Macau has fast become an emerging hub of Chinese banking, with the industry playing a key role in the continued internationalisation of the renminbi (RMB) and the diversification of the peninsula’s economy away from gambling. Though still relatively immature, particularly when put alongside neighbouring Hong Kong, key names in Macau’s banking industry are doing a great deal to bring its fledgling banking industry up-to-date.
World Finance spoke to Jiang Yisheng, Vice Chairman, CEO and Executive Director of ICBC (Macau) about the region’s prospects, and how the bank is leading the latest developments.
In what key ways has Macau’s banking sector changed since ICBC (Macau) established itself in the region?
The establishment of ICBC (Macau) has greatly promoted the banking industry in Macau by way of a remarkable catfish effect. For example, the bank has come up with a concept for better service, better products and an all-round better customer experience, working hard to provide a variety of financial options for different clients. Digital services and continued innovation have also developed rapidly, making e-banking the mainstream service in the whole area. Besides, RMB business has become a new source of growth, together with the RMB cross-border trade settlement and financing business.
The establishment of ICBC (MACAU) has greatly promoted the banking industry in Macau by way of a remarkable
catfish effect
What are the biggest opportunities and challenges for Macau’s banking sector?
First of all, the global economic recovery situation remains uncertain, along with cross-border capital flows, which have put a lot of pressure on the bank’s asset and liability management and liquidity management.
Second, the competition in the banking industry has become more and more intense. At present, there are a total of 28 local and foreign banks, excluding the Postal Savings Bank (according to the Monetary Authority of Macao), and the biggest among them are absolute Chinese-funded banks. The homogenisation of the business model and management style has intensified the competition, and put some of our products at a competitive disadvantage in recent years.
Third, due to the turbulence of global financial markets, the acceleration of international capital flows, and the division of monetary policy in major economies, the banks are more strictly regulated and subjected to supervision than ever before. Finally, months of decline in gambling revenues have had a great short-term impact on Macau’s economy, which would has also caused the bank’s losses to some degree.
On the other hand, a series of concrete measures on economic diversification in Macau have been formulated in response to the gambling revenue decline, bringing new favourable opportunities for Chinese banks that, due to policy constraints, cannot provide financial services to the gambling industry. Moreover, with the healthy financial position of the Macau Special Administrative Region’s Government, major transportation infrastructure projects and the livelihood public spending projects will continue to speed up, marking a new breakthrough for the banks, and ICBC (Macau) in particular.
The wealth of the average Macau resident has increased rapidly in recent years, meaning more market demand for retail, wealth management and private banking business. At the same time, the cross-region development is making progress for both local economic and financial services, including cooperation with the Pearl River Delta Region, opportunities from the establishment of Hengqin Island FTA and the construction of the Hong Kong-Zhu Hai-Macau Bridge.
Along with the acceleration of the RMB internationalisation, the foreign exchange controls on capital accounts in China have gradually opened up. Therefore, a great many domestic enterprises are seeking foreign investment, making it even more important for banks in Macau to provide appropriate financial services as a link to it, especially for Chinese-funded banks.
Talk to us about the localisation of ICBC (Macau) and the reasons for this
At the end of 2014, ICBC (Macau) had 16 branches, 243 self-service electronic devices and an outstanding e-banking service system, with local employees accounting for almost 95 percent of the bank’s total. In addition, over 250,000 of our customers are local (see Fig. 1), which is almost 89 percent and equal to 63 percent of the working population in Macau. Deposits from local customers have reached 78 percent and income from localised business income accounts for almost 93 percent of the bank. Besides, the market share on economic housing mortgage loans was close to 80 percent of the whole local market in Macau.
Since its establishment in July 2009, ICBC (Macau) has always followed the oversea-branches development strategy of the head office by grasping opportunities from the integration of Guangdong, Hong Kong and Macau, and facilitating trading between China and Portuguese-speaking countries. Nowadays, with the support of local government and regulatory agencies, relying on the ICBC brand advantage and the synergy effect from the integration, the localisation of ICBC (Macau) is successful judging by several aspects, namely the customer, the channel, the business and the human resources.
Why is localisation important for the long-term development of the banking sector?
The long-term development of overseas banks needs support and cooperation from the host country/region, its government, regulatory agencies, enterprises, local communities and residents. Actually, localisation is a win-win situation, beneficial for both the banks and local economic development. The banks can seize the opportunities from local economic policies and social development, and both can find potential for growth. In another way, the bank can also provide financial support and a variety of financial services for local enterprises and residents. With the localisation of new competitors, products, services and technology, the quality and efficiency of local financial services will accelerate the development of the local economy. In fact, the bank and the local economy can influence each other as part of a virtuous circle.
How does Macau’s banking sector compare with neighbouring nations?
Relative to banking in Macau, Hong Kong has entered into a mature period, with its large banking sector and a full-set development system of product and management. By contrast, the financial structure in Macau is much simpler, and the banks here still fall far behind the neighbouring regional banks. However, with the construction of the main financial system, the propulsion of basic services, and the establishment of financial markets, Macau has attracted considerable investment for the broader development and localisation of the banking industry.
Tell us about the bank’s participation in activities apart from banking
First of all, ICBC (Macau) has always taken part in social responsibility projects, ever since its establishment. For example, the bank arranged for more than 1,000 staff and their families to join the Annual Macau Walk for a Million and contributed donations to the related fund every year. The bank also affords scholarships for major universities in Macau to support the development of local education. The bank makes donations to several charity communities and foundations and provides priority services for free, while also offering relief supplies and assistance when needed, and showing concern for energy efficiency and environmental protection activities.
Why is it important that financial services engage with social and environmental developments?
It helps to build a strong brand and improve the bank’s image, through which we obtain recognition and praise from customers and society. It also helps to continually enlarge and cultivate clients’ foundations and improve banking services. We enable employees to get involved with social work and banking with a broader vision, as we promote economic development and social progress simultaneously.
How does the region’s wider social and environmental development feed into the success of ICBC in Macau?
With a better brand image, ICBC (Macau) has fast become the choice bank for a greater number of local enterprises and residents. Both the banking customer and business scope has been expanded, with customer numbers up threefold and total assets up in four of the last five years. Employees help reinforce this sense of responsibility and maintain enthusiasm for our work, which in turn has helped keep these initiatives. Meanwhile, these initiatives mean the bank is significantly more competitive at attracting and retaining the best talent. This communication with all parts of society has greatly improved our service and diversified financial commodities, which means the bank gains more of a market share.
What are your ambitions for the future?
Over the next five years, ICBC (Macau) will further enhance its competitiveness on several fronts, such as in business development, internal management, risk management, human resources, culture construction and so on. While being one of the most competitive banks in the local market, the bank will continue to develop and improve in a bid to become a more influential bank in the Guangdong, Hong Kong and Macau area.
