UOB to grow organically through seamless connectivity

This is evident from the millions of Singapore dollars it has already poured into IT investment, especially in the last decade, with no plans to stop there.

UOB Group intends to pump another $2.1 billion to $2.5 billion into technology between now and 2026, as it believes this will give it the competitive edge to stand out as the regional bank of choice for its customers.

The bank — third largest in Asean by assets — aims to achieve a return on equity of 14% by 2026, which will be powered through its targets to increase income contribution from its Asean-4 market (Malaysia, Indonesia, Thailand and Vietnam) to 30% of total income, a higher mix of non-interest income stemming from growth in wealth, trade and customer treasury as well as from improved cost efficiency and productivity through investment in people and technology.

In an interview with The Edge Malaysia conducted between presentations at UOB’s Corporate Day held last month in Kuala Lumpur, Wee speaks at length on a wide range of topics that offer insights into his philosophy of running a regional bank.

See also: UOB’s Wee on driving business through values and culture

Throughout the 1½-hour session, the conversation keeps returning to the organisation’s culture and people. It is obvious that the veteran banker views this as key to UOB growing sustainably into the future. Below are excerpts from the interview.

The Edge: We were informed that this is actually your first ever interview with Malaysian media. What brought about this decision to go through with it?

Wee Ee Cheong: I’m the ambassador for UOB, right? So I represent the organisation and my Malaysia country head, [Ng] Wei Wei, wanted me to reinforce our commitment to the country.

See also: Banks in Singapore can withstand multiple shocks: MAS

I mean, there’s no reason for me not to be connected to Malaysia. Your country is blessed, being a big country. But Singapore, we are a tiny dot and we have to go out.

By going out of Singapore, it’s more challenging — different language, different culture, different way of looking at things. You can see it from the kind of money we spend on technology to connect the whole of Asean.

Can you imagine the amount of work we started 10 years ago? This is why today our platform is ready and, of course, we are trying to improve the product capability every year.

I believe not a single bank is able to do that today [in terms of having such an integrated regional platform like we do]. Today, it’s no longer about a collection of banks, like in the old days. In the journalism world, you may say UOB has so many banks — one in Malaysia, one in Thailand and so on.

But, from the customer experience standpoint, you don’t get the same experience if the system is not connected. All you are doing is buying one bank after another. So, we have actually spent the last 10 years dismantling that [and building an integrated regional platform].

I keep telling myself that I’m not going to be able to help the customer, especially a regional one, if I have a bank in Malaysia on a stand-alone basis. I can have one bank for Asean. This is where we are today and with technology, I’m able to cover it. So customers would only have to speak to the relationship manager to cut across the whole region.

From the business standpoint, the complexity gives me the opportunity to make money. If the relationship is just a one-country relationship, it’s very easy to break. But once you are connected to UOB, the complexity makes it difficult for you to move. That’s where the ‘stickiness’ comes in. This is where we can survive but it’s hard work and difficult to replicate.

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Is the plan for UOB to be entirely Asean-focused? You are not in all the Asean markets yet, correct?

Yes, we’re not in all of the markets within Asean. I think being in the important markets is good enough. Laos and Cambodia are too small. If I can handle Malaysia, Vietnam, Indonesia and Thailand, that already forms 80% of the whole Asean market. These are the ‘big tigers’. If I can manage that, no problem … I’m already home.

So there are no plans to look beyond Asean?

These are incremental. It’s not important to me. Today, if you look at the market, most of the global banks are around the world but they all become irrelevant because too much investment is involved. Banking is increasingly regulated.

A lot of KYC [know your customer], uplifting and so on. You have to focus on doing what is right. We have offices in different countries but these are very wholesale-oriented. But for the consumer part of it, it is all Asean. Even for China, it is a big market, but we try not to spend too much on resources in China. What we do is only to connect the Chinese customer coming to Asean. This is where our competitive advantage is.

I cannot compete in China with all the big Chinese banks. It’s just impossible, not in my lifetime. But if a Chinese customer comes over to Asean, I can compete with the Chinese banks because I have the footprint, the people and I have more deep-rooted culture so I can manage that.

By the way, this is already happening. Half of the foreign direct investment [FDI] brought over are Chinese and they prefer to bank with us.

You spoke about being the one bank for Asean, but the fact is there are actually several banks that are also regional. Malaysia has four regional banks while the two other banks in Singapore also consider themselves Asean players …

Everyone can consider themselves Asean players.

So it’s actually quite a competitive space within Asean itself, isn’t it?

Well, banking is competitive, but look at the amount we’ve spent on technology and infrastructure. So as a customer, if you have to pick one, [as] we have the infrastructure and the connectivity, the probability is that you will pick us, all things being equal.

So you are saying that the way to compete among these regional banks is through digital?

It’s through digital, the platform and the connectivity. It’s easy to say, but not as easy to execute because of the compliance involved.

About 10 years ago, my country heads asked me why there would be a need to create this Asean platform when each country within Asean has its own special way of doing things.

I insisted that we have to standardise. Yes, certain things can be modified to suit the local market, but standardisation is very important. Once you are able to standardise, you can have scale.

The speed to market is very important. Today, if I introduce one product in Singapore and it is popular, I can quickly replicate it for other markets because the platform is standard. All my local [Singapore] peers run on a federated model — for each country they have their own system. It is very difficult to communicate.

How important is it to you to defend the ranking of being the third-largest bank by assets in Asean?

It’s not important to me whether we are the second- or third-largest because when you say third, what does it actually mean? It is just [about] generating loans. To me, we want to focus on trade and connectivity. Booking a loan is easy to do but to develop connectivity that works seamlessly and dealing with cash flow management, it’s a lot of hard work and not as straightforward.

You have to understand this. For me to book loans in Malaysia, if I don’t have the deposits, how am I going to book loans? I cannot borrow money from interbank to book loans. What will happen if the bank pulls [back funds]? I’ll be in a difficult position. So, I have to build CASA [current account savings account]. I have to build stickiness in deposit.

This is where we are creating the platforms. So that, for example, when your salary is banked with us, it then creates that stability — the stickiness that we are talking about. Then only will we be able to give loans. Otherwise, your housing loan is 20 years. If deposits [in the bank] are only short term in nature, whereas 20-year housing loans are given, when customers withdraw deposits … finished!

That is a very basic fundamental. We have to make sure it’s right first. This is why within the bank we say, ‘No funding, no lending’. Simple as that. Credit will not kill the bank [quickly], it will be a slow death. It’s liquidity [or lack thereof] that will kill the bank. The moment people start to pull out, that’s it. So we have to be disciplined, especially with the region where the currency flow is not like the US dollar.

So it doesn’t matter to you whether you are second or third largest in the region?

As long as we are healthy. Of course, size is important. But if I do all these things [that I mentioned] right, I’m not worried about ranking.

How do you view M&A as a means to potentially scale up further in the region?

I think we have enough presence in Asean and we see an opportunity to grow organically now. I don’t have to acquire to grow. When you acquire a bank, you take both the good and the bad, including the people. Then, it becomes a human resource exercise. In UOB’s history, we have acquired eight banks and we know how painful it is to acquire.

So, just to be clear, M&A is taking a back seat, even if an opportunity arises?

No. If there is an opportunity, like the Citibank [consumer business] opportunity, where we can buy portfolio, why not? I can add scale immediately.

Is there any part of the existing UOB portfolio that you think is lacking in some aspect?

I think what we have is a good platform. We will continue to acquire customers. With the Citibank consumer portfolio acquisition, it has given us a customer base of about eight million currently. In two years’ time, we are talking about 10 million. We want to continue to act organically. I don’t need to go and acquire another one. As for wholesale banking, we continue to work on it. We have the integrated online platform for it. So, hopefully, we are in a position to capture [some market] domestically as well as regionally. In that sense, I’m able to compete with the local bank.

When you look at the Asean market today, which markets do you see as being the most important or the brightest growth spots?

These are all my ‘children’. So they are all equal.

But, in reality, no one child is equal, right …

I think each country does present certain strengths and weaknesses. It’s not like I have to pick one. But the easiest one for us, in a way, is Malaysia. Why? Because my family grew up in Kuching, Sarawak. Culturally as well, it’s easier for us to manage.

On the other hand, Thailand is a kingdom. It has its own culture. We have persevered there for over 20 years. It is difficult there but we have grown in such a way that we are the only Singapore bank there. The other foreign banks in Thailand have all exited the market.

A lot of people say, if you see future, then you put money. But, sometimes, you have to persevere before you see future. Today, we are No 3 in Thailand when it comes to credit cards. I think we have the scale in Thailand now — we inherited about 2,000 staff from Citibank.

Now, the question for us in Thailand is how we can continue to add strength and depth, because Thailand can help us to serve other parts of the region, like Vietnam.

As for Indonesia, we are still small there. I think we can grow a lot faster in Indonesia.

But not via M&A?

No. If I have a choice, I’d rather grow organically. If I can grow organically by 20% or 30%, what need do I have to buy? But that would be the fastest way to expand … You also have to look at what kind of people you’re ‘buying’. What kind of system are you buying?

Just like an old house, you have to tear it down before you can rebuild.

Going back to Malaysia, is the Johor-Singapore Special Economic Zone something UOB is looking into?

Yes, this is something I’m excited about and Johor is just next to Singapore. I’m positive about it. I think ultimately, both governments will have to strike a deal. It might not be a win-win [situation]. Sometimes, you will win or lose a bit; it doesn’t matter.

You have to see the big picture to move forward. If both sides are practical and willing to give and take, I think that would be a very good thing. I think there are very promising prospects because Johor is about 4.5 times bigger than Singapore. So, we are able to create synergy.

We are happy to work with other Malaysian banks like Maybank and CIMB. Sarawak is also another new area [of opportunity] like Johor, and because of my family’s roots, when I go there, people tend to be more welcoming. So this is where we have some competitive advantage.

Some say that a family-owned organisation isn’t as professionally run as when you have a professional CEO. What’s your view on that? Secondly, looking ahead, what’s the succession plan? Will UOB remain a family-run bank?

There are very good companies that are professionally run and there are also family-run ones that are very successful. I like to see UOB as a combination of both.

Even though my family is the single-largest shareholder, we don’t own 100% of it. So it’s not family-owned in that sense. I’m an owner-operator model. I have all the professional people.

My children are not involved in this business; they choose not to be. They want to have their own dream, so be it. Ultimately, it can be professionally run and hopefully, they can be at a board level. They can preserve their [family’s] legacy if they want to.

So, I’m not hung up on being a family-run bank. The last thing you want is to introduce nepotism, which is not healthy. You must allow the professionals to take their place.

Sometimes, they can be even better than the owner. As long as they have the long-term mindset, I think they should be able to do better. This is why [in] our KPI [key performance indicator], we are always weighted on values. Generally, that is the corporate philosophy: to do the right thing and not mis-sell products.