March 6, 2017
thoughts on
thoughts on
National Reset

Bristol University Homecoming - Banking on Change

March 6, 2017
Organized by:
Bristol University
Featured on:
School of Economics, Finance and Management Bristol University
featured on
School of Economics, Finance and Management Bristol University
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Change - ability to adapt, the need to change to survive - was a consistent theme for me and will be more important for you. 


Thank you for the warm welcome back to Bristol. This is my first visit since 1989 when I came back the year after I graduated to court my future wife, Azlina, who was in her final year. This visit won't be as life-defining obviously, but I am thrilled to be back. I don't have a good explanation for taking 28 years to come back; I have been to Bath a few times. Maybe it’s just the fear of overdosing on nostalgia. 

I always look back, gratefully, on my 3 years (1986-88) at Bristol as the time I got "straightened up". I arrived having just thoroughly enjoyed 5 years at an all-boys public school. So the plan was to continue where I left off, with less restrictions.The plan was to hang out with public school boys, play rugby, drink a lot and scrape a degree. The reality was 1) I had to hang up my rugby boots because I was badly injured in my second match for the university, 2) I had two rather dangerous incidents from drinking too much so I had to cut that down, and 3) there were so many more interesting people than public school boys. Not least girls and international students who taught me new and different perspectives on life. So I would say I discovered myself here, worked pretty hard to get a decent degree and then went on to Cambridge for a Masters program before heading back to Malaysia to work. 


The title of my lecture today is “Banking on Change”. As many of you will be thinking about your careers after Bristol, I thought it’d be most useful if I deciphered some lessons from my time in banking and share some perspective about the future. Change - ability to adapt, the need to change to survive - was a consistent theme for me and will be more important for you. 

CIMB Career 

CIMB has been my first and only employer; I spent a total of 25 years as a CIMB executive, 15 of them as Chief Executive. As you saw from the video, CIMB has been an incredible growth story, transforming from a small Malaysian investment bank to an ASEAN universal bank via a series of M&As and fresh builds across practically all countries in Southeast Asia and beyond. We have about 40,000 staff today, whereas I joined the firm in 1989 as employee number 69. 

When I was starting the iron curtain was still up, mainland Chinese were riding around in bicycles, mobile phones and the Internet were science fiction stuff, and businesses ran on typewriters, telex and fax machines. Globalisation, liberalisation of economies, the rise of China and other emerging markets, the AFC, the GFC, 9/11, the Asian Century, the 4th industrial revolution and climate change were some of the biggest themes and events that changed the world since then. 

As I share with you things that I learnt, we must bear in mind that your world will be very different to mine. Nevertheless some key principles will endure, so hopefully you will leave this room with one or two useful thoughts. 

Power of anticipation 

The first lesson I would share is the power of anticipation or getting ahead of change. At the personal and corporate levels, this made the crucial difference for me. 

For the first 3 years I worked in CIMB's corporate finance department where my main task was to take companies public, on the KL Stock Exchange. We were seeing unprecedented growth in the number of listed companies so it was obvious to me that the stockbroking industry would be the big beneficiary of this trend. So in 1993 I decided to get ahead of it and asked for a transfer to CIMB Securities, our brokerage subsidiary. As it turned out it wasn't just more companies being traded but in 1993 international funds discovered the asian tiger economies and our markets went through the roof - that year the KL index went up 98% and trading volume 458%. 

The broking industry structures hadn't anticipated such levels of activity. Employee sales commission structures were designed for a small-volume retail market, so we had a huge windfall. For 3 years I lived the Malaysian version of "The Wolf of Wall Street" (minus the dwarfs and cocaine) and made a lot of money. 

It wasn't long however before I began to ask myself how long this could go on. It was just too good to be true: How can I be paid so much for doing so little- making phone calls, spinning stories about companies I didn't know and then partying with clients at nights? After 3 years, in 1996, I decided I had to get ahead again, be first to move on before there is a rush for the door. I asked for a transfer back to the bank and accepted a huge pay cut. Only a year later the Asian Financial Crisis wreaked havoc; the ringgit plummeted, companies went bankrupt, banks drowned in bad loans and the stock market crashed. Most brokers lost most of the easy money they made in the bull run. As I was out I was thankfully unscathed. 

At the corporate level, there was a parallel story. At the height of the stock market bull run, CIMB's return on capital in its brokerage company was phenomenal- over 200% per annum. Other brokers also enjoyed similar returns. The difference was that as others ploughed back the profits into broking based on past returns, CIMB decided that broking surely cannot continue to be obscenely profitable. We studied that in developed markets, alongside vibrant equity markets were bond markets, yet Malaysia only had government bonds, not corporate bonds. Surely corporate bonds will be the next big thing for the capital market? 

In 1996 we began to build a corporate bond business - origination, distribution, trading and risk management- before any other bank. Then during the AFC, the government and corporates had to turn to the bond market to raise capital from beyond the wounded banks and banks had to restructure loans into long term bonds. Invariably the government and corporates had to hire the only bank that was truly ready to intermediate bonds. The AFC was a most lucrative period for CIMB; we went into the crisis as a mid-tier investment bank, we came out of it as the undisputed No. 1, because we anticipated and got ready for the future. 

Power of Diversity 

The second lesson is about the power of diversity. I found that our most successful teams in the firm have been the ones who were able to harness the power of a diverse workforce. Of course, in multiracial Malaysia, multi-racial teams come first to mind. But it is also about diversity in gender, IQ, age, background and so on - to bring the widest range of ideas to solve a problem or to offer widest choice of salesperson to connect with the customer. 

When I choose leaders, ability to interact with and lead diverse groups is always a key criteria. Excelling with diversity is about being able to overcome one's natural or tribal instincts of preferring similar others. It is always easier to hang out, work with people like you but when forming a team clones are not terribly helpful. Of course there is no better time to hone in diversity skills than at university. 

Man in the Mirror 

The 3rd lesson is to understand the man in the mirror (or woman of course). It's a bit embarrassing but I did frequently look in the mirror before going to work, while asking myself questions like - What are his weaknesses? Is he still suited for the job at hand? And this must be done frequently as you will change and your job will change over time. 

When I became CEO, I was only 32; short-fused and impulsive but I knew it so I surrounded myself with grey hairs to advise me. When I decided to retire at 48, I felt that I couldn't be the best CEO for the firm for 3 reasons 1) I had become too powerful, people were no longer speaking the truth to power and we were making more mistakes 2) I was quite burnt out 3) I had been CEO for too long (HBS says best is 4.8 years, I was 15 already) and my ambition was to build an institution yet the enlarged entity had never seen a CEO change. 

Politics beats Economics 

The 4th lesson is that politics always beats economics, which wasn't what I was taught in my politics and economics course in Bristol. I used to say that politics tended to come first in developing economies, but after Brexit and Trump it's true everywhere. 

In 2007, I successfully engineered the massive merger of 7 government-controlled listed plantation companies in Malaysia to become the world's largest plantations company. Four years later, in 2011, I tried to merge 2 airline companies - Malaysia Airlines and AirAsia - and failed. Both deals were politically very sensitive - job losses, consumer protection, valuations etc but the real difference was that in the first deal we had a strong and secure government whereas during the latter the government has been short of political capital. 

Failure is mother of Success 

A 5th lesson to share is that failure was important to my successes. You will all fail at some point; will you stick your head in the sand or pick yourself up and want to make sure it never happens again? 

I had successfully listed so many of companies as adviser & underwriter that when it was time to list CIMB itself in 2003, I was super confident that it would do well. As it turned out, CIMB's IPO was one of the worse that I handled. For the first three months, the share price stayed around the IPO price in a rising overall market. I was humbled. Eventually I picked myself up, called my team into a room and asked what did we get wrong? Basically we concluded that our capital structure didn't show that we understood shareholder value drivers. So we did something dramatic to deal with the perception I mentioned and attract investor attention- just 3 months after listing, CIMB declared a massive special dividend to shareholders which stunned the market- after 3 months of listing shareholders received a 20% cash return on investment. That presented us with another chance to go back to the investment community, show we understood value creation and present our growth story again. By the time CIMB was de-listed in January 2006, exactly three years after the listing, the stock had given 360% returns to shareholders who had stayed with us since the IPO, making CIMB one of Malaysia's most successful ever listed companies. 

True Success is a Successful Successor 

My 6th an final lesson is about succession. Choosing a successor is one of the most important decisions a leader makes. Only if he/she then succeeds can you then say that you were truly successful. Some CEO's like the idea of the company failing after they leave and being told that they are being missed terribly. That is wrong. As a leader you are still responsible if the organisation fails soon after you leave; poor succession or weak organisation. 

The biggest final decision I made was to appoint my successor, the current Group CEO, Zafrul Aziz, who is also a Bristol alumni- pure coincidence (unless its the water around here). So far he is doing well, so my chances of being deemed a successful CEO is still decent. 

After CIMB 

Since September 2014, I have been non-executive Chairman of CIMB so while I still spend about half my time on the bank, I have been able to take on other positions - board of Malaysia’s sovereign wealth fund Khazanah, which controls most of our Government- linked companies and has US$35bn AUM, and the Employees’ Provident Fund, Malaysia’s largest fund with US$170bn AUM; member of the International Advisory Board of Blavatnik School of Government at Oxford University and chair the WEF ASEAN Business Group. And I invest in some small businesses here in the UK. 

I love the range of things that I do now, which also give me time to reflect on the past on occasions like this and think about the future in 3 main areas banking, ASEAN and Malaysian politics. 

Future of Banking 

It is the perfect storm. 

The banking industry is being revolutionised by technology; as an enabler for banks to deliver better products and services cheaper and faster to customers, and for non-banks to challenge us in some areas of banking or become banks themselves. The rise of fintech companies and new fintech banks is most dramatic in China, where a combination of entrepreneurial innovation, large market and regulatory support has fuelled the emergence of the likes of WeBank, MyBank, Ant Financial and JD Finance as serious long-term threats to the established order of banks in China and beyond. 

Traditional banks are also struggling to cope with re-regulation that demands higher capital, liquidity and governance. Better governance is also applied on the oversight of 

staff behaviour and compensation, which has, in turn, made banking a much less attractive career for top talents. A Financial Times analysis of the career paths of graduates from the top 10 MBA programmes from around the world shows only 10.6% chose banking as a career in 2015 compared with 17.4% in 2008. 

Revenues for banks are also much tougher to earn due to slower global economic growth and margin compression, driven by competition and disintermediation. 

So it is indeed a perfect storm for banking and 20 year the golden era is over. To survive banks have to recalibrate their business models- cut costs, embrace technology and fintechs and show customers more love. 

CIMB's agenda today is encapsulated in what we call T18 (Target 2018), a three year recalibration plan to survive and thrive after the perfect storm. We are optimising capital, reducing costs, exiting unprofitable businesses, revamping organisation culture especially in how we serve customers and breaking down internal silo's and investing heavily on digital banking and advanced analytics. 

Most banks in the world are recalibrating. Some will do it too slowly or too badly and not survive. But I think given strong branding, balance sheets and regulatory conservatism, I think most big banks will weather this period but in 5 years the best ones will have changed beyond recognition. 

Future of ASEAN 

ASEAN as a regional grouping is being challenged on several fronts- geopolitical tensions (China-US, South China Sea, China's chequebook diplomacy, US protectionism, islamisation) and with Brexit, some doubt its continued existence. 

My personal view is that southeast asian nations need ASEAN more than ever. And from my interactions with business and government leaders, they all remain very committed to the grouping. Ironically we see Brexit as vindicating the so called "ASEAN Way" of unanimous decision making and respect of the sovereignty of each nation. It makes integration frustratingly slow- ASEAN initiatives are almost never on time but then no one needs a divorce. 

Malaysian Politics 

You will probably have read a lot of negative news about Malaysian politics in recent times- a major international financial scandal, greater islamisation, massive demonstration for free & fair elections, continued incarceration of the leader of the opposition and so on. Actually add to all that, 3 plane crashes in 2014 and recently a bizarre assassination at the KL airport; overall, it's pretty grim on the international news front. 

The perspective from a longer lense though is of a country with a dominant ruling party that has been in power since independence (1957) facing the common challenges of being in power for too long - corruption, vested interest, war lords, declining popular support - coupled with new age social media negating censorship. The government's response in recent times has been to clamp down on dissent; again quite text book and unlikely to work. What is working for the government though is Malaysia's unique race and religious balance and the global rise of neo-populism and authoritarian leaders- ie there is 'crazy' everywhere. 

It is expected that a GE will be held in 2017- the most important GE since 1974 and the one that will define Malaysia's position in the new world. It's fascinating stuff for political scientists, but for Malaysians the consequences will be massive. The lesson from Trump and Brexit is that no one should take political outcomes for granted- we must work for them. 


I have shared some of the key lessons I learnt during the course of my career that I thought would be useful for you. Of course there were more, and many more war stories that I will document one day. 

I have also shared some thoughts about the future. The uncertain future for banks is also felt across most old economy businesses. Those of you planning a career in business will have to decide if you want to play defence with an established business or an attacker / disruptor with new business models. There is a third option- join an established business that is recalibrating for the future. That is what CIMB is doing, that is the sweet spot. 

There is also a fourth option which I am doing personally - investing in businesses that are least exposed to change and politics - high end furniture craftsmanship and food. 

Best of luck.