CTBC Bank's Tung: “About half of our income will come from overseas”

CTBC Bank, the largest private commercial bank in Taiwan, is actively expanding overseas to escape the constraints of a highly competitive and saturated home market. The bank, with total assets of $126.8 billion and net income of $1 billion as of December 2017, competes with over 40 other domestic players in an arguably small market with a population of no more than 24 million people. Yet, it was the most profitable in the industry. Chairman of the bank, Chao-Chin Tung, stressed that overseas expansion is one of the ways to ensure “a reasonable return” to its shareholders.

In the past five years, the bank has increasingly looked overseas for growth and appears to be reaping tangible results. Its recent overseas foray includes the acquisition of a small retail bank in Japan in 2014, Tokyo Star Bank, the first domestic bank to be wholly owned by a foreign bank. It provides financial solutions and overseas networks for Japanese small and medium enterprises (SMEs) looking to expand their business in Taiwan, China and Southeast Asia.

In 2017, it acquired a 35.6% stake in Thailand’s LH Financial, with the objectives of leveraging it to serve Taiwanese corporation operating in the country for cross-border trade finance and wealth management.

Now, it operates a comprehensive overseas network with over 260 service outlets in 14 countries and regions that include separate subsidiaries in the US, Canada, Philippines and Indonesia.

However, Tung explained that the importance of an overseas business is not a new or recent realisation. “We started more than twenty years ago to understand that to help our customers to grow overseas we needed an international presence,” he said. The bank then started to progressively expand its overseas markets and build a complete cross-border financial service platform.

Its North American operations was first established in 1989 with coast-tocoast presence in the US with New York in the east and Los Angeles in the west. It US network allows the bank to increase commercial and industrial loan, commercial real estate finance, cash management, personal account, deposit and mortgage businesses, as well as to develop local and Asian client business opportunities, including the acquisition of mortgage assets.

Its Philippines subsidiary was set up in 1995 and has become a leading player in the local bond market, and is consistently cited as one of the top 10 government securities dealers.

In South East Asia, it opened its Singapore branch in 2009 as the regional financial hub to enhance target client cultivation and to participate in cross-border financing projects, focusing on top-tier corporate clients in Asia through syndication and bilateral relationships. It has recently also expanded into providing cash management and international trade financing services to target clients.

Tung shared that overseas businesses currently contribute about one third of the bank’s total revenue and the aim is to increase it to 50% in the next five years.

The bank has identified a few areas of potential growth, mainly to serve crossborder needs of SMEs in China’s Pearl River Delta region through its branches in Shanghai, Guangzhou, Xiamen, Shenzhen and Hong Kong.

“We have also identified Japanese SMEs and smaller corporates at the peripheral whose overseas needs are not currently being served by the megabanks,” Tung added. “Japan is very different from other countries, it is not easy, but there are good opportunities to grow.”

The bank is using its Singapore regional hub to grow its corporate finance and international banking business and has just undergone a business transformation in the past year. “We are moving beyond syndication and building more and deeper bilateral relationships with our clients by cross-selling. Furthermore, we are leveraging our global networks to accelerate the growth of international business by expanding the scale of overseas markets and connecting cross-border opportunities to boost synergy. This also means that we are developing a more holistic suite of products and services,” Tung remarked. In particular, its US presence is helping it to create a competitive edge in its US dollar clearing and cash management services in the region.

Maintain a leading domestic position while actively expanding overseas

CTBC Bank started out as trust and investment company in Taiwan, and was the first to be converted into a commercial bank when it did so in 1992. Its predecessor was China Securities and Investment Corp, the first private securities underwriter in the country that was established in 1966. The expansion into trust and investment business took place in 1971 when China Investment and Trust Company was formed.

In 2002, the Chinatrust Financial Holding company was created to bring together all the financial services businesses under a unified structure, including the addition of Taiwan Life in 2015. CTBC Bank was renamed from the original Chinatrust Commercial Bank as it moved forward in its plans to expand business overseas and become a global brand.

The financial group which was founded by the late Jeffrey Koo Senior and majority owned by the Koo family is today run by a professional management team.

According to Tung the bank will continue to refine it business model to better serve its core customers and to strengthen its industry-leading position in the domestic market. In addition, it is looking to leverage the synergies offered by the integration of its overall retail banking business.

Tung said: “Looking abroad, the bank will take greater initiative in seeking out new opportunities for growth, expanding its customer base by strengthening the advantages of overseas networks and client offering.”

The bank realigned its banking operations in July 2017 into three businesses: Institutional and international banking, global capital market, and retail banking.

It elevated its global capital market business to one of the major areas of operation with the aim of creating a unified global command and ensuring the further expansion of the capital market business.

Accelerate digital development

CTBC Bank is also accelerating the digital transformation of its services in three areas in 2019. It is continuing to implement digital technology in order to bring customer processes and satisfaction to the next level. It is also developing innovative digital services for unique customer experiences. Finally, it continues to strengthen its data platform and roll out new data-driven services in order to more accurately satisfy customer needs.

A highlight of its recent business development was the expansion of mobile payment service offering, namely the LINE Pay co-branded card. Since its release, the card has achieved remarkable results in number of transactions and spending. It is also expanding its collaboration with LINE to offer social media and related financial services.

With the goal of providing more comprehensive and convenient digital financial services, CTBC Bank introduced a number of innovative self-service initiatives, including what it claimed as Taiwan’s financial industry first-of-a-kind foreign currency exchange machines. In addition to conventional foreign currency withdrawal functionality, this new generation of automated machine allows two-way cash exchanges between New Taiwan dollars and foreign currencies. Also leveraging financial technology, CTBC Bank has launched a new suite of digital financial services covering customer needs ranging from investment and insurance to loans and personal budgeting. In line with this focus, it is also among the first financial institutions in Taiwan to offer a card-based payment service integrated with the three major mobile payment systems (Apple Pay, Google Pay, and Samsung Pay).

Ensure effective regulatory compliance

In 2017, the Bank established the compliance division which operated directly under the president. In that same year, it also committed to enhancing awareness and capabilities across the organisation. In 2018, it further improved the procedures we have in place to ensure effective compliance with emerging regulations. Through collaborative roles, centralised operations, and automated processes, it seeks to ensure compliance effectiveness and efficiency while also optimizing customer experience.

Going forward, Tung shared: “CTBC Bank will continue to respond promptly to market dynamics, ensure diverse revenue sources and robust asset quality, and accelerate our digital transformation. Meanwhile, it will enforce regulatory compliance and rigorous risk control mechanisms.”