Interviewed By The Banking Conversation
Chao Chin Tung, chairman, CTBC Bank, discusses CTBC expanding beyond Taiwan and going global, and his outlook on Taiwan’s future and its relationship with China.
Here is the transcript of the video:
Emmanuel Daniel (ED): I am very pleased to speak with Chao Chin Tung, the chairman of CTBC Bank, actually a bank that I have always known as China Trust Commercial Bank. You took over the chairmanship when the late Jeffrey Koo passed away in April 2012. Were they big shoes to fill, and how has it been in the time that you’ve been chairman?
Driving CTBC into a new era
Chao Chin Tung (CCT): That was a sad moment when I took the place of Dr. Jeffrey Koo, when he passed away. He contributed to this bank for so many years. He created it from scratch. When I took the office, actually, the bank had already become a very much international one.
So, everybody knows the challenge recently in the international operation is the compliance issue. Each one connects to each other. There’s no more gap. It is actually seamless. So, especially in a financial institution, in making the deal, the cash flow is actually like water everywhere, so you cannot tell which one is which. So, that means you cannot get away from those other countries’ compliance issues or the other countries’ policies. You need to fit all these in, so this is quite a complicated and difficult job, actually, as compared to how it used to be.
ED: By the time you became chairman, the bank had actually had very strong management. One of the interesting characteristics I remember about China Trust is the fact that it was a very professionally run bank – domestic bank – that could actually stand against the foreign banks coming into the country. Citibank’s first countries to attack in the 1990s were countries like Taiwan, and China Trust was able to hold that, and that was because of the quality of the people you had. So, where are these people now?
CCT: They are still there. They have graduated from the young men and become the middle-aged, and even the old, like me. The most successful thing is that our late chairman Jeffrey Koo put much emphasis on human resource. When you start from scratch, through the use of different strategies – compared to the other local banks – they want to hire the young men who have the vision and can survive in the international environment. And so, they are promoted. They get into the different financial institutions and get training, and they also send employees to Wharton School to develop management skills.
These are the kind of things that have been done for so many years, so we have a very solid management team, and they are still in CTBC.
ED: Actually, you also have exported management skills. A number of people in Taiwan and even in China are actually ex-China Trust managers, so you are not just good for yourself, but you’re an exporter of talent.
CCT: Well, they call us like Citi now. Citi used to train a lot of people, and they are in every bank, so they call us just like another Citi.
ED: What are some of the challenges that you face today that are different from 2012?
CCT: I think the attitude, the whole world environment, changed a lot. The first thing that every government is focused on is consumer protection. That makes a lot of difficulty when you’re running a financial institution especially when the global political environment has become so different. There are a lot of terrorist issues. So, America emphasizes anti-money laundering. They want to protect all the decent people from those threats, so it would take the resource out. So, that adds a lot of pressure, as a bank, to control operational risk. It is very difficult.
ED: But what about the balance sheet and the market share of your core businesses? Because today, when you think Taiwan, you think Taishin Bank, and some of the other banks that have come up quite well. What’s the nature of competition today? Can CTBC hold its own?
CCT: CTBC is just like a well-developed country in Taiwan, and most of the others are like emerging countries. So, this is a very clear comparison. So, they probably have a rapid growth rate, but actually for the market share and other skills, it is still distant.
ED: It puts CTBC very far in front. On the retail front, a lot of what you grew in the early days focused on credit cards, and today, I think it’s more on wealth management. What is your primary product driver in the bank, the successful products that help you to acquire customers and keep customers?
CCT: In our bank, we separate the credit cards into the payment division, and wealth management belongs to another division. Actually, for the past several years, wealth management actually represents half of the profit – not only revenue, but half of the profit of the bank. But the credit cards are getting tougher. Because the customer segment is so difficult to control, they were getting all kinds of campaigns every other month.
ED: So, what used to be a profit driver, today is like a millstone around the neck.
CCT: Yes and also the government controls it. You cannot charge that high an interest.
Expanding beyond Taiwan and going global
ED: Right. So, that strategy has evolved. What are some of the ways in which you motivate your staff? What are some of the goals that you’ve given your staff to achieve?
CCT: Right now, as I mentioned yesterday, we have more than 100 operations overseas in 15 countries. So, that’s our goal. We cannot remain domestic and compete with each other with very limited resources, so that’s why we have to go explore overseas, and getting a piece of the cake in every way. That’s the way we should do it. We expand financial servicing everywhere. That’s why we 100% acquired the Japanese bank. Recently, we have acquired in Malaysia, Indonesia and in Singapore.
ED: All this has not changed your cost-to-income ratio very much. It’s more like in the high 50s, so almost 60% cost-to-income ratio. Are you sometimes afraid that the costs will go up?
CCT: As long as you still put it in your mind all the time. That way, we will still have the control. We have a target every year, so we need to do something about it. So, how much is a captive cost, and how much are you going to spend on the expense in your daily life? So, all those things, you need a lot of jobs to do that, too. Then, in that way, it achieves the goal, and we are going to make the profit for the shareholders.
ED: So, in terms of the acquisitions that you’ve made, which are the most successful ones that you’re happy with?
CCT: Do you mean for so many subsidiaries and branches over there? I cannot say which is the most successful. I would say the biggest reason for that is the global situation is very difficult, so everywhere, we need a special effort for doing that. So, there’s no shining star right now.
ED: It’s hard work every day. How is the business environment in Taiwan evolving? There was a time when Taiwan was growing very strongly, but today, many things are not very strong. The stock market is not strong. The small business segment is not exactly doing well. Also, the large corporations in Taiwan, they have multiple sources of funding and multiple sources of financial services.
CCT: Well, if you will only look at the picture in Taiwan, you will get an impression like this. It’s just that all the Taiwanese around the world are doing business in other ways, in other places. So, just like our bank, we have so much of our focus overseas, with the expansion of all these businesses –
ED: What percentage of your total income is overseas income?
CCT: Our global trade is worth $5 billion a year. Six percent comes from Asian countries, so that is why I say we maintain a very good relationship with the old Asian countries. That will be our resource to acquire for the future.
ED: But you have had a couple of false starts in China. Have you done joint ventures in China before?
CCT: No, we have a branch there, but we will try to acquire one existing bank subsidiary over there. It is not accomplished yet, but we’re trying to penetrate that market very carefully. Nevertheless, it is a big market. You have to take a look at that.
ED: Right. So, you have got to choose what part of the market you want to build in China.
CCT: It is in retail financial services as well.
ED: So, the potential is there and, at the same time, you need to be focused in making sure that you don’t run over cost.
CCT: Yeah, of course. This is a big market. There are a lot of resources you can use and then acquire.
Outlook on Taiwan’s future and its relationship with China
ED: What is the future of Taiwan in your opinion, in terms of as a country, as a society, and whether it has a good relationship with China?
CCT: Actually, I like to go for the old Asian countries. They should be active, that is the most important. They are most supportive when they join the party. They are like DBP. Our people can really provide a lot of support for the infrastructure over these kinds of operations. We like to do that.
ED: Right. In terms of pushback, like difficulty that you have today that you probably did not have 10 years ago, what are some of those difficulties?
CCT: I do not think there is a pushback. Many years ago, we did not even have a door on it, but right now, we have many ways to communicate, so it is much better than before.
ED: Is China going to be one aspect of growing your business, like you have market share ideas to fulfill, so you are going to be greatly invested in China?
CCT: Our bank investment is limited. We’re going to acquire subsidiaries and expand our business there, but the investment is just limited.
ED: In terms of liberalisation and consolidation, do you think it will ever happen in Taiwan, the banks being consolidated?
CCT: The media and the government have been talking about this for so many years, but it is just like a marriage. You have to find a suitable wife to fit your needs. The trend is that if the market is still getting worse, then probably the small and medium businesses cannot survive. We’ll be ready for that.
ED: So, you have a good sense of where you are going and what you want to achieve.
CCT: Of course.
ED: If the economy is slow, sometimes it is very hard to get a good sense.
CCT: But you have to have confidence for the future. Otherwise, you cannot survive.
ED: That is right. But sometimes, when I go to Taiwan these days, I find that, in some areas, people feel like there’s nothing more that they can do, because the skill set has reached a certain level and you can’t really improve on something. You can innovate or you can come up with new ideas, but you can’t grow the business. This is the challenge in Taiwan.
CCT: Sometimes, some individuals have narrow minds. That’s why we say that our future is the whole world, especially in Asia. We’re living in a small place, so we’re only 23 million people. It’s a very limited market.
ED: So, are you a big believer in the use of innovation, such as mobile technology and devices, as opposed to traditional banking?
CCT: That has to be done very carefully. There are some people looking at China, so this has to be the trend, but in China, they have their own reason.
ED: Their own problems.
CCT: It is not only problems. They can use this tool to penetrate to rural areas easily. Otherwise, probably, they can sell things inland. They cannot sell them so easily, so this is nothing compared to a country like ours.
You need to acquire all the technology which relates to anything in financial services. Other than that, you need to have innovative thinking about customer evolution, their behaviour. You have to follow that. You are doing the business with the customer segment. That’s why you have to hear from them. It’s not only from our thinking on how appropriate it is and good for the customer. It’s not so.
ED: It is interesting to hear you say “good for the customer.” Is that because you’re the executive chairman or non-executive?
CCT: We do not have names like executive or non-executive. They are kind of mixed. We do not do a daily business. We do not do that.
ED: But you provide leadership, you provide direction, you provide process, which is the decision-making process.
CCT: If you’re doing things right, you can be a great leader. Otherwise, they will not listen to you. They will argue with you.
ED: Right. And if you do things right, you will not have to do too many things. You just need to focus on getting the message across.
CCT: Looking at it in a broad way and at higher levels.
ED: And in that kind of position, how do you handle competition, which requires decision-making very quickly? In a competitive environment, making decisions quickly is very important, but if you are one step removed from the bank’s process, it adds to the time it takes to come up with a decision or a strategy.
CCT: You only need to just watch how your colleagues are doing the steps, how fast they are doing them, how correctly they are doing them. That is all you need to do. You do not interfere every day, but when you’re looking at it there in the right trend within the accepted steps, they’ll be fine.
ED: In the consolidation in Taiwan’s banking industry, do you see that consolidation will mean job losses at all, in the next few years?
CCT: Usually, you see two parties. If the lower-level skilled are then merged with the high levels, then probably they will lose their jobs, but we did not face any serious problems before. If they lose their job from this bank, a lot of other banks will hire them because they are still skilled people.
ED: Is CTBC a preferred employer, meaning do you get good students and a good flow of graduates coming to join CTBC? It is a good flow?
CCT: We are doing that through the campaign on the campus.
ED: And you are happy with the kind of quality of students that you get that become full time staff?
CCT: That is right.
ED: So, the final question is: As someone who is in a position of chairman, what are some of the tools that you use to manage your staff? In terms of managing your staff, do you think that person-to-person contact is better, or are you comfortable with electronic media or electronic communications?
CCT: Person-to-person contact is very important. You know the person’s personality, and then you know how much you are accepted when you make a suggestion to them. For some people, perception is very high and they probably will not accept you. So, when you know a person well, you know how to manage them.