Taipei Times: Is there an effort by ABN to beef up consumer banking business at the cost of corporate banking in Taiwan?
Jerry Letendre: Actually since 1997, we have been in consumer banking and we have been accelerating our efforts of late. This is a global objective as well -- not simply a Taiwan or Greater China objective. To share some background, last year the bank decided to restructure itself in order to a achieve better focus on critical client segments or business lines. To this end, we have divided the bank into three banks basically. One is wholesale banking, which includes investment banking, equity capital markets, mergers and acquisitions and corporate finance will be captioned within the wholesale banking.
The second bank is the private banking and asset management business. The asset management business is where we manufacture mutual funds. We have an asset management [operation] with nearly US$200 billion under management.
PHOTO: CHIANG YING-YING, TAIPEI TIMES
The third business, which I head in Greater China, is consumer and commercial banking. This is the source of the greatest amount of profit for the bank. We have excellent growth plans for all three businesses. At the moment, the consumer and commercial clients -- what we call the triple C business -- is going to produce the greatest amount of profits.
TT: What do you mean by Greater China?
Letendre: By Greater China, we mean Hong Kong, Taiwan and China. And as you can imagine, there is not much going on in China. But as a foreign bank, we are pretty well positioned. But again the access that foreign banks have on the mainland is fairly limited. Nonetheless, we are looking forward to that opening up, and it represents some very interesting prospects for us.
TT: But you are based in Taiwan?
Letendre: In the near term, the action is in Taiwan. My personal view, and of the bank, is that you have a much higher success of entering the mainland from a Chinese market, like Hong Kong or Taiwan. But there are both pros and cons depending on which country you chose. We have chosen to make it Taiwan. The core part of my strategy is to build our presence in Taiwan and use that as a springboard to enter the mainland -- when we are allowed to do that.
TT: So Taiwan helps you get into China?
Letendre: I mentioned the strategic significance of Taiwan, and it does have a strategic significance of us in order to get into the mainland. But if I look at the Chinese marketplace, then I look at where the most interesting groups and centers are because we are not going to expand all over China. It is going to be too difficult and too expensive. So we have to pick and chose where we want to grow. If I have to tell you the five most interesting places, it would be Shanghai, Beijing, Guangdong, Hong Kong and Taiwan. I look at Hong Kong and Taiwan as two of the very interesting urban Chinese markets.
TT: So do you think this market is saturated or there is still a lot of potential?
Letendre: The market will continue to grow. In fact, our first quarter annualized GDP growth rates fell to a 26 year low. If I go back, how far does it take us. It takes us to 1975. How many recessions did the US have in between? At least, two or three. And Taiwan had to go this far to have only 1.1 percent GDP growth rate. So we have to keep that in perspective. What is troubling is that the growth historically has been much stronger. This is a short-term problem. If you look at the longer-term prospects of the market, it will continue to grow quickly.
TT: Which part of sectors are you most interested in?
Letendre: The level of prosperity of individuals in Taiwan will continue to grow. I think the market will continue to evolve in a very attractive way. In the near term, there seems to be some saturation in the banking industry. And the government is trying to resolve that through legislation to help the banking industry to consolidate. That is healthy. It will bring up the efficiency of the banks. By rationalizing the system, we will end up with a far more efficient system, leading to lower costs, which hopefully translates into more money being spent upon product innovation and service development.
TT: Can you be little more specific on the services which you may offer to that segment?
Letendre: We are basically interested in a concept called "Preferred Banking," which for me is wealth management. It is advisory based, as opposed to transactional and product-based. It is designed for individuals who think there are certain financial events that they know are going to occur in their lives and make preparations for it. And more consumers are like me that do not know what exactly I have to do to make sure that all these things are there. So what we have is a fairly comprehensive tool that allows one of the preferred bankers to take a customer through a process which helps them understand based on their own goals in life what they need to do in order to achieve that from a financial standpoint. I think a very few people are served with that product right now. It takes time for the market to realize that there is a need for this. We have financial consultants who are very capable of serving this, and ABN AMRO has substantial strength in this area globally.
TT: Any other sectors that you want to focus upon?
Letendre: Secondly, we will also continue to focus on the credit part business. We actually have really good credit management systems here. And finally, we will also focus on exporting and importing small and medium enterprises which we have served traditionally. It is especially interesting for us strategically because of our interest in China.
TT: I heard ABN AMRO is getting out of the corporate banking business?
Letendre: At the moment, I am only responsible for consumer banking. It [corporate banking] is a situation that is not very interesting.
TT: So who are your biggest competitors?
Letendre: Well, the foreign players are our biggest competitors. So obviously Citibank, Standard Chartered and HSBC are going after the same segment. But the number of domestic banks are actually doing a very good job. That is a good sign. I will really like to see the market improve as a whole, which is good for everyone, particularly in terms of the consumers served.
TT: Are you interested in having a strategic alliance or buying up a local financial institution?
Letendre: We are looking at all kinds of possibilities.
TT: So what do you want to become: a local player with a financial supermarket or a foreign bank serving a niche market? It is difficult to be both at the same time.
Letendre: I want to be right in between. There is a point at which you can over-penetrate the market. There is a point of diminishing return, which is normally smaller than people tend to think it is. So it is the most important thing when you try to identify the market segments. First is to identify the profit pool that is big and growing; and second you have to know that you legitimately have the competencies and skills to deliver to that market segments that will allow you to be successful. Those are the two main important questions. You don't have to be the largest to do that, because, for me, the key is not the size but the quality of the profits. I think the world thinks too much about maximizing things, not too much about optimizing things. The trick is to strike a proper balance so as to come out with an optimal outcome.
TT: There is a big trend now in the corporate world about trying to do everything.
Letendre: That is right. But I don't subscribe to that logic.
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