy focused on innovation.

“Malaysia needs a vibrant water industry that is anchored on technological development and R&D activities to help grow the local industry cluster and create a competitive edge for Malaysian-based companies in the global market,” says Tan Sri Rozali Ismail, founder and Executive Chairman of Puncak Niaga. “To meet these challenges we will need innovations in water resource management, development and governance, as well as financing models to encourage investments. Innovation is a much broader notion than R&D and is therefore influenced by a wide range of factors. Innovation can only happen if we have a good foundation for research.”
For Puncak Niaga, continuous investment in R&D is the foundation of this innovation, with specific focus on improving the quality of urban infrastructure and resource management. Sustainability, cost effectiveness, broad-spectrum water treatment, public health protection and meeting the water needs for urban growth are particular areas of focus.

To drive this forward, Tan Sri Rozali strongly believes in the need for co-operation between the public and private sectors, as well as academia. This “innovative partnership approach,” as he calls it, is in line with initiatives put in place by the Malaysian Prime Minister under the Economic Transformation Programme (ETP). Additionally, the pursuance of a private sector-led economy has led to greater consultation with consumers and the growth of public-private partnerships in the water industry.

Transforming a nation
While the ETP has an influence on the economy as a whole, the 2006 Water Services Industry Act governs the restructuring of that specific sector. Despite making good progress and achieving several milestones, the industry still faces a range of challenges, particularly in supplying water to rural areas. “Malaysia is still battling with issues of escalating costs in meeting [these needs],” explains Tan Sri Rozali. “To manage increasing costs to meet social obligations with equally stubborn tariff rate increases can pose serious business issues for water operators and the government alike.”

The restructuring of the water services industry, however, is only one part of a government-led reform of the whole Malaysian socioeconomic structure. Two strategies have been put in place to achieve this – the Government Transformation Programme (GTP) and the aforementioned ETP. The GTP includes six National Key Results Areas dedicated to effecting social change: enhancing the quality of education, upgrading public transportation, reducing corruption, reducing crime, upgrading rural infrastructure and uplifting low income households. The ETP aims to effect economic change through its 12 National Key Economic Areas. This programme is projected to raise Malaysia’s per capita GNI from $6,700 in 2009 to over $15,000 in 2020, closer to the level of other high-income nations.

Of the 12 key economic areas – which range from education, to tourism, to agriculture – the one that will have the biggest impact on the water industry and Puncak Niaga is ‘Greater KL/KV.’ This key area, which is broken down further into 10 Entry Point Projects, deals with the development of the Greater Kuala Lumpur/Klang Valley region. Greater KL is already the largest contributor to Malaysia’s GNI, but this programme aims to increase that contribution to more than seven times that of the next urban centre, Johor Bahru. Additionally, this area of the ETP will contribute 2.5 times more to GNI than the next largest area: oil, gas and energy.

Robust water and wastewater services for public and environmental health are key to bringing about this growth. Two of the Entry Point Projects deal with this area specifically: “Developing an efficient solid waste management ecosystem,” and “Sewerage – Non River.” To deal with this, Tan Sri Rozali says, “We can expect sector specific reform to enhance stocks of renewable resources, reducing environmental risk and rebuilding our capacity to generate future prosperity.”

Innovating partnerships
Forming the foundations of this drive forward in the water sector are public-private partnerships. The efficacy of private sector participation in the delivery of public service has already been proven in the energy, transport and health sectors. Public-private partnerships have – when implemented correctly – reduced costs, increased investment and let the state reallocate savings to other areas, such as infrastructure.

“Both the public and private sectors have a unique and yet symbolic role [to play in] the betterment of the water sector,” explains Tan Sri Rozali. “Water runs across state boundaries and regions: we need a proactive private sector and government agencies to tactically manage regional issues and to innovate towards more productivity-led services.” To achieve this, he says, government and companies must both be redesigned for growth, with new business strategies and greater organisational relevance.

One of the major areas Tan Sri Rozali picks out that could best benefit from public-private partnership schemes is research and development. For him, universities are the roots of the R&D tree, providing new product ideas or new methods of overcoming existing technical issues. As universities receive grants and funding from the government for research, public sector funding and private sector innovation are brought together at this stage.

“At Puncak Niaga, we are constrained by limited returns on R&D,” he says. “The most pragmatic approach is for both the public and the private sector to work together to gear up strategic R&D in the water industry. This can be both for developmental purposes as well as increasing the capacity of the water players for outward investment, leaving them market ready for strategic alliances.”

Of course, privatisation of utilities is not a new concept. The privatisation of the Malaysian water industry – which Puncak Niaga was involved with – took place in the 1990s. Since then it has had great success replacing the existing dilapidated water system with a new, modern one – particularly in Selangor, Putrajaya and Kuala Lumpur. “There are important challenges facing the water sector in both developed and developing countries,” says Tan Sri Rozali. “The maintenance of existing infrastructure and expanding the existing network needs financial autonomy plus sustainable and equitable tariffs, along with efficient revenue collection. But I believe that privatisation is one of the more effective ways to secure effective and efficient service for the people.

“With a private sector-led economy, the private sector will play a major role in the water sector,” he says. “Of course privatisation also reduces the burden of government subsidies.” He admits that the Malaysian privatisation model is not perfect and still has challenges to overcome. However he believes that once the ongoing restructuring exercise has been completed and the gradual tariff rate implemented, these obstacles will be greatly reduced.

Striking a balance between public interest and private interest is also crucial. “A private sector like ours needs to maintain the bottom line and the government also needs to maintain the distribution of wealth in an equitable manner,” says Tan Sri Rozali. “But I am quite confident that with the current pragmatic government and forward looking administration, we will overcome these challenges soon enough.”

Expansion and diversification
As far as the future is concerned, the world is Puncak Niaga’s oyster. Trade liberalisation permitting the free flow of goods, services and people in Malaysia brings numerous opportunities for the company. Its future plans can be split into three areas – expansion within Malaysia, international expansion and diversification.

“We want to build a successful brand of trust, based on good service and reputation. We are after all in the business of treatment of a very vital natural resource,” says Tan Sri Rozali. “Additionally, while Malaysia, with a population of 28 million, is big, we need to look beyond our shores for business. So we are now exporting our core expertise to China and India, and exploring opportunities in Bangladesh, Kazakhstan, Laos, Cambodia, Mongolia, and other Asian Countries.”

In terms of diversification, the company has set its sites on the oil and gas sector. “Upstream oil and gas production contributes RM 87bn to the economy, while downstream activities contribute RM 24bn. Separately, the energy sector contributes an additional RM 16bn to this sector. We view this as a huge opportunity to diversify into the oil and gas sector.”

This is an exciting time for Puncak Niaga, with a plethora of opportunities arising across many areas. With its knowledge, experience and enthusiasm for innovation and collaboration, there is little doubt that these ambitions will soon be bearing fruit.

For further information www.puncakniaga.com.my

$2trn restructure over next 10 years

Posted on by

There is a consensus among analysts who observe the Brazilian economy that it should grow four to five percent a year for the next decade. As with most major developing countries, macroeconomic fundamentals tend to enable this growth pace for many years – although in the short term, the emerging economies are being urged to restrain demand expansion so as to control a still worrisome inflationary pressure.

In the long run, each of these economies will face considerable challenges. In Brazil, the relevant challenges lie in the microeconomic field (competitiveness, with emphasis in technology and production scale) as well as in institutions (regulation, planning, governance), underscoring the need for infrastructure expansion, mainly in energy and logistics (roads, railways and ports).

According to official governmental and private company surveys, infrastructure expansion in Brazil will require investments amounting to $2trn in the next 10 years. A little more than half of this amount will be applied in energy – at least $600bn in pre-salt oil and gas and another $500bn to expand electric power generation and transmission capacity.

Funding distribution
The energy sector in Brazil, which has a new focus on renewable energy, has been one of the most promising and innovative in the world. The main reasons for this are: (i) the domestic demand’s steady growth and the existence of a vast external market for some products (mainly oil and ethanol); (ii) a sound planning structure and favourable regulatory environment; (iii) relevant actors and global companies with room and appetite to grow; (iv) a prodigious potential of exploring renewable energy, highlights being wind power and sugarcane biomass, both in full expansion; and (v) good supply of innovative financial resources and instruments to finance the supply expansion. In view of all these reasons, there is significant room for investment in equity, financing, and mergers and acquisitions.

For years, the necessary increase in the capacity of electric power generation in Brazil has averaged 5 GW a year (ranging from 10 GW to 12 GW of installed capacity, given an average load factor slightly below 50 percent by virtue of high seasonality, mainly in terms of hydrologic flows and wind regimes) – representing an average investment of BRL 30bn ($18.6bn) a year in new plants.

Added to the investments in lines and other equipment required for the transmission and distribution of this energy in a vast territory, the need of resources amounts to some BRL 65bn ($42bn) a year. Out of this total, we estimate (based on average values of projects under LCA advisory) that around $180bn are intended for renewable sources, substantially to hydric, wind and biomass sources. Finally, around $100bn will be devoted to the expansion of production capacity in sugarcane and ethanol through the current decade.

This is a considerable amount of resources for any economy, at any time. Either as equity or debt, there is room for new investors in energy in the country. Using an equity-debt ratio of 30-70 percent, we come to $350bn in equity; as for the financing resources, those shall be sought in the market, since the main long term financing agencies in Brazil (development banks such as BNDES and BNB) are not able to extend their portfolio at the same pace – they shall, moreover, support the other infrastructure sectors with equally relevant investment programmes in the same period.

Investment incentives
In order to prompt new long term funding instruments for infrastructure, the Brazilian government recently granted tax incentives for application in debentures: foreign, as well as domestic personal investments, will not pay income tax on capital gains on these securities, which should yield six to nine percent per year after CPI inflation, depending on the risk analysis of each project.

These rates are attractive to many investors around the world as well as to the borrower, inasmuch as the projects have displayed sufficiently high rates of return.

Clearly this is a key moment for the Brazilian economy and the country’s infrastructure. And of all the sectors, energy – having a tradition in planning and standing as the focus of recent governments – is the best prepared to grow.

Fernando Camargo is Director of Investment, Corporate Finance and Energy at LCA; fernando.camargo@lcaconsultores.com.br; www.lcaconsultores.com.br

FX markets enjoy colossal expansion

Posted on by itsupport

A key tactic in the world’s recovery from the financial crisis has been for banks to increase their capital reserves. While a noble goal, the unfortunate consequence is that it has significantly increased the length of time that savers are locked out of their deposits – an increase which is scarcely compensated for by an insignificant rise in interest rates.

Not everyone wants to invest their savings for two years with no right to revoke and no more contributions than three or four percent per annum. These savers are therefore seeking more attractive investment alternatives. There are mutual funds, but these come with additional costs; and of course there is the stock market, but this requires considerable capital to begin trading.

For investors who do not possess large funds but are looking for a significant return on their capital, the foreign exchange market is a natural home. Forex is the fastest growing and most liquid market in the world: the Bank for International Settlements’ (BIS) triennial report found that in 2010 global foreign exchange trading reached $4trn a day, up 20 percent from 2007.

Its huge scale is due to its character – rather than there being a specific place of trading for over-the-counter products, the foreign exchange market is a vast network of central and commercial banks, investment companies, brokers and dealing companies, regional currency stocks and individuals, all trading with each other online, 24 hours a day.

The main goal for investors entering the forex market is to diversify their assets and withdraw funds from the home market in periods of high uncertainty. And although the market’s rate of growth has slowed (between 2004 and 2007 it grew 69 percent), improving internet infrastructure in developing countries and investment globalisation suggests it is unlikely to peak anytime soon.

Currency pairs
According to the latest BIS data, the euro-dollar is still the most traded currency pair of the market, accounting for roughly 28 percent of all transactions per day (more than $1trn). In second place is the dollar-yen pair (14 percent of daily turnover, or $560bn). The pound-dollar pair takes the third position (nine percent of market share, or $360bn). The euro-yen and euro-pound pairs commonly hit three percent ($120bn) of daily turnover in the forex market.

The US dollar is the market’s dominant currency, taking part in 84.9 percent of transactions – although this has decreased from 85.6 percent in 2004. The use of the euro, by contrast, has increased from 37 to 39.1 percent. Approximately 35.9 percent of currencies traded are from the Asia-Pacific region, including the Japanese yen, Korean won, and the Hong Kong and Singapore dollars – in 2007 their share was 33 percent. In recent years the Australian dollar surpassed the Swiss franc to become the fifth most traded currency in the world.

Trading on the foreign exchange market is also attractive because brokers provide the client with leverage for their trades, which can exceed the deposit hundreds of times. This means that successful trades can result in a profit many times larger than the initial deposit. For example George Soros, one of the most famous currency speculators in the world, earned $1bn selling the pound for just two weeks.

Access to the forex market simply means registering with any brokerage company – the challenge is finding the right one.

Choosing FBS
The market is flush with companies offering essentially identical services. However there are still some leading companies that stand ahead of the competition because of their dependability, attitude towards clients and good service.

FBS is one such company. Formed in early 2009, it now boasts 80,000 clients across more than 50 countries. It operates offices in 16 countries in Europe and Asia, including its main offices in Kuala Lumpur, Shanghai and St. Petersburg.

The broker provides three kinds of account to cater to a variety of traders. First, primarily for beginners, is the micro account, which offers fixed spreads and can be opened with deposits as low as $5. Standard accounts can be opened with $25 and offer ECN/STP trading with leverage up to 1:500.

For more experienced traders with more substantial deposits, FBS provides an Unlimited account, offering interbank liquidity, floating spreads, the ability to see the depth of the market, and no limits on trading strategies and electronic advisers.

Prospective clients can experiment with FBS’s platform by creating a demo account, and enjoy a $5 bonus when opening a live account. With this bonus traders can evaluate the advantages of trading with FBS without depositing their own funds.

Regardless of their type of account or the size of their deposit, every client is equally valuable to FBS. The broker’s competent and professional staff are always ready to help traders and respond to questions as fast as possible.

Informational and analytical support for clients is one of the major advantages of FBS. In order for traders to feel more confident making decisions about committing a transaction, FBS has a large Research Department populated by experts in the global financial markets. Every day these analysts prepare reviews, articles, comments and news on the situation in the European, Asian and American stock exchanges.

The quality and reliability of FBS has been noted by a number of independent institutions of the international currency market; in 2010 FBS received the ShowFx world exhibition awarded for Best Mini-Forex Broker.

With high liquidity, the strong potential for even further growth and an endlessly dynamic nature, the international currency market is one of the most popular investment alternatives today. Although trading comes with certain risks, it also carries the potential for very quick, very high reward – which can be many times greater than the initial investment.

Technology ‘vital’, says banking group

Posted on by

The financial meltdown that occurred in September 2008 revealed an economic crisis that had been latent for several years. Crédit Mutuel, a mutual banking organisation, has shown great resilience during this very difficult period and has been protected by the services it provides to its members. It is the only French bank not to have had its credit ratings downgraded by the international ratings agencies during the last three years.
The group achieved total net earnings of over €3bn in the last financial year, an increase of 61 percent.

According to the bank’s chairman, Michel Lucas, “These results reflect the work performed by our elected officers and employees over more than a century. The challenge of our founders was to ‘help and serve.’ We set out to rise to this challenge year after year by focusing our efforts on client-members.

“Our cooperative business model and devotion to the mutualist values of responsibility and solidarity have established the Crédit Mutuel’s reputation over time,” he says. “The group once again reaped the benefits in 2010 of its commitment to providing a service to people and the economy. It has pursued a controlled growth strategy in France and on international markets, adding to its product offering and expanding its lines of business.”

With a group share of capital and reserves of €32.3bn, the group has a floor Tier 1 solvency ratio of 11.5 percent (an improvement of 0.5 percentage points). According to Standard & Poor’s most recent report on risk adjusted capital ratios (the Basel criteria approach), Crédit Mutuel is the best capitalised bank in France.

This financial robustness is a key factor in providing a measure of the bank’s lasting success and security for client-members.

It is accompanied by a dynamic sales momentum related to the quality, motivation and permanent training of its staff; a proactive organisation and the use of efficient tools; and a strategy based on proximity and trust.

Dominating the market
In 2010 the group focused its efforts on injecting dynamism into an increasingly diversified offering, and has seen strong growth in its lending and savings activities, as well as its insurance, online banking, video surveillance and telephony businesses.

Individuals, associations, professionals and companies (in France, one in every three companies banks with Crédit Mutuel-CIC) have benefited from customised advice on their projects. This service is strongly enhanced by the expertise and skills of the bank’s 76,000 employees and 24,000 elected officers.

The performance of the insurance business has once again illustrated the strength of the bancassurance historical business model created by Crédit Mutuel 40 years ago, which now benefits more than 11 million customers.

The group boasts 5,875 points of sale (85 more than in 2009) including 5,369 in France and 506 outside Metropolitan France. Total current savings held stand at €575.5bn – a year-on-year increase of 7.2 percent.
Loans come to a total of €323.1bn – an increase of 6.1 percent – providing the economy with a greater proportion of active support than that shown by banks in other European countries. The market share of the networks in France stands at 14.2 percent for deposits and 17 percent for loans.

Over the past three years the group has developed its interests in neighbouring countries:in Germany with Targobank, and in Spain via an agreement with the Royal Automobile Club of Catalonia and stakes taken in Banco Popular, Cofidis and Monabanq. As a result of this geographic expansion, the group is now the fourth largest provider of consumer credit in Europe.

Banking on the move
Since technological expertise is a key component of its strategy, Crédit Mutuel-CIC is continually strengthening its position in the fields of electronic payment services, flow management and mobile telephony.
The group is now the second most popular provider of electronic payments in France, with almost 20 percent of the global market; and the leading provider of payments made with affiliated merchants, with 2,350 million operations handled for a total of €106bn – 33 percent of the market. It is second in France in terms of issuing interbank cards, with 8.8 million active cards.

Crédit Mutuel was the first French bank to offer merchants secure payment services over the internet, as well as the first to test contactless payments via mobile phones and bank cards. Now, thanks to its NRJ Mobile, Crédit Mutuel Mobile and CIC Mobile brands, the bank plans to offer further innovative approaches to mobile payment.

The priority given to personalised customer services can also be seen in the bank’s residential and professional video surveillance packages, where it is the dominant player in France with a market share of 30 percent.
This positioning has helped to form the identity of a bank that stands out from the rest: Crédit Mutuel-CIC won first prize for the banking sector at the BearingPoint-TNS Sofres Customer Relations Podium and was found to be France’s favourite bank in the Posternak-Ipsos image barometer.

The group has a firm focus on serving its client-members, supporting companies that create regional employment and playing an active role in financing the economy as and where needed.

With retail banking at the heart of its activity, Crédit Mutuel marries the strengths of a cooperative mutual bank with deep local and regional roots with the power of CIC to gain national and international reach in all areas of the finance and insurance businesses.

Locking out micro-finance

Posted on by

Bank Rakyat Indonesia (BRI) has been the most profitable Indonesian bank for six years thanks to its aggressive focus on low-income businesses. The higher profit margins available in servicing micro and small commercial businesses have been a powerful engine for growth for the bank, which recorded IDR 11.47trn ($1.33bn) of net profit in 2010. A huge programme of expansion means the bank now has the widest banking business coverage in the nation, giving it the best access to Indonesia’s captive market of 240m people.

BRI is also the second largest bank in Indonesia in terms of assets: helping it to tap the potential of unbanked entrepreneurs, developing them into bankable businessmen and so empowering the economic community.

This focus comes with expensive operating costs and high capital needs for infrastructure – but this has not discouraged the bank from increasing its national penetration. Now with more than 7,000 outlets, the bank has created strong entry barriers to its competitors in serving Indonesia’s huge microfinance potential.

Working so closely with entrepreneurs means the bank has a real focus on providing excellent services that are relevant to local businesses’ actual needs. “We have gone all out in improving our performance,” says Sofyan Basir, CEO of BRI. “We optimise our intermediary function by disbursing healthy loans to prospective businessmen, particularly into micro, small and medium segments. We keep improving our services, and keep innovating new banking products and features to increase our fee-based income.”

“We have put much effort into raising low-cost funds and effectively manage our funding as well as improving our efficiency,” he says. “We aim to reach at least a 60 percent current and savings account deposit ratio through our outlet expansion strategy across this nation – the strategy also aims to create economies of scale.”

Indonesia’s growth potential
As the world secures its recovery from the financial crisis, emerging Asian countries such as China, India, South Korea and Indonesia have an optimistic future thanks to their abundant resources and greater potential for growth. Of course, the crisis caused a significant decline in global demand for Indonesia’s exports – but the huge potential of the country’s domestic market has not yet been fully realised.

For the banking sector this is a huge opportunity, and BRI’s expanding infrastructure, solid capital base and skilled staff give it a competitive edge to reach Indonesians at every economic level. “Our target is to serve at least 80 percent of our loan portfolio to micro, small and medium (MSM) businesses, but there is huge untapped potential everywhere in this country,” says Mr Basir. “As long as we can grow faster to provide services to those potential customers, we believe that we can create much higher ROE – and also relatively higher net interest margin, due to the fact that MSM businesses create higher margin.”

“We have already proven to the world that our company is one of the most attractive companies to invest in, as we are able to give return on equity around 30 percent,” he says. “However, we are also aware that market competition and regulators will bring our net interest margin down in the long run. Therefore, we continually try to boost our fee-based income as a second line income source.”

Knowing the market
According to Indonesia’s central bank, 99.9 percent of Indonesian entrepreneurs are categorised as micro, small and medium businesses – and approximately 60-70 percent of them have no access to banking services. Furthermore, a World Bank survey conducted in 2009 found that 32 percent of Indonesian citizens are financially excluded, and poverty is still high in the country. Other studies have confirmed this – the ratio of loan to GDP in Indonesia was 27.8 percent in 2010, indicating lower bank penetration.

Businesses are underserviced because of their size. There are more than 12,000 traditional markets in Indonesia, driving what the west would call the high street economy – but because they are small or sole traders, they are normally considered unbankable. Furthermore, traditional banking services are not available to these businesses because owners cannot leave the marketplace during business hours.

BRI’s strategy, however, is to bring banking services to the traders.

The bank has operated its ‘Teras’ – sub-micro outlets – since May 2009. These Teras embrace feasible but not-yet-bankable people and entrepreneurs, expanding BRI’s penetration into Indonesia’s traditional markets. Officers equipped with electronic data capture devices visit traders in their place of business to offer banking services such as microloans, deposits, utility payments and transfers. This pro-active approach is of significant benefit both to the traders and BRI, which would not otherwise have enjoyed their business.

BRI offers a wide range of market-driven products and continues to develop its offering, enhancing features of existing products or creating new and innovative ideas to fulfil customers’ needs in every segment. However it is the micro, small commercial and consumer segments in which BRI excels, with its unique ‘loan for unbanked’ business model. This helps feasible but not-yet-bankable people to expand their businesses so they can take advantage of BRI’s full services in the future. The bank provides mentoring for the borrower as part of its intensive relationship management programme, in effect grooming the business until it grows to small or medium-size. Unlike other microfinance institutions which offer microloans as a grant or government channelling programme, BRI’s microloans are entirely commercial.

Competitive advantages
BRI maintains its lead in the micro-finance segment thanks to its network of outlets – the largest in the country. Currently it operates more than 7,000 outlets across the Indonesian archipelago, and plans to add another 500 branches this year. With branches in every sub-district of the country, the bank is never far away from its existing and prospective customers. Furthermore, since the end of 2009, all of the bank’s branches have been able to provide real-time, online banking services – a key technological advance putting BRI steps ahead of its competitors.

The bank employs more than 75,000 staff, recruiting graduates from top universities and local staff in its branches. BRI has also committed to continuous professional development: employees are kept up to date with training seminars and higher education opportunities, helping the bank in its mission to become the biggest and best commercial bank in Indonesia.

However, because the microfinance sector is so lucrative and reliable, other banks are trying to threaten BRI’s dominance. “The biggest challenge in microfinance is maintaining our pace of growth while we are also urged to push down the operating cost,” says Mr Basir. The bank’s strategy is to continue development of outlets such as Teras, to create new products and features, and to improve levels of service and price competitiveness – thereby creating entry barriers to competitors and improve retention of existing customers. This expansion should also create economies of scale, while a separate investment in developing e-channels and new technology based-services such as phone, SMS and internet banking will lower transaction costs.

Corporate business
BRI is also expanding its reach in the corporate business sector, despite its typical low return and potential to reduce the bank’s overall net interest margin. However interest income is not the only reason to serve corporate customers, says Mr Basir. “We are also taking into consideration the multiple benefits of its trickle-down businesses, such as cash management, payroll, low cost deposits and administration fees.”

By targeting state-owned enterprise projects with government guarantees, BRI has penetrated the corporate sector while minimising its risk exposure: saving capital usage, and building synergies by cross-selling other products and services. However, says Mr Basir, this expansion is more to optimise the return on excess funds, rather than shift the focus of the bank. “Our core business will stay in the MSM segment, and maintain corporate loans not more than 20 percent of our total loan portfolio.”

A bank for the people
Mr Basir’s vision is for the bank to become the ‘national payment agent’ within three years. “We already have the enablers and infrastructures,” he says: “the largest customer base, largest networks all connected real-time online, qualified human resources, robust supervision and control system, as well as strong brand awareness.”
This awareness is helped by partnerships and cooperatives with villages: BRI offers soft loans and mentoring for sub-micro businesses (home industries, agriculture and animal farming), with the aim of empowering local communities and overcoming poverty.

The bank also funds programmes dedicated to local communities, including natural disaster recovery, building public utilities and infrastructures, scholarships for children from unfortunate families, and renovating public health facilities and places of worship.

“For us, availability and accessibility are the key points for expanding financial inclusion,” concludes Mr Basir. “More people utilising banking services will improve the economy.”

JPMorgan pays $153.6m in SEC settlement

Posted on by


JPMorgan Securities has agreed to pay $153.6m to settle civil fraud charges against it for misleading buyers of complex mortgage securities investments during the collapse of the housing market, it was announced late on Tuesday. 


The SEC found that JPMorgan did not correctly disclose to investors that the vehicle had been created on behalf of hedge fund, Magnetar, and the role it played, namely that it was involved in picking CDOs for the portfolio and “stood to benefit if the CDO defaulted”. 
Under the settlement with the SEC, JPMorgan agreed to improve the manner it reviews and approves transactions relating to mortgage securities.


Head of the SECs enforcement, Robert Khuzami, said: “The settlement ensures harmed investors receive a full return of the losses they suffered.”
A JPMorgan statement said, it was pleased “to put this matter concerning certain 2007 disclosures behind us,” and added the SEC has not charged the bank with “intentional or reckless misconduct”.

Foster’s $10bn takeover bid rejected

Posted on by

Foster’s, Australia’s biggest brewer by sales, rejected a $9.51bn cash offer from London-based SABMiller on Tuesday, saying the bid undervalued the Australian company.
The unsolicited and unconditional offer of A$4.90 per share for the firm was an 8.2 percent premium on the closing price of A$4.53.

SabMiller CEO Graham MacKay confirmed on Tuesday that it made an offer for its Australian counterpart as it aims to “strengthen the Foster’s brand portfolio and work with the local team to bring innovation, global scale and expertise to the business”.

He added: “SABMiller has a proven track record of acquiring and integrating brewing companies in a way which benefits shareholders, employees, business partners and the broader community.”

Foster’s said: “The board believes that the proposal significantly undervalues the company in the context of a change of control and, as such, it does not intend to take any further action in relation to it.”

Europe delays €12bn aid packet to Greece


Posted on by


European governments chose to withhold the decision on whether an additional aid payment of €12bn should go to the Greek government, saying the nation needs to put a strict austerity package in place first.


Luxembourg’s Prime Minister, Jean-Claude Juncker, who chairs the 17-strong group of European finance ministers, said: “We agreed that there should be a private creditor participation, which should be voluntary because we want to avoid any credit default or credit event.”
 Juncker added: “It has to be clear that Greece has to bring about a situation where all the expected commitments are taken care of. In the beginning of July we will continue to discuss the private creditor participation, which will be voluntary and we will have to check whether Greece has fulfilled all its obligations.”