Hong Leong Bank Bhd is Malaysia’s sixth largest bank in terms of assets. The bank had its roots as Sarawak-based Kwong Lee Bank and later, MUI Bank, before it was acquired by the Hong Leong group in 1994. In 2001, it acquired Wah Tat Bank, and in 2004 merged with sister company Hong Leong Finance to form an integrated financial group.
More recently, Hong Leong Bank has been making headlines for its proposed acquisition of EON Capital Bhd, which is being opposed by certain shareholders of the latter.
In the following email interview, group managing director and CEO Yvonne Chia shares her views on the banking group’s business, strategies and growth outlook.
TEFD: What are the group’s competitive strengths and advantages?
Chia: Hong Leong Bank is a quality bank with a strong market position, a well-recognised and transformed business franchise with a full range of banking experience, an established history and good, entrenched relationships with communities.
We have a large share of the consumer segment, with over 70% gross loans to retail customers. We are entrenched with mass affluent customers, with a 21% share of the bankable population, and as well as with the middle market business community. Our non-performing loan ratios are among the lowest in the sector, underscoring our superior asset quality.
We are well trusted and embedded in the communities we serve. These core franchise strengths are evident through our position among the top four banks for individual deposit size. The bank also holds the No 3 position in institutional unit trust agent assets-under-management market share.
Hong Leong Bank has an extensive integrated multi-channel sales and distribution capability that allows the bank to reach out to the communities we serve. These include 186 branches in Malaysia, two overseas branches (in Singapore and Hong Kong) and a subsidiary in Vietnam. The bank is also the main distribution franchise for the wider Hong Leong Financial Group. 
What have been the achievements of the group since 2006?
Despite the financial crisis, our financial performance in FY09 ended June was steady. Pre-tax profit increased to RM1.132 billion from RM1.01 billion in FY08. In the three years from FY06 to FY09, our pre-tax profit has increased by 1.5 times.
Between 2005 and 2009, we completed the first phase of our business transformation programme, in which we focused on strengthening and scaling up the business, risk and technology infrastructure to grow profitably and sustainably. We also expanded the reach of the bank via alternate and electronic channels.
Regional embedment has been one of the main goals of our strategy since 2006.
We were the first Malaysian bank to make a strategic investment in the Chinese banking sector through a 20% stake in the Bank of Chengdu in 2007. In 2010, the bank established Sichuan Jincheng Consumer Finance Ltd Co, a joint venture with the Bank of Chengdu to start consumer finance operations in central and western China.
Hong Leong Bank was the first Malaysian and southeast Asian bank to be awarded a 100% wholly owned foreign bank licence in Vietnam in late 2008. In October 2009, Hong Leong Bank Vietnam opened for business in Ho Chi Minh City. Plans are underway for a new branch in Hanoi and additional transaction offices in Ho Chi Minh City.
How is the group positioning itself within your industry?
A fundamental differentiator for our bank is our focus on embedment in the communities we serve. We aim to be close to our customers on the ground, understanding their needs and wants, and ensuring our brand values of integrity, trust and service are represented well in everything we do.
Our position within the industry is also guided by our philosophy of getting the basics of banking right, such as having a well-capitalised balance sheet, strong liquidity and deposit franchise, strategic asset-liability management and prudent risk management.
We are set apart by our focus on prime value, which is the intrinsic value placed by the market on a business based on various factors, including its scalability, resilience, sustainability, brand recognition, transformational growth and global competitiveness.
Did the financial crisis in late 2008/2009 have any impact on the group?
Our objectives for the Hong Leong Bank brand at the outset of the crisis were simple — sustaining the long-term franchise and shareholder value of the bank. We also maintained the discipline of abstaining from excessive risk-taking in the short term and avoiding the sacrifice of tomorrow’s credit, liquidity and franchise reputation for today’s profits.
The effect of the global financial crisis on the bank was limited to the knock-on effects that the crisis had on the Malaysian economy. We were well prepared and delivered a resilient performance throughout the crisis.
What are the group’s plans for the future, both short and long-term? How is the group planning to compete in an increasingly globalised environment?
We aim to strengthen our domestic core businesses by growing, strengthening and embedding our domestic core positions in the country. We plan to transform branch banking to drive further embedment into our communities. We also plan to broaden the local and regional franchise of Hong Leong Islamic Bank.
We are becoming a regional player. We see much potential in the Chinese market and will be helping to transfer our skill sets and knowledge base to transform Bank of Chengdu into a market-oriented regional bank in China. We will also be broadening the Singapore and Hong Kong branches and building our wholly owned subsidiary bank in Vietnam from a greenfield state into a recognisable franchise in Vietnam.
Where would you like to see the group in 10 years?
Hong Leong Bank is on a balance position of strength today. We have always maintained high standards of enterprise risk management and strategic franchise liquidity. We have built to this level of capacity, and we will remain focused on long-term prime value creation and economic sustainability for all stakeholders.
Over the next few years, we will future-proof our competitive viability with scale efficiency, build compelling branch prime value and an embedded brand presence, build new businesses and new segments for earnings and fee income, and secure regional options by building new banks in new markets.
This article appeared in The Edge Financial Daily, October 26, 2010.