Heat on as new banks enter
Malaysian banks can expect more intense competition now that there are five more commercial foreign rivals.
This means that local lenders will have to improve their products and service level. Also, they will have to figure out how to retain their employees as the entry of new players could result in staff pinching.
On Thursday, Bank Negara Malaysia awarded commercial banking licences to five foreign banks, including two from Japan.
The five are France's BNP Paribas SA, Japan's Mizuho Corporate Bank and Sumitomo Mitsui Banking Corp, Indonesia's PT Bank Mandiri and the United Arab Emirates' (UAE) National Bank of Abu Dhabi.
This means that these lenders could do consumer banking, which is a growing market, as well as corporate banking, which involves lending to small and medium enterprises, among others.
Mercury Securities research analyst Edmund Tham said that local banks must buck up because foreign banks are good in certain areas, like cash management, for instance.
"Marketing people from the foreign banks will also be more dynamic because they can't operate from many branches like the local banks," he added.
Unlike local banks, which can open as many branches as they want, foreign commercial banks can only open eight.
Despite such limits, foreign banks are doing well. US lender Citibank has a big credit card business and was the market leader until recent years.
An analyst at TA Securities said the new banks would be strong in the corporate loan segment.
"But some Malaysian banks are responding to the challenge. Citibank, for example, was big on the credit card segment with the highest return on equity even though the bank only has a few branches.
"But now Malaysian banks are gnawing into their credit card market share. Local banks are also moving offshore to intensify their global presence, such as in Thailand, Singapore, China and other areas."
An investment banker at Kuwait Finance House said the new additions will be good for the banking landscape as there will be more options for customers.
"But local banks have to rise to the challenge as well by giving more flexible products, better rates and better customer service," he said.
Malaysia has over the years issued 19 licences for commercial banking, and three for Islamic banking, to foreign operators.
This means that local lenders will have to improve their products and service level. Also, they will have to figure out how to retain their employees as the entry of new players could result in staff pinching.
RHB Research Institute head of research Lim Chee Sing said that while local banks are used to competition, they have to be wary of foreign banks which will slowly but surely intensify the heat.
"It will take some time for them to fully enter into the competition, and it will arrive from various angles. Some of the local and foreign banks right now are already crossing in each other's path," Lim told Business Times in a telephone interview.
On Thursday, Bank Negara Malaysia awarded commercial banking licences to five foreign banks, including two from Japan.
The five are France's BNP Paribas SA, Japan's Mizuho Corporate Bank and Sumitomo Mitsui Banking Corp, Indonesia's PT Bank Mandiri and the United Arab Emirates' (UAE) National Bank of Abu Dhabi.
Mercury Securities research analyst Edmund Tham said that local banks must buck up because foreign banks are good in certain areas, like cash management, for instance.
"Marketing people from the foreign banks will also be more dynamic because they can't operate from many branches like the local banks," he added.
Unlike local banks, which can open as many branches as they want, foreign commercial banks can only open eight.
Despite such limits, foreign banks are doing well. US lender Citibank has a big credit card business and was the market leader until recent years.An analyst at TA Securities said the new banks would be strong in the corporate loan segment.
"But some Malaysian banks are responding to the challenge. Citibank, for example, was big on the credit card segment with the highest return on equity even though the bank only has a few branches.
"But now Malaysian banks are gnawing into their credit card market share. Local banks are also moving offshore to intensify their global presence, such as in Thailand, Singapore, China and other areas."
An investment banker at Kuwait Finance House said the new additions will be good for the banking landscape as there will be more options for customers.
"But local banks have to rise to the challenge as well by giving more flexible products, better rates and better customer service," he said.
Malaysia has over the years issued 19 licences for commercial banking, and three for Islamic banking, to foreign operators.
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