Banks see higher revenue growth in SMEs

Source From (The Star Online): http://biz.thestar.com.my/news/story.asp?file=/2011/1/15/business/7784736&sec=business

Published: 15 January 2012
By DALJIT DHESI
daljit@thestar.com.my

Banks with strong small and medium enterprise (SME) portfolios are expecting higher revenue growth for their SME operations this year owing to the Government's various projects to spur economic growth.

UOB’s Chan Kok Seong says the bank is fortifying its SME portfolio.
 

Some of the notable ones are the Economic Transformation Programme (ETP), the 10th Malaysia Plan (10MP) and the proposed RM40bil Mass Rapid Transit (MRT) under the ETP.
OCBC Bank (M) Bhd emerging business head Wong Chee Seng says the Government's various investments and financial assistance programmes will enable incremental build-up of business activities for SMEs and enable them to obtain Government guarantees to support their business financing proposition with banks.
“The bank's SME business is performing even better now than last year and expect it to grow further in tandem with the growth of the SME segment and supported by the increase in our distribution strength via the capacity built into our sales force, branches and partners.
“We expect revenue and loans outstanding for the SME sector to grow in the region of about 10% each by the end of 2010. Net profit for this sector is also expected to increase by the high double digits over 2009 due to lower credit losses arising from an improving loans portfolio quality,” he says.
Despite the economic slowdown last year, Wong adds that the bank experienced revenue growth of 13%, loans growth of 20% and net profit growth of 50% as at the end of 2009 for its SME business.
The bank currently commands 4% of the SME market and its share has been on the upward trend.
HSBC Bank Malaysia Bhd deputy managing director commercial banking and director for sales Thomas Varughese says the SME sector is an important market segment for the bank as it is the foundation of HSBC's commercial banking business as well as the segment's high potential to be profitable business.

Alliance Bank’s Steve Miller: ‘The bank aims to be the main banker for SME clients.’
 

“Our SME business has been doing well and our growth has been promising over the last year. This business contributes about 50% of commercial banking profits and we expect this to grow to 55% to 60 % over the next three years. We will continue to allocate resources and invest heavily in this area to encourage growth over the next three years,” he adds.
On its strategy to boost the SME business, Varughese says the bank has enhanced its commercial banking business structure to focus on SME business acquisition over the next few years.
Wong says OCBC's strategy is predicated on the concept of “simple, fast, convenient”, and in this regard has set in place sufficient resources and scorecard lending measures to deliver simple and fast loans as well as convenient cash management services to assist in the daily running of the SME business.
The processes and procedures applied from the point of product origination to distribution and after sales service are constantly scrutinised by teams of specialists in the respective areas for continuous improvement, he notes. This also, he adds ensures that the bank is up-to-date and relevant in the current SME market environment.
Hong Leong Bank general manager for commercial and SME business banking division Wong Kee Poh says that as at December last year, the bank's financial assistance to SMEs comprised 40% of the bank's total business banking portfolio.
According to him, its SME loan growth is currently in the high teens and mostly in working capital and trade financing.
He adds that there is still ample room to grow in the SME segment and to increase Hong Leong bank's market share.
“Our strategy is to continue to market aggressively into this portfolio, remain relevant and become one of the top SME supporter in the country. We are in the process of hiring additional account officers to build capacity and scale up our business.
“Concurrently, we are reorganising ourselves to strengthen our brand promise by maximising the competencies of our human capital, and improving our processes for speedier delivery, facilitated by a robust IT infrastructure,” he notes.

Hong Leong Bank’s Wong Kee Poh: ‘Ample room to grow in the SME segment.’
 

Alliance Bank Malaysia Bhd head of SME banking Steve Miller says the general economic recovery coupled with gross domestic product growth projections for the coming years, the bank has seen an increase in working capital financing requirements and anticipate this trend to continue as long as the economy maintains its current trends.
Miller adds the 2011 Budget contains many provisions that will directly or indirectly drive growth in the SME segment, which it views as a positive impact for the overall SME loan growth in the future.
Without specifying any numbers, he says: “For the last six month's performance ended Sept 30, 2010, Alliance SME business recorded positive year-on-year growth on revenue and in terms of balance sheet, it is on pace to achieve our year end targets.” The bank's financial year ends March 31, 2011.
Miller adds that the bank aims to be the main banker for SME clients and offer one-stop-solutions to address their business and financing needs.
Going forward, he points out that Alliance SME banking business is confident of forging new partnerships and being recognised as a thought leader in the SME market.
United Overseas Bank (Malaysia) Bhd (UOB) director and CEO Chan Kok Seong says the bank's market share, which he decline to divulge, in the SME segment has risen in the last two years.
He points out that UOB is expanding its SMEs sector financing, adding that it charted a robust growth rate of 24% for SME loans and expect the growth momentum to remain strong this year.
Some of the measures that the bank is embarking on to fortify its SME portfolio include simplifying loans processes, qualitative and quantitative customer rating/scoring model to suit the SMEs segment, collateral free loans for targeted customer segment, innovative bundling of trade finance and treasury products, cash management products to assist the SMEs to better manage their cashflow and actively engaging in discussing financing needs with the customers.