World Finance

Bottom of the valley?

Posted on August 24, 2011 by

The Silicon Valley – the world-famous bastion for technological innovation – might have passed its glory days. Facing increasing competition from emerging markets such as China and India, the tech haven is suffering a ‘brain drain’ at a worrying rate.

However, any flight of expertise would simply correct for the large influx of immigrant entrepreneurs that flooded the sun-drenched region for generations. Reports indicate that as many as 52 percent of Silicon Valley’s start-up companies were founded by immigrants, and immigrant inventors contribute to 25 percent of US global patent applications.

The immigrants who flooded Silicon Valley form an integral part of the vital region; but loyalties are shifting. Turning their backs on the renowned home of IT innovation, many entrepreneurs have decided to take their practices back to their native countries, or relocate to other attractive tech havens – be it in China, India, Germany, France or elsewhere. According to a study carried out by researchers at Berkeley, Duke, and Harvard universities, many immigrant students plan to return to domestic shores rather than settle in Silicon Valley – which up until a few years ago had been the norm.

So where will the world find its new technological nexus? Countries such as China and South Korea have a distinct headstart thanks to the vast quantity of capital being pumped into their respective technology sectors. However, experts agree that it’s difficult to determine if these destinations really have what it takes to develop environments to rival the expertise and infrastructure already in situ at Silicon Valley.

Boasting practical benefits that China and India might be lacking, European countries such as the UK could well pose a threat to Silicon Valley. Russia too, is rising in tech circles.

Not one to give up without a fight, Silicon Valley spokespeople claim that the allure of the original tech hub won’t subside anytime soon. After all, there’s no escaping the fact that about $10bn is invested in budding entrepreneurial companies every year.

The original Silicon Valley at a glance
Despite the increasing competition, Silicon Valley is still regarded highly in the tech universe and its heritage alone adds to the credibility of the region. Located in the southern part of Northern California’s San Francisco Bay Area, the ‘valley’ is in fact a vast region encompassing the Santa Clara Valley, including the city of San Jose; the southern peninsula; and the southern East Bay. This area has served as the base for the electronics industry since its conception in the early 20th century, and has been behind practically every technological revolution since that time.

The area’s famous moniker was coined in the early 1970s by entrepreneur Ralph Vaerst, who came up with the name in reference to the high number of silicon chip ventures that were based in the area at the time. These days, with the production of semi-conductors gradually moving overseas, the name has become associated with the high-tech businesses and software companies that swamp the area; and is more commonly used as a byword for the entire US technology industry.

The business culture that Silicon Valley has generated is so effective that it accounts for as much as a third of venture capital investment in the US. As such, this perennially sundrenched locale, the home to so many of the world’s largest technology corporations, has held the crown as the undisputed ruler of the tech world through the culture of high-tech innovation and development the area has nurtured. Now however, it is far from unique.

Rising in East London
Silicon Valley is far from having the technological innovation field to itself. East London is rising as a tech location in its own rights and could soon morph into a bona fide silicon valley – at least if UK Prime Minister David Cameron has his way.

The plan to transform the area, which is also home to the Olympic Park for the 2012 games, into one of the world’s greatest technology centres was unveiled by Cameron last year. Speaking at a gathering targeting entrepreneurs and investors, the PM’s enthusiasm over London’s status as a ‘valley in the making’ was palpable. “Right now, Silicon Valley is the leading place in the world for high-tech growth and innovation. But there’s no reason why it has to be so predominant,” he said. “Our ambition is to bring together the creativity and energy of Shoreditch and the incredible possibilities of the Olympic Park to help make East London one of the world’s great technology centres. I want to show you how we can get there.”

Cameron is not alone in his faith in the area as a new tech Mecca, as he reflected in his speech: “For the past few weeks and months, we have had dozens of meetings with technology companies and venture capital investors from across the world. We said to them: ‘Here’s our vision for East London Tech City – a hub that stretches from Shoreditch and Old Street to the Olympic Park. This is what local businesses are saying they need. What part can you play in making it happen?’ I have to say: the response has been overwhelming.”

That response has come from the right people as well. Firms including Google, Facebook, Cisco, Intel and British Telecom are all queuing up to join the East London Tech City, along with a crucial host of start-ups and SMEs which will help contribute to fresh thinking and innovation into the area.

East London’s rising status as the UK’s tech centre has been assisted by some key developments. The area has been subject to a remarkable makeover in preparation for the Olympic Games, most notably in terms of transport links. Now one of the best connected areas in the country, by 2012 East London will boast a fully operational terminal providing high-speed rail travel to the continent as well as trans-continental air travel courtesy of London City Airport.

On the back of the Olympic developments, an influx of new businesses and retail outlets have also helped improve the status of region. The soon-to-open Westfield shopping centre is one of a number of high-profile ventures that have already immeasurably improved the status of a once undesirable area. This is only likely to improve as all the features of the area become fully operational as the Olympics draws near.

The final draw for the area is the benefits of East London’s peripheral. Tech City is sandwiched between the heartland of London’s creative industries and the City of London, one of the world’s great financial centres. Factor in the close proximity of several widely respected universities and the area has every amenity and stimulus it needs to succeed.

Crucially, in addition to the conception of Tech City, the UK government is actively working to improve the climate and culture for technology and entrepreneurialism, much as Silicon Valley has done par excellence. “We are already doing a lot to support this new economy, from making reams of city data freely available to London’s technical talent for transformation into apps, websites or mobile products, to piloting public Wi-Fi on London Underground,” enthused Boris Johnson, the Mayor of London.

Much as Silicon Valley has, Tech City is also targeting the demographic of overseas investors and developers. The launch of an Entrepreneur Visa was brought about to encourage individuals with good business ideas to set up companies with ease in the country.

Another scheme, the Entrepreneur First programme, was unveiled earlier this year targeting elite graduates.

Based on the Teach First programme designed to assist young budding teachers, the format is a two year programme headed by McKinsey & Company, through which graduates with promising business ideas will receive mentoring, business training and networking opportunities. When the two year scheme is up, the participating candidates will be given the option to either continue building their own business, or to apply to graduate recruitment schemes within some of the companies that are associated with the scheme. The companies that form part of the graduate boosting system are a who’s who of successful businesses, including Microsoft, Tesco, BNP Paribas, BT, Cisco, Qualcomm, Intel, Civil Service Faststream, L’Oreal, Allen & Overy, Diageo, Pricewaterhouse Coopers, Shell and RBS.

The UK is pulling out all the stops, it seems. But does it have a fighting chance to become the new Silicon Valley? Considering the UK set in motion the first industrial revolution about two centuries ago, a tech renaissance would simply reinstate its past glory as a leader in the field. Add in the strong educational framework and a forward-thinking and cosmopolitan population, and Tech City has a great deal in its favour.

China shows its tech muscles
In a bid to flaunt an innovation-based economy by 2020, China is advancing swiftly into the realm of technology, and is now considered one of the strongest contenders to seriously challenge Silicon Valley.

Recognising the potential, foreign and native investors alike have raced to inject funds into the tech sector.

Although the Chinese tech environment remains very much under development, it has quickly grown from its blueprints. Recognising the potential of the region, an increasing number of top-notch entrepreneurs and major technology companies from across the globe are flocking to the country, turning their back on the sun-drenched destination that previously held their attention. Indeed, if there is a country revelling in brain gain, it’s China.
Generous funding is not the only element that tempts the best in foreign minds to settle in China; the country’s culture of tech innovations is becoming a draw in its own right. China might be known as the copy cat above all others – be it in the field of hand bag design, technology or otherwise – but there’s no doubt that the country has started to impress its surroundings with an environment that supports original ideas.

Already some native companies are rising to position as world players in innovation. The Chinese internet conglomerate Tencent boasts a stock market value that hovers just below the names of leading lights such as Google and Amazon. Two other strong contenders are the leading e-commerce portal, Alibaba, and Huawei Technology, who has made its name pioneering next-generation mobile communication infrastructure. In the field of computer engineering as well, one of the fastest computers ever to be produced is the brainchild of Chinese engineers. Collectively, these forward-thinking companies and products have helped to boost China’s status as a viable force in the tech sector.

As a way to flex its tech muscles to the world, China plays host to one of the world’s most important conferences on tech innovation and entrepreneurship. CHINICT (a portmanteau of China and ICT) is an annual event that has now been running for eight years and is next set to take place in Beijing in May 2012. The conference attracts delegates from all over the world and the interest it generates is highly indicative of China’s growing status in the tech universe. As a result, the event has grown increasingly grandiose as the years go on.

What may hold China back in the zealous race to become the new Silicon Valley is its current lack of indigenous technical expertise, making it tough to rival the established culture of tech geniuses present in Silicon Valley. Another disadvantage is presented by the somewhat rigid government regulations related to business, coupled with tricky intellectual property rights. Furthermore, the country’s educational system is nowhere near as sophisticated as that of the US and Europe – although it is improving. About four million pupils graduate every year in the country, and around 600,000 leave universities with a degree in engineering, so China’s workforce is set to become more skilful. Given time, China might well become a valley in its own right.

Russia 2.0
Another country eyeing Silicon Valley’s throne is Russia. The country has significantly improved its credentials for business and intends to prove this with the completion of an awe-inspiring new technology park by 2014. Set to allow space for more than 500 firms and costing in excess of $2bn, its hoped the investment will pay off in a new generation of entrepreneurs.

Serving as the inspiration behind the concept, the Zurich Technopark will provide the Skolkovo project with vital know-how. The two entities are said to be forming a collaborative alliance, with the CEO of the Zurich Technopark, Henning Grossmann, planning to conduct regular quality controls of the Russian site and assist in its business promotion.

The park will be based in the Moscow suburb of Skolkovo, a sleepy and rural area about 20km west of central Moscow, where affluent Russians keep holiday homes. The man behind the initiative is the Russian billionaire Viktor Vekselberg, who will take charge of the project, backed by the support of billions of dollars in government investment. To lure quality players – individual entrepreneur and companies alike – the Russian government will offer tax breaks as well as funding schemes for selected companies. Setting the bar high, the hope is that the tech park in Skolkovo will attract companies such as international software firm Kaspersky Lab, along with other major names, both domestic and international.

Positive points that will help to boost the credibility of the project is that it will be largely autonomous, boasting its own water and power supplies, to avoid problems companies can otherwise face when securing these types of amenities.

It all sounds promising. Insiders fear though that with such large sums surrounding the tech park that it may attract corruption, hiking up prices. Even if measures are taken to prevent this happening, the very perception of Russia as a less reputable location to do business will create hurdles for those trying to promote the Skolkovo park. As such whether Russia can create the next Silicon Valley remains to be seen.

Silicon Valley hasn’t lost its crown just yet. But neither is it the definitive location for technology companies that it once was. As the world fully embraces the possibilities provided by the internet age, it’s conceivable that new developments could come from any corner of the globe. And any one of them could cause the sun to set on the illustrious valley.

Peru leader implements client-based strategy

Posted on August 24, 2011 by

After weathering the worst global financial crisis in history in 2008-2009, the Peruvian economy posted excellent economic results in 2010 with approximately nine percent growth. Although expansion in 2011 is expected to moderate somewhat, the country will continue an upward trend and offer opportunities to well positioned companies like Pacifico Seguros, one of Peru’s premier insurance providers.

A brief look at 2010’s figures for the Peruvian insurance industry shows exceptional year-on-year (YoY) growth.

This represents the tip of the iceberg, particularly considering the country’s low insurance penetration levels (1.5 percent of GDP compared to 3.2 percent and 2.1 percent for regional peers Chile and Colombia respectively). In 2010, the Peruvian Insurance industry grew 33 percent YoY with total direct premiums close to $2,622m. The Property and Casualty lines reported approximately $1,200m in direct premiums – which represents an 11 percent increase YoY – while the Health and Life segments registered premium growth above 20 percent and 60 percent respectively with regard to last year. In this scenario, the sector’s earnings exceeded $200m, posting an increase in excess of 40 percent YoY.

The context from 2011 and on will offer a host of opportunities for companies that are willing and able to put the client first. Pacifico Seguros, a subsidiary of Credicorp created in 1943 to serve Peru’s insurance needs, has taken on this challenge and is working side-by-side with its clients to help them understand and manage their risks.

To work effectively with its insured, Pacifico has developed a five-pillar framework (see box opposite) to govern interactions with customers. This client-based focus has led Pacifico to step up the game for innovative customer service. Improving on a familiar concept in the fast food business, the firm offers a 30 minutes or it’s free proposition: Pacifico guarantees SOAT policy delivery (Statutory Auto Liability Insurance) in 30 minutes or less or the client receives free coverage as long as he or she owns the vehicle. The company also backs its auto claims service pledge with a bonus: an advisor will arrive at the scene in 15 minutes or less or the client receives a $200 certificate to use on Pacifico products. Other added-value services include aero-medical evacuation, which is covered under Pacifico’s most comprehensive health plans. Initiatives like these are unrivaled on the local scene and reverberate positively throughout the company’s business lines, making Pacifico’s value propositions palpable to its clients.

The company’s efforts over the last five years have positioned Pacifico as the “top of mind” insurance alternative. Executives at the country’s major companies prefer Pacifico for all their insurance needs. This is reflected in local perception polls, including the Chamber of Commerce of Lima’s latest survey of executives, which named Pacifico “best insurance provider” in every category. Market studies conducted in 2010 by Ipsos Apoyo, the local affiliate of an international market research firm, confirm this perception reporting that Pacifico is the public and business leaders’ insurer of choice.

To build a solid operating foundation, Pacifico has implemented a framework for Enterprise Risk Management to manage risks holistically and seize opportunities that are in line with the company’s strategy. The firm also shares risk with world-class reinsurers: Lloyds of London, Munich Re, Swiss Re and Gen Re, among others. All of these companies provide Pacifico with invaluable expertise and guidance.

Currently, the company’s risk management approach focuses on strict compliance with regulation to protect stakeholders. Pacifico is adapting its risk-based capital measures to contemplate Solvency II requirements and is the only company in the Peruvian market to comply with the Sarbanes-Oxley Act. This ensures that Pacifico has adequate reserves, good corporate governance and transparent financial disclosure.

Pacifico’s risk management focus and its five-principle framework for customer relations have generated exceptional results. An analysis of the last five years’ net income shows that Pacifico’s compound annual growth rate (CAGR) was a significant 57 percent. In terms of direct premiums, a comparison of figures for 2005 and 2010 indicates a CAGR of 24 percent (from $359m in 2005 to $714m in 2010). A YoY assessment indicates that the company’s net income was $55m, which represents a 12.8 percent increase over the $49.2m reported in 2009. The loss ratio in 2010 was 66.3 percent, which compares favourably to the 65.2 percent in 2009. The combined ratio for the same period was 94.9 percent (96.9 percent in 2009).

These efforts have allowed Pacifico Seguros to become one of the region’s most solid and well-respected companies. In fact, two of the most prestigious international rating agencies, Moody’s and Fitch, have awarded Pacifico Seguros an investment grade rating. Additionally, many multi-national corporations trust Pacifico to cover their local insurance needs and act as a fronting insurer for their global programs.

To remain globally competitive, Pacifico is in the process of implementing an integration strategy with closely related businesses. Along these lines, the company has recently purchased two major clinics in Lima and one in the provinces as well as a full-service medical assistance provider. All of these efforts reflect Pacifico’s commitment to putting its customers first.

Looking ahead, the company’s strategy focuses on growth in personal lines through multi-channel distribution and enhancing its role as a financial planner. In the business segment, the emphasis will be on providing industry-specific risk management advisory services. Pacifico is aware of the need to increase penetration in the provinces, where the demand for insurance products is expected to grow as the country moves towards a more decentralized economic model. This will allow the company to extend the benefits of insurance to a more diverse and underserved client base.

Pacifico’s five-pillar framework
Build long-term relations
– Offer easy-to-understand, competitively priced products through the most productive and accessible sales channels.

Specialise in risk management
– Help clients understand and manage their risks
– Apply a disciplined approach to underwriting by leveraging the knowledge of staff certified by the American Institute for Chartered Property Casualty Underwriters and the Chartered Insurance Institute

Pay claims in a fair and timely way
– Process claims fairly and quickly, keeping the clients’ best interests in mind

Strive for excellence in customer service
– Consistently exceed client expectations with the support of simple and lean processes and cutting-edge IT platforms

Offer financial solidity
– Use sound and robust financial practices
– Give clients peace of mind: all the company’s financial obligations are backed by Pacifico as part of Credicorp

ING restructures; clients gain value

Posted on August 24, 2011 by

Key changes are afoot at ING Chile as it braces itself to become a major pawn in its mother company’s Latin American restructuring strategy. The Chilean division leverages the vast network of its global 107,000 strong workforce and available resources to deliver positive experiences to customers and simultaneously create ING brand promoters. Concurrently, clients experience an individual and personalised service, which offers a wide diversity of saving and protection options, and helps them build their long-term plans at retirement.

It is the only financial company in Chile involved in the business of life insurance, AIA and mutual funds as well as having a stronghold in voluntary pensions with savings of over $1bn. AFP Capital, the company’s pension fund, is one of the top three in the country with nearly two million clients and $34.1bn in managed funds. Additionally, it boasts over 70 mutual funds which provide customers with an alternative to investing in equities and fixed income.

Wealth management strategy
When ING Chile launched its novel wealth management strategy in 2010 it made client focus the key ingredient. For ING this method has meant not only higher sales volumes but more importantly increased client loyalty and an improved understanding of consumer needs, its CEO believes.

Andrés Castro, CEO of ING Chile, explains: “Without a shadow of a doubt the most pertinent element of the ING Chile wealth management strategy has been consistent client support. In an insurance market which is highly dominated by a product and factory-driven approach, having clients at the core of our daily work marks a fundamental change in the business.”

When it comes to the serious issue of reliable wealth management suppliers, the majority of people base their choice on the advice and recommendation of family members, friends and colleagues according to ING. The trust clients put in the knowledge of those around them has increased as they appreciate real life experiences more than similar sounding advertisements and marketing messages from companies they cannot associate with.

Because word of mouth carries more credence than advertising, ING Chile employees are harnessing the influence of its satisfied clientele and continue to deliver on their brand promise. It appears the task is clear-cut and depends exclusively on its employees following a simple, ING approved approach. They have to be easily accessible, clear and transparent in all dealings, and fast and efficient all the way through their professional client advice.

Keeping it clean and straightforward with a graspable vision of what the group needs to achieve for its clients defines the facets that set ING apart. It moreover shows how the wealth management strategy at ING Chile differs from that implemented by its competition, Castro says.

“Essentially it is the client focus that really makes the difference. Simply speaking, while at ING we try to foster contact with clients, rival companies simply limit contact to sale, withdrawal and claim processes. Additionally, the lack of complete product offering makes it even more complex for competitors to communicate and delivery promises to clients. The industry determines what our clientele needs not the other way around.”

Positive effects of strategy
Results so far are showing that ING is on the right track with its methods and wealth management strategy. The group made a good start to 2011, posting in May a 1Q11 net result of €1.38bn, compared to €1.23bn in the same quarter last year. Strong capital generation at ING Bank continued into 1Q11 with the bank’s core tier one ratio increasing to ten percent.

Jan Hommen, CEO of ING Group, said: “Both the bank and the insurance division posted strong results in the first quarter, illustrating clear progress on their respective performance improvement programmes as they prepare for their futures as stand-alone companies.”

The solid first quarter result comes after a positive year in 2010 when ING recorded a higher underlying net profit. ING Bank reported another successful quarter as results benefited from a healthy interest margin, higher client balances, lower risk costs and focus on cost control. Total operating profit at ING Insurance showed a significant improvement in the first quarter, supported by higher sales and growth in assets under management.

ING restructuring
The mother company announced at the end of July that it is to sell its Latin American life insurance, pensions and investment management businesses to Colombian Grupo de Inversiones Suramericana for €2.61bn. The deal values the Latin American operations at 1.8 times book value, 16 times its estimated earnings. The Latin American businesses to be sold had combined revenues of €670m in 2010 and the sale will make ING a profit of €1bn according to the company.

In mid May ING exercised its option for early repurchase of €2bn, with the total payment amounting to €3bn, and which included a 50 percent repurchase premium. Provided the strong capital generation continues, ING intends to repurchase the remaining €3bn core tier one securities at the latest by May 2012 from retained earnings, on terms that are acceptable to all stakeholders. This will be conditional upon there not having been any material changes regarding the company’s capital requirements and/or ING’s outlook on external market circumstances.

ING Chile gives greater prominence to lasting plans and says the company’s strategy will benefit its clients not only immediately but also in the long-run. Castro explains how ING’s wealth management strategy has put more emphasis on the need for clients to get actively involved in building their retirement plan.

“Firstly, the ‘Get your Number’ campaign has put that concept across and helps clients to be more conscious of the future. ING is definitely more effective regarding its advice when each client defines a saving and protection target. Secondly, once a goal has been determined, ING utilises its product offering to propose a saving plan for each consumer or segment of clientele. Finally, once the saving plan has been determined, the company commits to track performance and risk profile to assure promise delivery.”

Employee guidance and training has always been of paramount importance to the company, and secures commitment to the programme from the top down, its CEO believes.

“Historically staff training has always been a key component of the ING business. With the introduction of our wealth management strategy, training underwent a radical change, as it was necessary to complement specific product knowledge to a broader expertise. Nowadays it is not enough to know about insurance products because a client-focused strategy demands going the extra mile in terms of proficiency on saving and investment topics that are necessary in enlarging the previously narrow product offering. In addition, the annual certification of our united sales force is a must, if we want to improve the quality and standardise the advice offered by our employees,” he says.

Corporate social responsibility
CRS programmes feature highly in business culture today and are a way for companies to give back to its communities. This is no different for ING Chile which has made CSR a priority and encourages employees to get actively involved. As provider of retirement solutions, the company understands that such a contribution to the local community will convey to clients and employees a durable assurance of belonging. Castro believes this is an achievable goal: “The key fundamentals to ensuring the success of this strategy is the long-standing commitment devoted to these initiatives while fostering participation in our employees in all the initiatives. Finally, once these actions are publicly communicated we close the circle and clients understand our dedication to continue servicing them in the long-run.”

“We send our employees out with a solid commitment to their communities and expect them to deliver high quality services and products, as well as pay attention to social responsibility matters. Besides our focus on education, which is the foundation for granting opportunities in any developing country, we have targeted our attention on environmental matters such as reforestation and energy saving campaigns,” he states.

Castro points out: “ING Chile, as well as every country where the group has local presence, cooperates and partakes in programmes with society in a positive and responsible way. We promote a continuous dialogue between the public, NGOs and our employees. In Chile, we specifically focused on furthering education with our programme “more opportunities: study builds futures.” We believe education is a great tool to combat poverty and inequality. Because of this, we work alongside “Súmate,” a non-profit organisation that helps young people. It particularly centers on those who have dropped out of the Chilean school system. We try to help Súmate by looking at ways to reinsert drop-outs into educational programmes.”

Education projects
Elaborating on one of its key educational projects, Castro states: “It involves the construction of a school in Lota, southern Chile, which was a region notably affected by the earthquake in February 2010. There are over 450 donors nationwide to help us achieve this goal, and we have a complete system of corporate volunteering under this umbrella as well. At the outset, the project started with tutorials, where ING’s employees supported young students in math, biology and other subjects. We also performed visits to schools as part of our plans for the next semester to start our motivational speaking for children.”

The drivers on implementing the new corporate wealth management strategy, both in terms of retail and corporate approaches, emerged when the company realised through its life insurance business division that there was a significant gap in service and product offerings for corporations. “The Insurance industry focuses on life and health coverage while our wealth management strategy demands a complementary focus on retirement services. It was necessary to introduce a cultural adaptation to our existing tied-agent channel saving products. At first corporations reacted slowly to the new proposal but soon they realised about their key role as promoters of retirement planning,” Castro enthused.

Without exception the company established that a considerable proportion of employees have replacement rates with pensions of an average of a ten-year gross salary, which is lower than 50 percent while international standards require about 70 percent.

Castro notes: “We demonstrated through training sessions to employers and employees that a small but disciplined voluntary saving can help contributors reach higher rates. This dynamic considerably facilitates the devotion of corporations to our group plans. The Chilean workforce is dependent on corporations as they represent a privileged umbrella with the ability to channel a variety of services for employees in relation to life and health insurance, but also in saving. It is ING’s objective to become the leading retirement service provider for corporations.”

There are however some challenges for the company regarding the enrolment process according to Castro, who says ING has implemented efficient ways to resolving any potential issues.

“The enrolment is a long and gritty process. To catch the employees’ attention it is necessary to gain access and be able to count on the committed participation of the human resources areas. This is not easy to achieve due to different priorities. Our tied-agent needs to obtain a concrete implementation agenda from the corporate representatives to avoid misunderstanding or postponements,” Castro explains.

Moreover, the company believes that it is important to be extremely efficient in any contact with prospective clients. In face-to-face interactions, agents should be extremely clear on the advantages and disadvantages of the product. The same clarity should apply to automatic enrollment tools, which are usually extremely straightforward. “They are simple and direct while upholding the main objective of building up your saving and protection plan,” Castro adds.

ING outlook and mission
One of the company’s strengths is to listen to client views and suggestions regarding its different products and services. It then analyses the comments and acts on specific criticism to improve customer experience. ING Chile has also put programmes into operation in various areas to support customer-focused innovations and improvements.

The ongoing challenge for the company during the period of 2011-12 will be to maintain momentum by continuing to consolidate its corporate platform to help reach its goals.

“Among other initiatives, it is our inspiration to widen product offerings that meet protection and saving needs for employers and employees. New schemes are under way with important emphasis on cutting-edge IT platforms. However, with a continuing focus on both operational and behavioural elements, we are in good shape for future accomplishments,” Castro believes.

ADCB commits to ‘best practice’

Posted on August 24, 2011 by

Corporate governance is key to any company’s strategy and operations. Good corporate governance can greatly benefit a business, help to improve its performance, attract business – including investment, loan and deposit business for ADCB – as well as significantly increasing the market’s trust in the business. The perception of good corporate governance by investors can underpin the development and long term stability of local markets, and help to attract foreign investors to companies in the UAE.

As global markets recover from the financial crisis, gaining market trust is more important now than ever.

Investors look for transparency, responsibility, accountability and fairness – it is these four key areas that ADCB has indentified as its core principles of corporate governance. In today’s environment, banks continue to be the bedrock to a healthy functioning financial system, and this remains particularly poignant in the UAE.

This means that strong corporate governance remains crucial for the entire sector, not only to meet best practices from a regulatory standpoint, but also to develop and improve market trust in ADCB, and in the sector as a whole.

The bank’s commitment to good corporate governance is the result of several important initiatives:
– In 2007, ADCB hired IFC, a division of the World Bank, which helped the bank to develop a three year ‘road map’ to meet the highest standards of corporate governance. This road map was based on the requirements of ESCA’s Corporate Governance Code, the requirements of ADX, draft guidelines from the Central Bank and global best practices and principles such as the UK’s Combined Code.
– The commitment of the board of directors, CEO and senior management to embrace and implement best practices within the bank.
– The creation of a Board Secretariat Department, headed by the bank’s General Counsel, a member of the UK law society, and staffed by internationally-qualified and experienced corporate secretaries.

The bank’s initiatives have been recognised by the following achievements:
– In 2009 Hawkamah awarded ADCB ‘Best bank in UAE’ at its Union of Arab Banks Corporate Governance Awards.
– In 2009 ADCB was the first bank in GCC to meet the stringent disclosure and transparency requirements to sell bonds to US investors (144A programme).
– In 2009 ADCB rated ‘top bank in GCC’ according to a survey on liquidity, volatility and transparency by TNI / Hawkamah.
– In 2010 and 2011 World Finance awarded ADCB ‘Best corporate governance of any company in UAE’, placing ADCB amongst many well known global blue chip companies.
– ADCB has been featured by World Bank as a case study for its corporate governance achievements.

To reach its achievements, steps taken by ADCB include: the reorganisation of the board and board committees, the reorganisation of management committees, an extension of the bank’s disclosures in its annual report, a focus on more regular and transparent market disclosures, regular board evaluations, a focus on board skills and training and amendments to the bank’s articles of association. In 2009, 2010 and 2011 the board made enhanced disclosures to its 2008, 2009 and 2010 annual reports, and provided these enhanced disclosures to shareholders at the AGM.

A key challenge faced by all companies is finding the correct balance between the board and management – the board’s role is to guide and set strategy, and set clear and appropriate delegated authorities. It is vital to avoid any tendencies to ‘micro-manage’ whilst maintaining appropriate oversight. ADCB has implemented a corporate governance framework, which is monitored by the board, board committees and management, to ensure the appropriate division of responsibilities and roles. At the local level, in the GCC in particular, a key challenge involves locating independent directors with strong professional experience. The bank recognised the need and value of independent objective expertise and has identified a suitable strategy – in 2011, Lord Davies of Abersoch was appointed as an adviser to the board. With over 25 years experience in banking and financial services, he is regarded as one of the finest banking experts of his generation, and ADCB is proud to welcome him to the bank.

As we look towards recovery across the industry, ADCB understands the importance and continues to work towards instilling confidence in it customers and investors. In-line with the principles of corporate governance, the bank has continued its high-level transparency towards provisioning. We strongly believe that this approach and the bank’s general commitment to governance will continue to enhance market trust and confidence in ADCB, at a time when customers and investors look for reassurance and security in a recovering market.

Saudi welfare packages encourage equities growth

Posted on August 23, 2011 by

To date, 2011 has been a volatile year for stock markets in the MENA region. The first quarter of 2011 was marred by a series of anti government revolutions, while the second quarter was affected by the worsening European debt crisis.

In the middle of this, the Saudi stock market has been one of the better performers in the region, thanks to the strength of its economy and the stability of its government. The Saudi stock market closed the first half of 2011 down a mere 0.68 percent – compared to the 6.52 percent decline in the S&P Pan Arab Index.

According to Sarah Al-Suhaimi, Head of Asset Management at Jadwa Investment, a leading player in the money management industry in Saudi Arabia, resilience of the Saudi market has been due to the strong fundamentals of the listed companies and the timely announcement of economic packages by the government.

She believes that the Saudi market is likely to outperform other regional markets going forward as well.

Turbulence on the Tadawul
The Saudi stock market – or Tadawul, as it is known locally – is the largest stock market in the MENA region, with market capitalisation of over $345bn. With average daily trading value of over $870m, it is also one of the most liquid markets around. Therefore, it is of great importance to any investor looking at the MENA region.

The first half of 2011 was characterised by the anti government protests that have come to be known as the Arab Spring. These protests in the region had their impact on the Saudi stock market as well. Against the backdrop of the region’s fast changing political situation, the Saudi Arabian government announced two welfare packages in February and March, estimated to be worth $170bn in total.

These packages carried two very important signals: first, that the Saudi government understood the issues faced by the general public; and second, that it had the financial muscle to address them. In these respects Saudi Arabia stood out from other countries in the region.

Both packages were well received by the Saudi people. Key areas addressed in the packages were the creation of new jobs, the start of unemployment benefits, the creation of a minimum wage, a one-time bonus to government employees, and improvements in the availability of housing and healthcare. “These steps support our view that Saudi Arabia is significantly different from other countries in the region, as it has the ability and willingness to genuinely address needs of its population and hence is not prone to the political instability seen in many other states,” says Al-Suhaimi.

These packages had two positive effects on the market. First, they reduced the perceived political risk of the Saudi market. Second, they are likely to have a positive impact on earnings of a number of sectors in the market. As a result the market rallied after hitting the lows in March.

The market’s uptrend was halted due to the worsening European debt crisis, which raised questions around the sustainability of the global economic recovery. However, as the 2011 second quarter result season drew closer, a pre-result rally developed.

“While the health of the global economy is important for the Saudi market, the local economic landscape is improving rapidly, which is beneficial for sectors like cement, building and construction, retail, and banks,” says Al-Suhaimi, whose team manages $2bn in assets across public and private equity, real estate and fixed income products.

Beating the benchmarks
Al-Suhaimi believes that the reason behind the strong performance of Saudi market compared to other major MENA markets is the impressive 20 percent earnings growth expected for 2011. “We believe that the Saudi stock market will witness the strongest growth among major MENA markets during 2011. Consequently we continue to be overweight Saudi in our GCC and MENA portfolios,” she says.

Jadwa’s funds have been leading performers in their respective categories since their inception in June 2007. Over the four years that the Jadwa Saudi, GCC and Arab funds have been in existence, they have returned 51.84 percent, 31.34 percent and 27.52 percent respectively. This compares favourably to the benchmark returns of 16.57 percent, -15.25 percent and -9.14 percent respectively.

Jadwa believes that the major government spending plan and the strong profitability of listed companies make the Saudi market highly attractive for investors. Moreover, economic and social conditions in Saudi Arabia are better than rest of the region. High oil prices – which are likely to prevail into the future – will keep government finances strong and help sustain government spending on social welfare and infrastructure development.

While Saudi is part of the MENA region, in many respects it stands apart from the rest.

Innovation drives Sri Lanka’s growth

Posted on August 23, 2011 by

Leading the way is Nations Trust Bank, Sri Lanka – the recipient of the World Finance award for Most Innovative Bank in Sri Lanka. In an age when banks and financial institutions are constantly placed under the microscope in terms of transparency, ethical behaviour and sound business planning, winning an award that judges all these aspects and more is a noteworthy milestone.

The culmination of the judging period for the award is preceded by intense valuations and assessments carried out by experts in capital markets, risk management, trading, technology and corporate governance issues across regional markets. The analytical process identifies business and branch leaders, individuals, teams and organisations that in the course of the year have made significant progress in their area, and whose achievements create new standards and new practices in the world of finance and business.

The evaluation process is based on transparency with shareholders and stakeholders; financial disclosures with regard to strength, size, soundness, profits, and performance; solution and optimisation of the bank’s products and services; and innovation, flexibility, leadership and geographical spread.

As the winner of this prestigious award, Nations Trust Bank believes that it has truly lived up to its vision of being the benchmark of innovation in the Sri Lankan banking and finance industry. Such innovation comes in many shapes and sizes. The bank prides itself on being the pioneer in the 365 day banking concept, as well as 24 hour contact centres and mini branches within supermarkets.

With Nations Trust Bank it isn’t just products but also services that are thoughtfully aimed at differentiating and enhancing the banking experience of customers, by consistently providing innovative and value added services.

Epitome of dedicated service
One such product is the ‘Bank at your Doorstep’ service. It allows Nations Trust Bank customers to simply call the bank hotline and request services such as cash withdrawal, cash transfer and delivery. Within an hour, a bank representative will arrive at the customer’s doorstep – be that at home, the office or even a restaurant – and personally take care of the request. Cash deliveries of up to LKR 100,000 (around $900) are undertaken in this manner.

This service epitomises and redefines the manner in which the bank serves its customers. Furthermore, specific departments such as IT, and products such as the American Express card, have won awards and recognition in their own right.

The employees at Nations Trust Bank play a vital role in securing this acclaim for the bank. All bank employees are continuously trained to ensure a consistently efficient and effective service that is both client oriented and customer friendly. In this aspect, front office personnel and other employees directly involved with customers receive additional special training. Back and middle-office staff are trained to ensure an unbroken chain of value addition is linked to the front office, in order to provide a wholesome service to the customer.

Having witnessed a 76 percent growth in post tax profit in the first quarter of 2011 over the same period in 2010, Nations Trust Bank is one of the fast expanding banks in Sri Lanka. Despite its relatively small size of 1,600 employees and 44 branches, the bank is focused on delivering a tangible, people-centred service to its customers – no matter where they are.

The fortune of peace
As a leading bank in Sri Lanka – and moreover as an innovative one – Nations Trust Bank realises the potential that the post- civil war peace dividend offers in lifting the economy. Furthermore, it is urging others in the banking industry to be committed to this journey of growth, within a regulated environment, at a brisk pace to catch up for lost time.

The post war macroeconomic conditions have certainly provided an unprecedented impetus for the economy, especially in private sector credit growth. In this backdrop, Nations Trust Bank has placed in motion a plan that seeks to expand branch presence, swell capital and balance sheet footings, and engage in enhanced employee activities.

All in all, Nations Trust Bank is committed to providing customers with a comprehensive and fully integrated banking service. Its network is constantly monitored, evaluated and changed to suit varying needs, trends
and developments.

Regionalised marketing improves acquisition

Posted on August 23, 2011 by

PT Asuransi Jiwasraya (Persero) has operated in the Indonesian insurance market for 151 years, adapting to the changing needs of its millions of clients through this time, but maintaining the core focus of high customer satisfaction.

Of course, many insurance companies – both local and foreign – have been drawn to Indonesia because of its high growth potential in the century and a half since Jiwasraya’s inception. Today the market is very competitive: companies are offering many new products, highly customised to the increasingly diverse needs and capabilities of policyholders.

This has only motivated Jiwasraya to improve its quality of service. The company has identified four key themes to develop in promoting its brand to potential clients:

– Product development – highlighting the work done by Jiwasraya’s research and development team to create new products and review existing products, ensuring they are carefully tailored to fulfil the needs of its clients;
– Pricing – demonstrating Jiwasraya’s competitiveness;
– Promotion – proving that Jiwasraya can be trusted as a good financial planner;
– Distribution – developing a comprehensive distribution network to achieve close proximity to existing and potential clients.

Results so far have been very positive. Marketing programmes have been supported by the customer service unit since 2009, for easier and faster access to information in addressing customers’ problems and complaints.

This was a key driving force in increasing new customer acquisition, helping premium income reach IDR 3,613trn ($230bn) in 2010.

The investment sector – the foundation of the company’s operations – also performed well, with optimisation of the company’s bond portfolio helping to improve performance. As a result of this the company’s investment programmes are now easier to monitor, thus minimising fluctuation. Jiwasraya’s return on investments was IDR 669.5trn ($78bn) in 2010, and overall net profit reached IDR 204.5trn ($24.0bn) in 2010.

Product innovation
In today’s insurance industry there has been a shift away from traditional insurance plans towards unit linked plans. However, with more and more competitors using the same mechanism, Jiwasraya has differentiated itself by giving added value to its customers, and offering more profitable value to potential customers.

In 2009 Jiwasraya launched its feature product JS Link, a unit linked plan which offers safety and profitability.

The main advantages of the unit link are maximum protection for the client with high coverage value, and flexible premium payments that can be customised to the customer’s requirements.

Jiwasraya was the first company in Indonesia to offer education insurance. These products are designed to fulfil parents’ various needs in financially planning for the education of their children.

In the corporate sector, Jiwasraya is aware that employees are important assets – and that every employee has unique needs to be fulfilled. The need to provide for employees’ productivity, welfare and health, as well as continuity of income for employees and their families when they enter the age of retirement is increasingly seen as part of organisations’ social responsibilities.

To provide convenience for companies to deal with such situations, Jiwasraya’s corporate insurance plan can be customised according to the needs and capability of the company’s clients.

Its JS Siharta product is a programme for old age welfare, including old age fund benefit, funeral compensation, accidental disability benefit and accidentally hospitalisation benefit.

The company’s health insurance product is designed to fulfil a company’s needs in risk aversion of employee health costs. Jiwasraya helps manage the appropriate financial planning in order to secure the payment of insurance benefits for participants who suffer illness from a disease or accident.

A personal accident product provides benefits for accidental death; or if injured in an accident it provides compensation for hospitalisation, hospital inpatient costs, medication and disability benefit.

Marketing channels
An effective and broad distribution channel is the most important aspect of marketing. Jiwasraya has established a comprehensive distribution network and area offices in many major cities. There are 17 regional offices, 71 branch offices and 382 area offices throughout the country, reaching even the remotest areas.

To improve its performance, Jiwasraya has adopted three tactical measures: it has increased the number and persistence of agents with high productivity and production qualities; restructured its marketing centres into regional offices; and expanded its channels by using several systems such as general agency systems, telemarketing and bancassurance.

Jiwasraya marketers receive professional training at recruitment and throughout their work with the company, developing professional and productive human resources where it matters.

Marketers’ pre-basic training provides a preliminary understanding of life insurance and the selling process; this is combined with licensed life insurance agent certification for marketers new to the industry.

Successful agents are then taught sales in greater depth, including presentation and negotiation skills, relationship management and effective telephone techniques; as well as useful office and management skills such as working as a team, prioritisation and managing conflict.

A supervisory development programme is also available for career development, with training as diverse as financial management, marketing management, problem solving and decision making, basic human resources, development management, and effective leadership.

Human resources management
Jiwasraya believes that human resources are the main factor in the success of every company, and that it is therefore important for the company to provide aspiration, satisfaction and comfort for its employees.

In 2011 Jiwasraya’s human resources division determined a new direction for the company to help it provide the best for its personnel. Jiwasraya now positions itself as a strategic partner for its employees, providing training and development, compensation and reward schemes, and career planning assistance.

To help its employees achieve optimal performance, Jiwasraya implemented a performance management system – identifying key performance targets encompassing financials, business processes, customer service, competence and innovation.

Comprehensive training programmes help employees realise their objectives in line with the company’s vision, mission and strategy. For its supporting unit, general training is delivered through seminars, workshops and conferences; while subject specific training includes areas such as database management and basic underwriting.

Social responsibilities
As a demonstration of its commitment to the environment, Jiwasraya has allocated funds to a Partnership and Community Development Programme. These funds have been distributed to eight provinces across the nation to 37 trading sectors and 25 other sectors, including service, fishery, farming, agriculture and plantations.

By assisting its foster partners, Jiwasraya hopes to contribute to the welfare of the Indonesian community, as well as securing a sustainable environment and continued growth.

Today, more than 3.4m customers have trusted their future to PT Asuransi Jiwasraya (Persero). The company is aware that trust is a virtue that should be upheld to maintain good relation with customers in providing appropriate financial advice and solutions.

WTS Group outlines consulting ‘pillars’

Posted on August 23, 2011 by

WTS is an international group of consulting companies operating in the areas of tax consulting and business consulting. The core of WTS’ work includes tax and legal advice to multinational groups, national and international SMEs and private individuals. The range of services has recently been significantly extended in the areas of investment tax law, M&A, private clients and non-profit organisations. In business consulting, WTS specialises in particular in financial advisory as well as national and international accounting services. With more than 400 employees in seven German offices, the group of WTS professional companies is one of the largest international tax consulting practices in Germany. The group is represented in more than 90 countries through WTS Alliance. WTS exclusively focuses on consultancy services to avoid any potential conflicts with auditing activities. Members of the board of directors at WTS Group are Fritz Esterer and Prof Dr Alexander Hemmelrath.

The company’s success rests on its main pillars: tax and business consulting with a total of twelve areas of competence.

Tax consulting
WTS offers legal and tax consulting services with both general tax experts and specialists in specific areas of taxation. Its consultants are comprised of tax advisers, tax representatives and lawyers. Due to its worldwide network, WTS is able to offer its clients expertise around the globe. Tax consulting includes expert advice in the following disciplines:

– Corporate Tax Advisory
– Integrated Tax Services
– Transactions
– Asset Management and Financial Services
– Real Estate Taxes
– Supply Chain Strategy
– Governance and Compliance Advisory
– Private Clients and HR Tax Services

Business consulting
Business consulting operates under the brand name Fortesse Consulting and is responsible for the fields:

– Financial Advisory
– Restructuring and Turnaround
– Process and Risk Management
– Accounting Services

Within the WTS Group, Fortesse Consulting offers CFO-close business consulting. The range of services includes both, comprehensive project consulting as well as the acquisition of commercial services in the context of business operations. These include in particular the advice on accounting, compliance and risk management, as well as restructuring. The implementation-orientated advice is based on in-depth business knowledge combined with years of practical experience. This guarantees the provision of high quality and proactive advice to international companies, medium-sized private and public companies and financial investors.

Around the globe through WTS Alliance
WTS Alliance is a global network of selected tax consulting firms and is represented by its partners in more than 90 countries. Since its foundation in 2003, WTS Alliance is regarded as a trendsetter in cross-border tax cooperation. WTS Alliance’s activities are coordinated by German-based WTS Steuerberatungsgesellschaft mbH. For the admission of new members WTS Alliance has imposed strict selection criteria. In 2010 the members improved their uniform market presence by founding the WTS Alliance Association.

Private clients
Advice to individuals on personal-legal and tax issues requires a trustworthy tax and legal advisor, who understands the unique situation and acts proactively. To the circle of our national and international private clients we count not only wealthy families or individuals, but also managers and CEOs of large corporations.

Among other issues, the work revolves around tax optimisation of domestic and international investments, business succession or charitable activities. Private client advisory provides a comprehensive approach. Apart from preparing income tax statements, support is offered in cases of cross boarder relocation, fiscal change of status and tax audits, issues on residency and double taxation. Tax advice is also rendered on share-based payment instruments (stock options, phantom stocks, stock awards, etc.), deferred compensation and pension plans, respectively.

To family-run companies frictionless succession arrangements are crucial for securing the continuity of the company. Prof Dr Hemmelrath and his team develop concepts for suitable company and wealth succession, create and customise prenuptial agreements, contracts of inheritance, articles of association as well as wills. They also provide advice in the fields of inheritance tax law, gift tax law as well as valuation law for national and international constellations along with the preparation of inheritance tax and gift tax declarations.

Non-profit organisations such as foundations, associations and charitable limited liability companies are provided with formation advice by Prof Dr Hemmelrath and his team, including the assistance during the entire formation process such as the generation of statutes and articles of association and the processing of non-profit status issues.

Tax declarations are prepared, assistance at audits is offered and compliance processes are implemented. All business transactions and accounting services are carried out in cooperation with Fortesse Consulting.

Tax services for HR departments
WTS’ international and national network of experts renders advice to companies as well as expatriate employees.

Global expatriate services encompass all aspects of delegation of employees in tax, labour and social law issues relating to cross-border delegations and the preparation of domestic and international income tax returns.

Another important aspect of HR tax services is wage tax advice. Payroll tax for employees is paid by the employer directly to the state. Changes in income tax law inevitably have financial and administrative consequences for the company. The legal regulations in the field of income tax are not only subject to constant change, but may also seem to be getting increasingly confusing. This causes a high risk for companies as they might pay too little income tax, for instance due to wrongful lump sum consolidation. Wage tax audits can then result in substantial interest payments which will incriminate a company’s operating profit.

WTS emphasises a practical approach to consulting, developing creative, tailored and pragmatic solutions. This again is reflected by the integrative approach to consulting, in which both the interests of the company as employer and the employee are borne in mind. It is important to identify tax risks at an early stage to optimise wage tax payments and keep the administrative burdens to a minimum. WTS experts, being the clients’ permanent advisors, provide advice and support during projects such as income tax audits, in the conception of corporate policies (travel expenses, company cars, hospitality, corporate events, etc.), or by generating flexible systems of remuneration and working time models (occupational pensions, working time account models, etc.). The WTS team further renders expert reports on current legal issues and obtains appeal information from fiscal authorities.

The strategies for success
WTS’ integrative and tailored approach to consulting makes a definitive contribution towards reducing tax-related risks. Experienced generalists and high-calibre specialists from major companies, consulting firms and the tax administration make up the teams of WTS advisors. WTS employees guarantee the success of the client’s business. With excellent qualifications, they work enthusiastically and effectively at the highest professional level.

They are solution-focused with a high degree of personal responsibility. With decision-making as one of their key strengths, our employees are appreciated by clients as valuable business partners.

WTS consistently pursues its strategy to attain a leading market position in all important areas of tax and business consulting while also providing its clients with access to a highly efficient worldwide network.

Prof Dr Alexander Hemmelrath is a board member of WTS Group

For more information tel: +49 (0) 89 28 646 0; Email: alexander.hemmelrath@wts.de; www.wts.de

Bank calls for a single European voice

Posted on August 23, 2011 by

With many considering the banking slide to have served it’s term and new regulations on the offing, several financial institutions have recognised this as the time to make profitable steps. Bank Austria has presented a strong and distinct message to the industry.

What does recognition as the “Best Banking Group – Austria 2011” mean to you?
Banks around the world lost massive amounts of trust during the global financial crisis. In this, people differentiated very little between investment and commercial banks. I see this distinction from World Finance as an important milestone on our path to winning back lost trust by coming even closer to our customers, offering higher service intensity, and offering simpler, real-life products. In other words: It is both confirmation and motivation for my team and me.

As part of UniCredit with its broadly diversified business model in terms of regions, product groups and customer groups, Bank Austria already proved to be very robust during the crisis and closed every quarter since the collapse of Lehman in 2008 with a profit. And unlike other Austrian competitors, we did not draw on any government assistance. In fact, we began utilising synergies early and were the driving force behind the consolidation of the Austrian banking market.

How was the first quarter of 2011 for Bank Austria?
We got off to a good start in 2011. The upward trend seen in the past few quarters continued in the first three months of the current year. It is particularly noteworthy that we have further improved our performance in commercial banking business with customers while the provisioning charge in Austria and in Central and Eastern Europe continued to decline. On the basis of these two factors, net operating profit increased by 38 percent, and net profit reached €341m. Although the economy is gaining momentum, especially in our CEE markets, we have not yet attained the pre-crisis level. We need to maintain stringent cost discipline and further improve our productivity in order to absorb the additional burdens resulting from the bank levies in Austria and Hungary and to meet the new capital requirements under Basel III.

What opportunities do your home markets offer for the future?
Austria is a mature, saturated bank market with more or less fixed customer shares. Bank Austria has a broad base as a universal bank and is the leader in many areas. For example, the University of St. Gallen named our retail business the “most customer-oriented service provider for 2011.” The European Customer Service Champions competition is based on concrete customer feedback, customer survey tools and complaint management as well as on service quality initiatives and innovative service models. In this connection, we recently introduced SmartBanking, a flexible package for the online generation – a customer group that completes most of its banking business over the internet and with smartphones and that does not want to be bound to branch business hours. I would also like to mention corporate banking, where we are the clear number one, and private banking, where we are the largest asset manager in Austria.

The key to growth in this market is customer satisfaction and absolute customer orientation. For this reason, we increased the number of special branches across Austria for serving small and medium-sized businesses with annual sales of up to €50m to approximately 60 over the past year.

And in Central and Eastern Europe?
There are still major opportunities in banking in CEE. On the one hand, the region is expected to grow at 4.4 percent this year and 4.0 percent in 2012, twice as fast as the eurozone. On the other, the convergence process in terms of prosperity and the use of financial services is far from complete. Take mortgage loans, for example: they only made up eight percent of the region’s GDP in 2010. In the eurozone, they make up 40 percent. There is also massive potential in corporate financing. It comes in at 26 percent of GDP in CEE but 52 percent of GDP in the eurozone. Taken together, all of these factors form a solid basis for continued growth in the banking sector in Central and Eastern Europe.

What risks are you confronted with right now?
Overall, our risk costs have fallen considerably compared to two years ago. Nevertheless, there is a great deal of uncertainty on the markets, especially because of the sovereign debt crisis. In this context, I am really disappointed to see how quickly our common Europe is cast aside time and again because of national interests.

We need more Europe, not less, to assert ourselves as one of the most potent economic areas in the world. It is time to act with solidarity and speak with a single voice. Speculative attacks against large economies in the eurozone are attacks against Europe.

What lessons have you drawn from the financial crisis?
It is no coincidence that Bank Austria and its parent company, UniCredit, have posted a profit every quarter since the eruption of the crisis. In fact, it is impressive evidence of how crisis-resistant our business model is, our model of a universal bank with broad diversification in terms of regions, customer groups and product groups. Other key factors are our conservative risk policy, strong deposit business and continuous efforts to improve our efficiency.

Nevertheless, the confidence crisis is also affecting our bank group. And we can’t fix this overnight with a slew of new high-gloss brochures. It will take hard work and absolute customer orientation.

What do you think of the coming new regulations, like Basel III?
The global financial crisis we just went through was precipitated by a number of factors. These include the blind trust investors placed in the little-regulated rating agencies, a jungle of shadow banks that is not monitored by the various supervisory authorities, insufficient liquidity at some banks, and the Fed’s policy of printing cheap money for many years.

Don’t get me wrong, I think that the new, stricter capital requirements are sensible, but they are not enough by themselves. The system will not be made more secure by highly regulating commercial banks like UniCredit Bank Austria, a traditional “bread-and-butter” bank with a high level of deposit-taking business, and letting the shadow bank system go about its business as usual. The business model and risk management system must also be taken into account here.

Lehman Brothers had a core capital ratio of 11 percent when it collapsed in 2008. What would have been a comfortable safety net for a customer-oriented commercial bank proved to be insufficient for one of the leading investment banks.

What strategy will the group pursue in the coming years?
As I said, Austria is a saturated bank market with a multitude of financial providers. This fierce competition makes it impossible for us to increase our margins at will. For this reason, we will continue focusing strongly on innovative offerings for new customer groups and on using the economies of scale provided by our membership in one of the leading European bank groups, UniCredit. For example increasing our productivity by combining IT activities.

We are striving to achieve organic growth in Central and Eastern Europe in the coming years. For example, we are planning to open around 900 new branches in selected markets such as Turkey, Romania, Hungary, Russia, Bulgaria and Serbia by 2015. The conditions are promising. All countries in the UniCredit bank network will post positive GDP growth for the first time in four years in 2011, and this should facilitate further recovery in the banking sector.

Are there business segments that your bank group wants to focus on in particular in this context?
We are currently completing a strategic assessment of all of our activities in CEE. In general, we want to maintain and expand our leading market position in the region. To this end, we will provide our subsidiary banks in Central and Eastern Europe with more capital for their customer business, focusing on the countries with higher growth rates. We want to grow selectively, organically and sustainably – quick, short-term profits are not part of our philosophy.

Willibald Cernko heads Bank Austria, UniCredit’s CEE sub-holding

Localisation and evolving products

Posted on August 23, 2011 by

In June 2009, two elite companies – Fubon Life and ING Life Taiwan – officially merged to become Fubon Life, in one of the most significant M&A projects in the Taiwanese life insurance industry. Before the deal was made official, the management team of both companies had developed a clear and definite strategy of business consolidation. The new Fubon Life announced immediately after the merger that because human resources are the most important capital for the company, it would be retaining all its employees. The company also actively informed its clients of the merger and ensured their rights and benefits would not be affected.

In the meantime, the management team consolidated the strengths from both sides of the merger and ensured they complemented each other in terms of human resource, product portfolio, customer service and distribution channels. It is because of these efforts that the company could maximise the operational benefits and demonstrate synergy faster than any other merger in Asia.

This synergy manifested itself in the company’s 2010 results. The first year premium income reached TWD 310.2bn ($10.4bn), a growth of 50.8 percent from 2009. The market share of Fubon Life moved up to 26.7 percent. Its earnings of TWD 8.62bn ($288.2m) and EPS of TWD 5.03 ($0.17) both topped the life insurance industries in Taiwan. The total asset value also increased significantly after the merger, growing 23 percent to reach TWD 1.62trn ($54.2bn) by the end of 2010. This strong performance was widely recognised in the industry, helping Fubon Life win the title of Most Admired Insurance Company in 2009 and 2010.

Comprehensive service philosophy
Fubon Life is founded on a customer-oriented philosophy to provide considerate and comprehensive service to its customers. To further improve its service quality, Fubon Life customer call centre has led the industry by introducing a 24/7 manned phone answering service. It also launched an internet phone service to serve the growing online customer population.

To integrate the sales systems of the two merging companies and improve service efficiency, Fubon Life launched the Fubon House project. These one-stop service centres incorporate a sales management system, customer service centre, training facilities and other corporate functions such as banking, securities and property and casualty insurance in the same office building for the convenience and benefit of customers. As of December 2010, more than 90 Fubon Houses have been established around the country to provide a localised service to customers.

Evolving products
In light of the aging society and the decreasing birth and marriage rates, Fubon Life has developed a variety of innovative insurance products to meet new market demand. In addition to basic life insurance, health and casualty insurance products, Fubon Life has introduced a series of protective insurance products such as surgical insurance, female life insurance, and major disease, specific disease and injury riders to help its clients create a comprehensive safety net.

Fubon Life also offers traditional foreign currency insurance policies and innovative investment-linked insurance products to fulfil the demands of its customers. Through the balanced development of tied agents, bancassurance and alternatives, Fubon Life can not only ensure its competitiveness, but also allow customers of different segments or regions access to its diversified product portfolio and service in a more convenient way.

A CSR role model
Fubon Taipei Marathon has become one of the largest marathon events in the world. It not only enjoys an attendance of more than 100,000 people, but also attracts champions of city marathons around the world to come to Taipei for the event.

In addition to promoting healthy exercise, Fubon Life has devoted significant effort to disaster relief projects, care for underprivileged children, and the promotion of cultural activities. After the Japanese earthquake in March, Fubon encouraged its employees to donate one day’s income to help the victims rebuild their homeland. Fubon Life therefore not only performed well in corporate earning and customer satisfaction, but also won numerous recognitions in Taiwan.

Aggressive expansion overseas
Fubon FHC, the parent company of Fubon Life, has been operating in the Taiwan market for 50 years. It has subsidiaries in banking, life insurance, property insurance and securities to offer a comprehensive and diversified financial product and service portfolio. The company has expanded overseas to Hong Kong, the United States, Vietnam and Mainland China with total assets of more than TWD 3.49trn ($116.7bn). In Taiwan, Fubon FHC has topped all listed financial holding companies in profitability in 2009 and 2010.

In addition to the continual development in the Taiwan market, Fubon Life is actively expanding its business into overseas markets with great potential, such as China and Vietnam. The company’s subsidiaries – Fubon Life Vietnam and Fubon Property Insurance (Xiamen) – and a branch office in Beijing have all been in operation since 2010. A joint venture with Nanjing Zijin Investment Co. is scheduled to be open in 2012.

A swiss tour d’horizon

Posted on August 23, 2011 by

Switzerland remains a solid location for financial and corporate investments. While the country officially went into recession in early 2009, the Swiss economy recovered quickly. Switzerland has not experienced a severe credit crunch as seen in other parts of the world: positive action, some of it in response to the crisis and some of it long-planned, has maintained stability in the country’s financial system.

As well as measures and legislative activity regarding the stability of the finance industry, tax reliefs for families and additional funding of unemployment insurance, the federal government has implemented certain stabilisation measures for the overall Swiss economy in three steps. The cost-effectiveness of these measures was split over the fiscal years 2008-10.

These three-step stability measures covered, most importantly, the labour market (short-term work compensation for enterprises, and the prevention or mitigation of youth and long-term unemployment), but also contained stimulus measures regarding, for example, the export risk guarantee, infrastructure projects (road, railway), high water protection, environment protection, green energy, and the refurbishment and maintenance of buildings. As of May 2011, the unemployment rate is at a low 2.9 percent.

Switzerland hosts, since its formation in 1930, the world’s oldest international financial organisation, the Bank for International Settlement (BIS), which acts as bank for the most important central banks. Switzerland is a member of the Basel Committee on Banking Supervision. Other prominent international organisations such as the International Committee of the Red Cross, the World Trade Organisation, the World Intellectual Property Organisation and the World Economic Forum are also located in Switzerland.

International attraction
Switzerland attracts foreign companies and (ultra) high-net-worth individuals and employees for reasons such as free capital flows, open markets – including the labour market – legal, political and economic stability; as well as its strong, independent currency, high legal certainty, effective protection of social and economic privacy and high personal quality of life.

Businesses are supported by the country’s pragmatic regulation of its financial services industry, reasonable taxation, excellent educational systems on all levels, and availability of skilled employees (both Swiss and foreigners). Furthermore, the real estate market is robust.

For example, the Society for Worldwide Interbank Financial Telecommunication, which counts among its members the 2,500 largest global banks, has established in Switzerland a new operating centre for processing all European wire transfers.

And it is not just finance firms, such as hedge fund managers and insurers, which are increasingly moving to Switzerland. Industrial firms are also looking to the country when establishing their European or global headquarters, operation centres, research entities or manufacturing or trading sites – including Procter & Gamble, Kraft and Cadbury, McDonald’s, Cargill, Transocean, Sempra Energy, Amgen, Google, Yahoo and Ebay.

Autonomy
Switzerland is not a member state of the European Union or the European Economic Area, but of the European Free Trade Association and Organisation for Economic Co-operation and Development. This renders Switzerland the autonomy to regulate its financial services industry as it deems appropriate.

Swiss financial market regulation is based on two pillars: supervision of the market actors such as stock exchanges, banks or securities-dealers, with a focus on the secondary market rather than regulating the primary market; and self-regulation. Already since 1977, based on self-regulation promulgated by the Swiss Bankers Association (SBA), Swiss banks have adhered to know-your-customer rules and implemented and constantly improved means to identify account holders and beneficial owners.

Switzerland introduced legislation to penalise both insider trading and money laundering in 1990; further legislation, including the Anti-Money Laundering Act – which came into force in 1998 – translated the recommendations of the Financial Action Task Force on Money Laundering into national law.

Market surveys such as the Swiss Financial Centre Watch show that the Swiss financial market has experienced a veritable boom, not so much due to banking and insurance but mainly due to new financial services providers such as hedge funds, private equity firms, venture capital firms, independent asset managers and trust companies. There has been no private equity crisis at all in Switzerland.

Switzerland is one of the world’s leading financial centres; supervised, since 2009, by the Financial Market Supervisory Authority (FINMA). Incorporating the former banking, insurance and anti-money laundering authorities, the new body streamlines financial regulation, making auditing and enforcement uniform across different financial sectors. Despite its start during one of the busiest periods for financial regulators, FINMA has coped well.

Another important pillar of the Swiss financial center is the SIX Group, which provides financial infrastructure services to national and international participants. SIX Group was formed at the start of 2008 through the merger of the three main Swiss infrastructure providers. SIX Group’s fields of business therefore include securities trading (SIX Swiss Exchange), securities services (SIS) and financial information and payment transactions (Telekurs).

In good company
There are many Swiss financial intermediaries of international weight. Most – notably UBS and Credit Suisse – provide not only global asset management, but also investment banking services, and are able to advise large international enterprises on a global scale. Zurich Financial Services and Swiss Re are very strong global (re-)insurers. Glencore, which went public in May 2011, and Mercuria are among the world’s leading commodities traders; XStrata is a leading global mining enterprise.

Switzerland is also a stronghold for pharmaceutical enterprises, such as global players Roche and Novartis, as well as more niche biotech companies. The country is the home base for large nutrition companies such as Nestlé, and hosts Swatch, Rolex and other luxury watch manufacturers. It hosts a number of companies that are not only listed at SIX, but also on the New York and London stock exchanges.

Mitigating bank risks
Overall, Swiss banks are in a comparatively strong position, having avoided the worst of the sub-prime crisis and the collapse of Lehman Brothers. The deposit guarantee for Swiss investors was increased from CHF 30,000 to CHF 100,000 ($90,000) in December 2008 by the Swiss parliament, which is a clear and meaningful sign to boost business confidence. The insurance comes from the banks themselves, which are required to hold assets in Switzerland that amount to 125 percent of the protected deposits. It’s a typical Swiss solution that, to every extent possible, no taxpayer money is involved.

Furthermore, in the aftermath of the financial crisis, FINMA took the initiative to mitigate systemic risks of large Swiss banks that are systemically important for the Swiss economy. It has also proposed measures strengthening the resilience of such banks, thus limiting the economic impact of a crisis in the financial system and promoting financial stability.

This initiative is embedded in the global framework, in particular of the Basel Committee on Banking Supervision, which issued new rules (Basel III) in September 2010. Switzerland will implement the Basel III proposals within the internationally agreed time frame.

These revised rules would be applicable to all banks regardless of their systemic relevance, but banks with higher systemic importance should maintain a higher solvency. It is currently planned to require large international banks to have a capital of 19 percent of their risk-weighted assets; i.e. the 4.5 percent RWA minimum capital requirements under Basel III, the capital conservation buffer of 8.5 percent RWA, and a progressive surcharge of 6 percent RWA based on current calibrations. The necessary legal changes are currently being debated in the Swiss federal parliament.

Staiger, Schwald & Partner, founded in 1964 and with offices in Zurich, Berne and Basel (notary office), is a Swiss business law firm advising top-quality domestic and international clients. Its professionals advise companies, financial institutions and high net worth individuals in national and international M&A, venture capital, private equity, corporate and finance transactions, banking, capital markets, insurance and any type of commercial project. Driven by personality and commitment, they are dedicated to the client’s goals.

Mark-Oliver Baumgarten is a partner at Staiger, Schwald & Partner and head of the banking, finance and capital markets team

For more information Tel: +41 58 387 80 00; Email: mark-oliver.baumgarten@ssplaw.ch; www.ssplaw.ch

Estlander: Pioneering new ideas

Posted on August 23, 2011 by

The Finnish CTA, Estlander & Partners, has shown the market that it is possible to learn from the errors others make in the industry and use it to its advantage. This magazine awarded the firm Best UCITS Compliant Product in Europe, citing in particular its fund offers to investors looking for an investment that does not correlate with other risky assets, and which provides an excellent opportunity to broaden their portfolio.

The company has built on the knowledge that capturing and locking-in opportunities for financial success requires extremely fast decision-making abilities founded in comprehensive and structured market information.

Its resourceful employees made use of this information in an innovative and systematic way as they developed a combination of information, advanced IT capabilities and risk management, supported by a committed R&D strategy and constant product refinement.

Martin Estlander in his humble Finnish manner explains: “Some of our competitors who implemented a comparable trading style have also been quite successful. The trading style we adopted however has been positive so far as we have never experienced a negative calendar year with it. Our holding period is shorter and we are more reactive to the market environment. This provides good returns and excellent diversifications. It is our long track record of achievement and our solid return characteristics which make us different.”

The latest published data showed Estlander & Partners manages $1bn, within its three distinctive investment programs: Estlander & Partners Global Markets, Estlander & Partners Freedom and Estlander & Partners Alpha Trend. Each one of the three programmes is a systematic CTA created to take advantage of any change, which denotes fluctuations in global asset prices and modifications in risk appetite. One of the CTAs most successful products has been the Estlander & Partners Alpha Trend, which has been in operation nearly 20 years and is a diversified short term trend structure which is active on more than 70 futures markets and offers a systematic programme with a highly selective trading process. The “Alpha Trend” offers investors the ability to hold positions for an average period of 20 to 30 days, delivers steady and consistent returns and has so far never experienced a year of negative returns. According to Estlander it has delivered a positive performance in 95 percent of its six month periods.

The investment philosophy within the different products of Estlander & Partners is straightforward. The CTA systematically and in a disciplined manner, without losing focus on constant innovation and enhancement, capitalises on market movements driven by investor behaviour. “Estlander tries to deliver high, absolute returns and strong risk adjusted returns by implementing rigorous risk control at every stage of the investment process,” the CTA says.

Estlander has been able to combine its employee’s individual trading experiences, quantitative skills and sophisticated modelling capacities to successfully tackle the complexity of the markets at any moment. The CTAs investment philosophy states: “We know that quantitative analysis is an effective way of profiting from market movements and historic price data repeatedly provides identifiable investment opportunities.”

It is Estlander’s belief that diversification across a broad range of markets maximises opportunity and ensures liquidity and that a systematic approach to investment decision-making enables the CTA and its clients to benefit from investor behaviour in a disciplined and risk controlled manner.

Meanwhile, CTAs nowadays use a plethora of electronic techniques such as algorithmic trading to achieve efficient execution. Institutional investors also increasingly use algorithmic trading in identifying and executing trading opportunities. Demand for advancing systems has led to technology constantly changing the markets and the way the industry conducts its business and is shaping next generation financial services delivery.

Estlander’s CEO notes: “Advanced technology has been an important part, has a big impact on the market and will continue to have an impact because it emancipates investors and allows for more liberty. The investor need to depend less on the human brokers and more on the platforms. It is a big change. Algorithmic trading has changed the industry especially for banks and professional players it has changed the market.”

Estlander & Partners is aware and welcomes the ever-changing landscape of alternative investments and regulation change for European funds. Institutional grade controls, increased transparency, liquidity and flexible product strategies are driving fundamental changes in the very fibre of the industry. Estlander feels this is a great opportunity for the industry. He says: “Added and appropriate regulation of products and the industry as a whole will assist in making it more regulated and comparable to other investments. It will also be easier to focus on benefits and bring about a change of mentality by making it more onshore. This is a very positive trend.”

The CTA has not yet adopted UCITS IV, which was transposed into national law on July 1, but noted, it will look into it in detail shortly. Estlander’s CEO said: “We welcome UCITS IV very much.It improves the regulatory framework further and is clear step in the right direction, making cross boarder sales more efficient. The reason of our growth has been due to UCITS as they provide us with the freedom to speak openly and communicate unreservedly, which has helped to promote transparency and will continue to do so.”

It was at the end of April when the CTA announced that its assets under management had gone past the $1bn landmark, which was an asset growth of over 100 percent on its year on year growth. Estlander commenting on the importance of the $1bn milestone and the significant growth, said: “We have seen increased interest in CTA strategies over the past year in addition to our amplified our focus on raising assets through the strengthening of our client relations with added client meetings.” He noted: “Estlander’s daily liquidity, uncorrelated profits and a long and successful track record have been welcomed by investors. This, in addition to onshore UCITS wrappers without any restrictions for investments or non-transparent added costs, seems to have attracted further investors. It has also helped the managed futures sector grow at the expense of other hedge fund strategies.”

The CTA operates out of two of the key university cities in Finland, Helsinki and Vaasa. Estlander says: “We are surrounded by outstanding people and co-operate with the academic world through sponsorship as well. In return this gives us very good access to creative people and superior thoughts. The pool of people we work with is paramount to us.”

The CEO of Estlander moreover feels that being based in Finland ranks highly because the business environment is considered one of the most commendable due to its high employee loyalty, job satisfaction, low corruption and strong corporate environment. In addition to the Finland offices the company also has an office in Munich. Its location close to the universities helped Estlander to enlist top talent, who then maintained their relationships with the company and assisted in the realisation of Estlander’s target objectives.

Estlander commented on the company’s distinctive location: “Our unique location, away from the main financial hubs, has supplied us with the freedom to employ a non conformist way of thought and provided an opportunity to approach unconventional solutions.” He added: “It feels good to have the freedom of thought, to work on our ideas and maintain a particular, unique focus without too much influence of how others do it or investors expect it to be done.”

The CTA recently opened an office in Zurich, Switzerland, to strengthen its presence further in continental Europe, and will be especially focusing on servicing high net worth individuals and institutional investor clients within the Benelux countries, Switzerland and Sweden. The strategy behind the move is simple according to its CEO: “An office in Zurich allows us to show our strong, more personalised, commitment to our clients. We are now closer to them as we can meet them face to face and in that way can serve them better.”
Estlander & Partners employs 45 professionals with reputable, thriving track records in fund management, trading and distribution and considers them the key element to their success. Estlander’s CEO notes: “As Finns, it is no surprise we want to be based in our own country, if possible. Our employees are our main asset and that’s key. Since our current location works for our clients and is important to our employees, it all works out just right.”

There are a few things in the pipeline for Estlander & Partners but there will first be a waiting phase until Zurich is fully up and running. Estlander says: “Once Zurich gets up to speed we will see what will develop next. It is so hard to predict the future but it more important to be reactive. Although it is too early to give specifics we do have an eye on further increasing our exposure to Asia, which is exciting as we increasingly observe demand from that region.”

Estlander & Partners upholds a positive outlook for the future due to an extremely strong investor demand but takes nothing for granted. Estlander commenting on the CTAs prospects: “The challenge and focal point for us will be to take care of our clients. We need to focus, research, pioneer new ideas and continually refine our methods. We also need to make sure we can keep up with providing investors with excellent, personalised service.”

5 year plan sees review at Boubyan

Posted on August 23, 2011 by

Winning the Best Islamic Bank award in Kuwait from Arabian Business magazine, and the Best Islamic Bank in Kuwait for Customer Service from Service Hero, was proof the bank is on the right track, whether with respect to product and service development or distinction in customer service.

During 2011, the bank continued the implementation of its local expansion strategy by offering more distinguished Islamic products and services in addition to the geographical expansion throughout the different areas of Kuwait to reach the largest ratio of the various categories of society.

Thanks to the developments witnessed in the bank, it ranked 44th among the top 500 Arab companies as per a report published in the last issue of Al-Iktissad Wal-Aamal magazine stating the top 500 listed companies according to market capitalisation for the two years 2009 and 2010.

Noteworthy is that the bank underwent a set of major developments during the last two years; namely since April 2009 with the formation of a new board of directors followed by a step towards enhancing stability by the entry of new stakeholders to the bank; chief among which is the NBK with a shareholding exceeding 47 percent.

During this period, and thanks to its professional management team, Boubyan Bank successfully shifted from loss to profitability and significantly regained the trust of shareholders and clients. Moreover, the bank developed a clear vision and strategy as professionally set by the present board of directors, which is carefully and continuously implemented by its departments in such a way that realises all the desired objectives.

The mentioned period witnessed a set of developments, basically the entry of NBK as a major stakeholder, following which an accurate assessment of the bank’s conditions was conducted for around two months, then a set of parallel steps were taken including contracting with a prestigious international consulting firm to prepare the bank’s strategy now in action.

As for the second step, the bank made a capital increase of 50 percent; thus raising its equity to above KD 235 million, which, in its turn, contributed to raising capital adequacy ratio to above 30 percent, the highest among Kuwaiti banks.

The third step was represented in the cleaning the bank’s budget by the write-off of precautionary provisions, whereas the last step was dedicated to strengthening the bank’s human resources, and completion of the executive team structure by soliciting a number of highly efficient banking executives.

Islamic values have played a major role in establishing the standards and principles of the bank and its operations. These values have been adopted throughout all sectors, departments and branches to reflect our genuine identity and ideals that are based on integrity, transparency, and honesty. In addition, the bank is committed to the society it operates in, and this is reflected through various social responsibility initiatives and programs. This has aided in the recruitment of talented Kuwaiti youth to join a promising banking environment.

The bank has succeeded in moving forward and has witnessed numerous operational growths, which includes the progress of private banking services and the expansion of its network, which will include more than 20 branches throughout Kuwait by the end of the year. In addition to this expansion, Boubyan Bank ATM machines will soon be located in more commercial and residential areas.

The bank has also developed its Platinum banking services to meet the needs of special clients such as company owners and executives. This service provides them with an exclusive package of privileges and services offered by our personal banking officers who respond to our elite customer queries and communicate with them on a regular basis to keep them updated on the latest services while providing them with trustworthy financial and banking advice to meet their expectations.

Boubyan private banking services has proven to communicate with customers effectively and efficiently by providing them with a number of leading services, including setting wealth management plans, reviewing the financial statuses of clients, and supporting their investments. We are committed to providing our customers with all the banking support they need while protecting their investments and assets by offering credit and Sharia’a consultation at all times.

The bank continued its policy aiming at becoming the first choice for companies desiring to deal with Islamic banks, as the new management adopted a clear strategy set by a leading international specialised entity.
The management structure was reorganised in accordance with the new strategy based on diversifying the banking relationships to encompass all economic sectors while focusing on productive sectors and targeting medium and large size enterprises to realise best banking service.

In addition, providing all banking needs through highly qualified specialised account managers for provision of best service, whereas their role is not confined to studying and granting credit to companies but also attending to the comprehensive banking relationship.

Despite the tough economic conditions, Boubyan Bank managed to realise remarkable growth rates in the credit portfolio reaching 30 percent by the end of the year, which is considered one of the highest growth rates in the local market, by soliciting many well-known productive high financial and economic worthiness companies, whilst strictly abiding by the highest credit worthiness standards, studying and diversifying risks.

Structured Finance and Syndicated Finance Division plays a key role in provision of new finance instruments whilst focusing on growth in syndicated finance for productive companies and development plans’ projects, as seen in arranging a syndicated finance transaction for Zain Sudan where the Division successfully gathered a number of local and international banks to participate in this transaction, thus increasing finance value to €270m. The Division also undertook the restructuring of some syndicated finances for some local companies, thus helping these companies overcome the tough conditions of the Global Financial Turmoil.

The year also witnessed assignment of a division for following up investment companies, which is entrusted with following up clients and adopts a policy based on negotiation with the defaulting client, the fact that resulted in rescheduling many files, improving collaterals’ ratio and correction of the conditions and composition of the bank’s credit portfolio.

In line with the restructuring process throughout 2010, the focus of the financial group was broadened from providing timely, adequate and effective information to also accommodate deploying a comprehensive framework for strategic performance management. This has enabled to benchmark the bank’s operating model against best practices that support senior management and effectively contribute into decision making.

During the year 2010, the bank’s human resources development continued, as the accredited trainees’ base expanded both on the local and international levels, in addition to retraining and qualification of all the staff of consumer banking, corporate banking and treasury services groups through an integrated training system.
To the end of creating a professional organisational environment, the preparation of career path plans for each position in the bank’s organisational structure was completed, and as part of the national labour support policy as a pivotal strategy, the Human Resources Group managed to realise a ration of 63 percent for Kuwaiti nationals of the total bank’s staff.

Bank eyes conservatism

Posted on August 23, 2011 by

Banco Industrial do Brasil is a privately owned Brazilian bank, established in 1994, headquartered in the city of São Paulo, with branches in the main states of the country. It operates essentially as a credit bank focused on the financing of small and medium sized enterprises (SME), offering competitive products to fit the needs of its clients.

With a long history and experience in the SME segment, the bank developed a profitable and sustainable business model based on three pillars: (i) focus and specialisation in credit market niches with high growth potential; (ii) agility in the origination of quality assets; and (iii) strict credit, liquidity and internal control policies.

Established as a multiple bank, Banco Industrial do Brasil is authorised to conduct credit, foreign exchange, and leasing operations, among other business lines, according to the Brazilian regulation.

History
The history of Banco Industrial do Brasil begins with the acquisition of Banco Santista by Carlos Alberto Mansur. Founded in 1988, Banco Santista was the financial arm of Bunge Group and its business model was focused in treasury operations.

After acquisition by Mansur, the bank changed its strategy focusing in SME credit operations, providing working capital, trade finance, foreign exchange and lending operations.

In 2000, Banco Industrial do Brasil began the process of opening new branches, in order to expand its activities. Currently, the Bank has seven branches and three offices providing services to the main economic centers of Brazil.

Focusing on diversifying its funding base, in 2002 the bank established a short term notes program of US$50 million, issuing its first tranche in the same year. In the following years, the bank has also raised funding with multilateral banks, such as DEG (Deutsche Investitions and Entwicklungsgesellschaft MBH), Inter-American Development Bank (IADB) and International Finance Corporation (IFC).

Corporate profile
Banco Industrial do Brasil prioritises the high quality of its loan portfolio, adopting a conservative credit policy. Clients are evaluated according to objective parameters that take into account the financial capacity, the liquidity of the guarantees, punctuality in meeting their obligations and the performance of the receivables portfolio.

The bank seeks to establish a long-term relationship with its customers, ensuring a deep knowledge of their needs and agility to meet their demands, offering a diversified portfolio of products, highly qualified human resources and decision-making oriented technological environment.

All transactions are analyzed by the Credit Committee, comprising of the bank’s executive, and approved only by unanimous decision. The bank has over 90 percent of its loan portfolio covered by guarantees such as receivables and other collaterals, thus contributing for the maintenance of a non-performing loans rate below 2.0 percent of the bank’s total credit portfolio.

The market risk is managed with a high conservative level. Treasury is not a profit centre. Its main function is to assure competitive and proper funding for the bank’s assets, avoiding exposure in currency, tenor and interest rates.

The main characteristics of the bank’s business model is conservatism featuring a low leverage level, strictness in lending and the maintenance of a high-liquidity level.

Credit portfolio
The credit transactions of Banco Industrial do Brasil are oriented to companies with annual revenues between $10m and $300m. The bank has developed a wide base of products, grouped into three categories: working capital, financing and trade finance.

The working capital loans are conducted by the lending of free resources, designed to industrial, commercial and service sectors, in order to meet the cash needs of the clients. They are generally for short and medium term and are guaranteed by receivables, pledge of goods, equipments, and certificates of deposit (CDs). The main products offered for this modality are: guaranteed account, working capital, hot money and discount of receivables.

The financing products consist in lending operations with directed resources, to industrial and commercial enterprises, in order to facilitate the acquisition of machinery, vehicles and other equipment. The main products offered for this modality are: lending from BNDES (Brazilian development bank) and lease sale.

Concerning the trade finance products, the bank conducts import and export financing operations and international remittances for foreign exchange settlement. These products are designed to agribusiness, industrial and commercial sectors and rely on credit lines from international banks and multilateral institutions.

Funding
The funding structure of Banco Industrial do Brasil is well diversified and appropriate to its assets’ profile. The management of the funding portfolio is aimed to prevent terms, interest rates and currency mismatch, and to guarantee the liquidity needed for the institution’s daily operations.

The local market is the main source of funding, which is vastly comprised of asset companies, investment funds, financial institutions, enterprises and individuals. This funding is raised through certificate of deposits.

International funding is structured through the issue of eurobonds and from multilateral institutions. Trade finance operations are financed by correspondent banks. The bank has credit lines with over 30 banks throughout the world. And is also a member of the Trade Finance Facilitation Program from IADB and the Global Trade Finance Program from IFC.

Corporate governance
Banco Industrial do Brasil adopts a solid corporate governance policy, based on sound practices, believing that it contributes for the evolution of its internal structure, improving its decision processes, as well as its internal control system, thus guaranteeing consistency, fairness and disclosure to the information flow.

The bank’s management comprises a Board of Directors and an Executive Board. The independent directors represent two thirds of the Board of Directors members.

The bank has established a Code of Ethical Conduct, applicable to all of its managers and employees, defining the guidelines that must be followed in all of its activities. It reflects the bank’s values, cultural identity and commitment with the markets where it operates and with the communities to with it relates.

The Internal Control System is established by a structured process involving all the bank’s employees, in order to enable secure, adequate and efficient conduction of activities.

Banco Industrial do Brasil also relies on an Anti Money Laundering program, developed in order to prevent that its products and services are used to intermediate illicit resources. Every single employee attends an annual training program.

Risk Management is conducted according to the principles of Basel II, regulated in Brazil by the Brazilian Central Bank. Such structure relies on the indirect participation of all areas of the institution and includes identification, evaluation, monitoring, control, and mitigation of risks, in addition to the requirements established by regulators, when specified.

The Bank’s Management opted to outsource the Internal Auditing, reinforcing its commitment with the independence needed to conduct such activity. In order to do so, the bank has hired a well known global auditing company, which annually defines the internal auditing plan along with the Board of Directors.

Banco Industrial do Brasil provides all information regarding its history, operational profile, and ownership structure on its Investor Relations website; in addition, there are downloadable versions of its financial statements, institutional presentations and rating reports. The Investor Relations website is available in Portuguese and in English.

Growth with solidity
Banco Industrial do Brasil conducts its business model through a client-orientation and relationship-based structure. The capability to anticipate its clients’ needs and the agility to meet them with competitive solutions are the bank’s main differential to maintain its growth throughout the years. Thus, the conservative management policies allied with its appropriate funding structure and comfortable capitalisation and liquidity levels allow the bank to maintain a solid financial position.

For more information: www.bancoindustrial.com.br/ri

Private banking in the polder

Posted on August 23, 2011 by

A new beacon in private banking excellence, ABN AMRO MeesPierson was formed in 2010 by the integration of two of the Netherlands’ oldest and most-respected names in wealth management – ABN AMRO Private Banking and MeesPierson. Private banking has historically been a key strength for the centuries-old Dutch bank ABN AMRO, and its former subsidiary MeesPierson was a purveyor of premium services for high-net-worth (HNWI) and ultra-high-net-worth (UHNWI) individuals in its own right. The two banks are now united in a powerful private banking combination offering clients total solutions tailored to individual needs, at home and abroad.

Frans van Lanschot is the man at the helm of ABN AMRO MeesPierson, which services HNWI, as well as UHNWI through the bank’s exclusive private wealth management proposition. “We are proud to have made this strong start following significant corporate changes at ABN AMRO and despite the financial crisis, and once again occupy a leading position among Dutch private banks,” says Frans. He believes that the new private bank’s success comes from a keen understanding of client needs rooted in strong, long-term relationships. “Clients today seek quality and not conspicuous consumption, and managing their wealth requires the same prudence,” he explains. “We carefully weigh risk and return so that our clients know their money is in good hands.” Frans says this requires being aware of market developments, responding proactively, and doing everything possible to understand what clients really need and crafting innovative solutions that are simple, clear and workable, and above all, suitable.

From families to family businesses
The new private bank has long addressed the specific needs of family wealth, including its transfer to the next generation. Its pioneering Generation Next educational programme prepares the children of clients for future assets. Foundations and charitable (non-profit) organisations are also supported with dedicated expertise through the Institutions & Charities proposition, which can also facilitate philanthropic matchmaking between prospective patrons and beneficiaries. In a related effort, ABN AMRO MeesPierson has recently begun working with clients on impact investing, whereby private capital generates social and environmental change and return. “Through our extensive internal and external networks, we’re able to facilitate direct or indirect investment in local enterprises, such as microfinance, or funds representing a pool of projects,” says Frans. Impact investing is a way for clients to apply their entrepreneurial experience, values and passions towards building a living legacy.

In terms of entrepreneurship, ABN AMRO MeesPierson is strongly positioned to draw on ABN AMRO’s broader commercial banking capabilities and focus on entrepreneurs and their enterprises. Frans: “This encompasses family businesses and their owners, for whom professional and personal needs are often intertwined.” He notes the importance of defining and structuring financial matters for this segment, evaluating all business and personal aspects against potential risks so that assets are not only protected but optimised. “ABN AMRO MeesPierson offers a special service that helps clients who bank with ABN AMRO both as individuals and as entrepreneurs to achieve this balance,” he says.

A specialist approach
Similarly, a Professionals & Executives team serves executives in various fields, including lawyers, accountants and consultants and also targets senior management of listed companies. “Such clients face complexities in their personal finances because of the nature of their functions, so they also require specialist services,” Frans explains.

“Our dedicated service teams address these individual needs and provide independent, appropriate advice directly supported by subject-matter experts.” These are just some examples of how ABN AMRO MeesPierson innovates on the basis of clients’ specific circumstances and goals.

Another example is ABN AMRO MeesPierson’s dedicated International Private Banking service for clients living abroad and requiring wealth management services both in the Netherlands and in their countries of residence. “Our specialised advisors offer the international orientation and local support essential for this segment to manage their assets worldwide,” Frans adds.

Holistic solutions and services
With client business dealings and lifestyles crossing borders and time zones, Frans also emphasises that an integrated and international service model is now more important than ever. “We have therefore defined the following three leading principles: we take a holistic approach to our clients rather than focusing solely on their investments; we always provide our clients with a strong set of products and solutions, offering considerable choices; and we deliver our services through an international network and professional staff,” Frans says. All this is essential to being perceived as a trusted advisor, putting client interests at the heart everything ABN AMRO MeesPierson does, from operations to investment recommendations. “It’s about being professional, independent, committed and transparent,” he affirms.

That’s why the bank recently redesigned its product philosophy with aligned local and global product and solutions capabilities covering investment advisory, treasury and special products, wealth structuring, discretionary portfolio management, structured products, private lending, investment products, insurance and research and strategy. This combines capabilities and expertise, leverages scale, streamlines policies, monitors consistency and ensures transparency – to the benefit of clients. As such, independent and transparent advice in these areas complements a rich array of services and products. For example, the research and strategy team – the cornerstone of the bank’s investment policy – analyses worldwide market developments and generates regular macroeconomic views, market forecasts and research on all asset classes and instruments (except investment funds). “These are all used for strategic and tactical asset allocation within client portfolios, which reflect carefully calibrated risk profiles,” Frans describes.

ABN AMRO MeesPierson’s open-architecture platform has also expanded to allow access to a broader range of products and opportunities whereby clients are offered the best selection of products available, irrespective of provider. Investment funds are thoroughly scrutinised by A.A. Advisors, the bank’s wholly-owned yet independent centre of excellence for fund selection and multi-management solutions based on industry-leading quantitative and qualitative analysis.

Network and know-how
In addition to its prominence within the Dutch private banking landscape, ABN AMRO also features a strong local presence in 27 countries in Europe and Asia. This includes trusted brands ABN AMRO Private Banking as well as Banque Neuflize OBC in France and Delbrück Bethmann Maffei in Germany. All enjoy proud traditions of service excellence spanning centuries, coupled with outstanding brand recognition and strong local reputations.

Networks and know-how are leveraged so clients experience truly international yet personal service. “Meanwhile, our World Citizen Services teams in Spain, France and Switzerland provide tailored advice to clients relocating to those countries,” says Frans. This exclusive assistance can range from structuring international assets, financing a home abroad and providing personal and business contacts in the local market.

Professional and knowledgeable client-facing and support staff are crucial. Therefore, ABN AMRO MeesPierson is committed to investing in and cultivating the capabilities of its 1,100 employees through ongoing training and development in partnership with leading local and international business schools. The ABN AMRO INSEAD Private Banking Certification Programme was recently launched to certify 550 private bankers in the Netherlands and the bank’s international network by 2013. “We strive for constant improvement, learning from one another – and from our clients. We want to remain a leading private bank not only in terms of market share but by setting the standard for service delivery within the sector,” says Frans. “That means ensuring that employees have the knowledge and skills to interact with clients at the highest level, and thereby, truly become trusted advisors.”

Committed sustainability
Frans points out that in addition to gaining and retaining client confidence, another challenge for financial institutions is to incorporate sustainability principles into investment processes. “This is an area in which the industry can create impact, both by embedding sustainability criteria in investment practices and with sustainable investment opportunities,” he says. The private bank offers such products through its joint venture with Triodos Bank – Triodos MeesPierson – as well as through Neuflize OBC. Sustainability is also part of ABN AMRO MeesPierson’s services, for example, sustainable portfolio management as well as its business operations. “Clients place increasing emphasis on sustainability in personal and business decisions, so making it a business priority shows that we understand and embrace our clients’ values,” Frans explains.

Sustainability is therefore another example of how ABN AMRO MeesPierson puts client interests first and continues to win their trust, through lasting relationships based on clear communication and accountability. “The only way to achieve this is by taking the time to listen to clients and get to know their specific needs and aspirations,” Frans confirms. According to him, these convictions reflect ABN AMRO MeesPierson’s passion to connect with clients and create sustainable value. “We will always stretch our boundaries and aim to achieve more for clients,” he concludes.

For more information Tel: +31 20 6286606; www.abnamromeespierson.nl