Jafar Amin, Asia Pacific regional president and head of corporate and investment banking at Wells Fargo, discusses the challenges that financial institutions and global markets face such as the US-China trade war, Brexit and the emergence of new tech players in the financial space.
Foo Boon Ping (FBP), The Asian Banker: We are here in SIBOS, London for our very first meeting with Jafar Amin, the regional president for Wells Fargo, Asia Pacific. How did 2018 fare and how has 2019 been so far, given quite a lot of uncertainty in the market? A lot of trade tension between the US and China. Tell us what’s been the Wells Fargo performance, so far?
Jafar Amin (JA), Wells Fargo: It's amazing that 2019 is almost coming to an end, right? The year has gone by really quickly, and obviously, there's been a lot of geopolitical tensions. Asia has been caught in the middle of that as well. But what I will tell you is that, inherently, Asia remains a great growth story, right? So whilst there are trade tensions, and you continue to see that permeate not just between US and China, that has an impact on other markets across Asia as well. We've seen certainly in our business, continued strong growth, partly because we've been very focused in our approaches and we continue to capture and support clients who are doing business, both from a trade and payments perspective. There has been continued interest in US dollar assets, which is an important part of our distribution and capabilities in Asia. We have continued to see a strong growth in Asia, particularly as Asian investors continue to be very long in terms of US assets. In terms of the trade specific issues, I think overall, there are some impacts on volumes. I always focus on market share and I will tell you that from a market share perspective, we have continued to grow market share both in in our core payments and dollar payments business. We've seen the amount of the share of wallet in terms of dollars continue to rise and that's helped Wells Fargo. From a trade perspective, there are obviously some changes in that respect but overall we continue to see good growth. And what we've done is that we've focused on cross border transactions involving our corporates in the US, with countries in Asia, and we've seen certain markets continue to grow even with the US-China trade, markets like Vietnam, Bangladesh where we have been able to facilitate a trade not only from a transaction perspective, but from a financing perspective, and that plays to Wells Fargo’s strengths. So from year-to date perspective, we've seen, continued growth in our business.
FBP: So on a region-wide basis, there is continued growth? What about in China specifically?
JA: Absolutely. I think, one point to highlight is that we remain again, in China, very focused in what we do, and it's primarily supporting our big financial institution partners in China and supporting their cross-border trade. So, we're not doing a lot of domestic, local business in China. So even with the slowdown in China, we've continued to see a strong growth in our business with the financial institutions in China and that has not yet been impacted. Now as the tariffs start hitting, there are more challenges domestically, will that impact some of the cross-border flows? Possibly. But I do think that the overall region continues to be very resilient. And we've seen pretty strong growth and we are not exposed to the domestic market or domestic economy, so we're not from a credit perspective, seeing any dislocation.
FBP: As far as US corporates exporting into Asia and China and specifically, there has been tariffs on other goods, there appears to be an abeyance of tariffs. How do you see that playing out?
JA: I think what we're still seeing and has been kind of the scenario that we have seen playing out as the trade war has happened, is that so far, the US consumers have not really been impacted as yet. So the tariff and cost increases are being absorbed, they are being absorbed either by the suppliers, they are being absorbed as a result of the fact that the RMB has weakened. So that hasn't fully impacted the US consumers as yet. Is there pain being felt on the manufacturing sites? Absolutely. And I think the other point you mentioned, what about the US companies operating in China? Clearly, that's been a challenge, and if you kind of read what US companies are saying, if they have manufacturing sites in China, and then they are using that to export out of China, that obviously has an impact, right? But if it's for the domestic economy, in China, for domestic sales, it's a different situation. But in general, I think the US-China trade war, has in some ways, accelerated a transformation that China was undertaking anyways. And everything that I hear when I speak to our clients in China, regulators, is about the diversification is being pushed forward, much more. So it's just accelerating that trend in a way that maybe is faster than it would have been, if there wasn’t a trade war.
FBP: Geopolitical uncertainties and trade wars are some things beyond your control. They come and go. They could disappear as easily. But what can you do in terms of helping with margins, reducing costs, security, safety, in the area of trade, there are a lot of digitalisation projects going on. Can you talk about that?
JA: Whether it's payments or trade, obviously there has been a big focus on, one is the customer experience, which I think is really important, and second, trying to reduce the costs. In terms of costs, I will tell you that financing costs are lower than they have ever been and there is tremendous liquidity still on the market, and we haven't seen any uptake in cost as a result of any of the geopolitical issues or anything like that. There are a number of things that we work on, to obviously improve the customer experience, the end-to-end processing, and a lot of banks are working on that. And that can be everything from new technologies to looking at our internal processes. When you're a large bank, there are multiple ways that you can improve the transformation of the end-to-end processing, so we focus on that.
FBP: Can you talk about the US dollar movement, for instance the United States administration wants the rates to be lower, and there’s even talk of negative rates, how does it impact banks, like yourself? Especially when US dollar assets would pay negative rates.
JA: I personally don't see that going the negative rates and as an American bank with very significant part of our balance sheet in the US, both from a loans and deposits perspective, we are fortunate that we are not anywhere near negative interest rate territory. I would say that a lot of our European banking peers and even others are more challenged in that regard. The US economy continues to be pretty strong and resilient, right? So of course, does low interest rates mean some challenges from a profitability perspective for the company? Yes. And we've come out and stated that. But at the same time, we have a very strong client base and a very strong diversified business. So from that perspective, there would be an impact on profitability, as interest rates come down, I don't think Wells Fargo is unique to that. In fact, we remain in a better position, given that we are far away from at least the negative interest rate territory. And our ability to reflect that in what we do with our customers, has certainly been pretty consistent. We have long standing customers. I would suggest that we are less rate sensitive from that perspective, other than the fact that for a big bank like us, with a big balance sheet of retail deposits, commercial accounts in the US, it is going to have a little bit of an impact. But overall, I think we're still well positioned versus many of our peers.
FBP: We are here in London, as Brexit looms large, and with the Asia-Pacific clients. Can you talk about Brexit and what it means for your business here?
JA: We made an investment in Europe, the Middle East and Africa (EMEA), we have a new regional president and head of CIB. My peer here in EMEA, we continue to believe in London as a financial centre. We will watch and wait to see what happens. Clearly, there are some uncertainties at the end of the month and it has obviously some challenges, but we prepared for that. We have prepared for all the scenarios. We've been setting up a securities entity for our European business out of Paris and London remains our European headquarters. We've got a Dublin entity, Wells Fargo Bank International, that continues to serve our non-UK business. So again, at the end of the day, I think your guess is as good as mine in terms of what happens at the end of the month. We're watching that carefully. But at the end of the day, all we can do is control what we can control and prepare for whatever contingency and scenario that comes out. And from an Asia-client perspective, I think they remain as much interested in Europe as they were before, but it's always looking at ways to operate within the environment that we have in front of us.
FBP: Can you talk about GPI innovation, cross-border payments? It’s a multilateral role for all banks, at the same time for your book transfers, you are looking at an alternative technology.
JA: I think GPI has been a great success and we are a key player in that regard and so from 12 months ago, when we were last here, we have seen a very significant uptake. And continued deployment of capabilities that come through GPI, I think is making a real difference for our financial institution clients. Not everybody is fully onboard yet but a lot more is happening and capabilities are coming through, we see that. We've always said that this is about partnerships. For us, we are constantly looking at ways to partner, not just within the SWIFT network, but including the emerging players and technologies to ultimately make cross border payments more efficient and effective. So we have something called a reach program, where again, you know, we're not trying to build local capabilities in terms of moving money around within a particular market, because we're focused on cross border. But then how do you make sure that the client experience the payments for our clients, then ultimately, end to end has the experience we want, and to do that you then need to partner with various technologies, whether they be fintech, whether they be other banks or even local technologies. So I think from that perspective, we do a huge amount of work with that and it is all about partnerships. I think it's helpful for us because we don't have a desire to be a local player in any market. So it allows us to be much more partnership oriented and innovative in that regard.
FBP: Can you talk about blockchain?
JA: In terms of blockchain, like everything else, it has a place in terms of innovation and we continue to look at test cases for where it makes sense for us and not every bank is going to have the same kind of solution that they are going to be looking at. We know that whether it's DLT, or blockchain for trade, is a challenging technological move and it's going to take time. But we certainly are, as you will have seen from our media statement, that we continue to look at all those solutions and making sure that there is a solution that works for us and you've talked about book transfers, we are one of the biggest Dollar clearers in the world. We have probably more customers in the United States to the extent that we bank one in three households. So those kinds of things allow us to look at things in a different way, but linking back to ultimately our cross-border solutions, that has to be the key. But everything has to start about simplicity, the end-to-end client experience and transforming the way that we've been operating and setting up our businesses is critical. It's not necessarily about the front end, but it's what I call the end-to-end solutions. At the end of day, the big part of our business on a global is still cross border and that’s not a book transfer issue.
FBP: Thank you.