Winds of change (Part 1)

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Standard Chartered Bank Malaysia’s new managing director and CEO Mahendra Gursahani, who got into the driver’s seat in February, does not expect a smooth ride ahead as he steers the bank through an increasingly challenging operating environment. Even so, he has big plans for the bank as Malaysia remains an integral part of the UK banking group.

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MAHENDRA GURSAHANI, Standard Chartered Bank Malaysia Bhd’s new managing director and CEO, has taken the reins at a time when the economy, both on the local and global fronts, is going through challenging times.

In Malaysia, growth is slowing and the banking industry is facing strong headwinds. Many banks are seeing an erosion in earnings. Even the foreign banks have not been spared. 

Mahendra’s appointment in February comes at a time when parent company UK-based Standard Chartered Bank plc is going through a shake-up after disappointing earnings last year. Europe is still struggling to emerge from the sovereign debt crisis it has been mired in for several years now.

The group’s chief executive Peter Sands is due to step down in June, while chairman John Peace and three board members have announced plans to resign in 2016. 

However, Mahendra’s new role is not a result of the shake-up but part of a succession plan that sees him taking over from now retired Osman Morad.

Mahendra has had an illustrious career in banking, having spent almost three decades with StanChart in Asia, Australia, the Middle East and Europe. Asean is familiar territory to him, and Malaysia in particular, as he made many trips here for business and pleasure when he was based in Singapore 22 years ago. 

He is no stranger to playing such a key role, as he was previously CEO of StanChart Philippines. Over the years, he has gained experience in retail and corporate banking, credit risk management and asset management, as well as the audit, risk and finance segments of the bank.

In his first interview with the media since his appointment, Mahendra says Malaysia will remain a core focus for StanChart despite the economic uncertainties. 

“With new leadership, a new way of thinking about our future will come about. But Malaysia remains a core element of the bank and of our Asean strategy. I can’t see that being dislodged in any way. I absolutely believe Malaysia will continue to be important in this new direction.”

Of course, he does not expect the journey to be smooth. Against a backdrop of low oil prices, a weak ringgit and volatile global economy, Mahendra admits he has little room to prepare for worst-case scenarios. 

“The world is evolving so rapidly that to have an outlook for the next three months is actually considered long term,” he says. “The challenge is in the unpredictability of the markets.” 

While such scenarios are not new, the world is so much more connected today. Any change anywhere in the world has an immediate effect on Malaysia. 

The solution to this, Mahendra says, is to be quick on your feet in any situation. “We need to be anticipatory and nimble to respond to that change as quickly as we can. That is about as prepared as we can be.” 

Thankfully, he adds, StanChart is both big and connected enough that it can adapt very quickly. In the face of adversity, its branches across the world can share in its expertise.

“When something happens and we need to respond to it, chances are it has probably affected another market. If they have already found a solution, then we can get to a solution much faster,” he says.

Like other foreign banks, and increasingly for local banks, wealth management is a key segment in StanChart’s business. It currently has about US$14 trillion (RM50.8 trillion) in assets under management (AUM) from high net worth individuals in Asia, Africa and the Middle East. 

Malaysia is its second largest market in Asean, after Singapore, in terms of wealth management. The average AUM per client in the region is US$5 million. Mahendra says this is an indication of strong growth and demand for wealth management products and services in the country.

The bank’s AUM in the area of fixed income securities have more than doubled over the past two years. Its equity funds’ exposure to core products, such as developed market equities and global equities, has grown more than 30% over the same period.

“Within unit trusts and bonds, investors have become savvier and ventured into regional and global markets as they see opportunities in developed market equities and global equities,” says Mahendra.

“Malaysians prefer income-generating products, so unit trusts and fixed-income products are quite popular. We have seen demand for these two products increase over the past few years.”

Singapore, being a wealth management hub in Asean, has paved the way for Malaysia. And both countries can benefit from StanChart’s wide network and experience.

“Our strength here is because we are an international company and we operate in so many markets. In some cases, we can bring ideas and deals that have been tried and tested in other markets and introduce them to our clients in markets that may not have seen them before,” says Mahendra.

There are plans to grow its wealth management segment. As it stands, the bank already has a large array of products and services that appeal to the different risk profiles and appetites of its customers. 

StanChart launched its Investment Suite in August last year. According to Mahendra, it is suitable for investors who want to manage volatility by making 12 systematic investments in unit trust funds over a period of 12 months. 

“With a starting investment amount of RM36,000, the suite is an effective and affordable strategy that would suit most investors. Investors can tune the level of risk exposure they take in the investment suite by further selecting investment products that are aligned to their risk appetite,” he says.

A challenge in the wealth management space is the issue of misselling, or selling products to customers who may not understand them well enough. Mahendra says the bank has several controls in place to prevent such practices, including calling customers after the product has been sold. 

“After the transaction has been concluded, there will be an independent callback process where someone calls the client and asks, ‘Is this is what the relationship manager sold you? Is it what you understand it to be? Is that exactly what you want? This is our back-end control,” he explains. 

The front-end control is where the customer’s suitability is assessed. There is a general belief that the higher an investor’s income or position, the better his knowledge of financial products will be. But Mahendra says this is not always the case, hence the importance of the callbacks.

“Sometimes, even if investor has a high income, he may have a risk-averse appetite. This is why it is important for us to do the assessment. We rate the profile of the investor against our products to match them up,” he adds. 

“If you are conservative by nature and that is how you prefer it to be, then there are products that will suit your needs. There is no one size fits all.”
 

This article first appeared in Personal Wealth, The Edge Malaysia Weekly, on April 13 - 19, 2015.