Malaysia to let foreign banks add branches; Citi keen http://today.reuters.com/investing/FinanceArticle.aspx?type=mergersNews&storyID=2006-06-09T085115Z_01_KLR321089_RTRIDST_0_FINANCIAL-MALAYSIA-CITIGROUP.XML
Fri Jun 9, 2006
By Hsu Chuang Khoo
KUALA LUMPUR, June 9 (Reuters) - Malaysia will allow foreign banks to open more branches outside its cities, the central bank said on Friday, in a move that further opens the way for foreign banks to expand their services.
"Wider dispersion of locally incorporated foreign banks across the country would contribute to greater financial inclusion," Bank Negara Governor Zeti Akhtar Aziz told a meeting of bankers in the Malaysian capital, noting that the branches of foreign banks were now mainly concentrated in major cities. "It is to be recognised that to be a commercially viable proposition, the attainment of critical mass is essential. In this regard ... consideration will be given to allow a greater presence in non-urban areas and serve segments of the economy which are now currently being underserved."
U.S. bank Citigroup (C.N: Quote, Profile, Research), Europe's largest bank, HSBC Holdings Plc (HSBA.L: Quote, Profile, Research), and Asia-focused lender Standard Chartered Bank (STAN.L: Quote, Profile, Research) are among the dozen or so locally-incorporated foreign banks, but have so far been competing with their hands tied, limited by the number of branches they are allowed to have.
Malaysia has vowed to free up its banking industry and is under pressure to lift foreign ownership ceilings, but until that happens, foreign banks such as Citigroup can only watch from the sidelines, because they are barred from owning any more than 30 percent of a local bank.
"25-30 BRANCHES NOT UNREASONABLE"
"Today is the first time we were told of the possibility that we may be able to open more branches, so now we need to go and understand the rules," said Piyush Gupta, chief executive of Citigroup's Malaysian unit.
"For the Malaysian market, getting to 25-30 branches is not unreasonable, and I would love to have many more branches than I have now. Everybody can't offer the same services but there will be fewer banks. I am expecting more mergers and acquisitions."
Citigroup, which now has a handful of cash machines in its three branches nationwide, plans to open four more this year, its full quota under a 2005 central bank ruling.
Despite its limited access to Malaysia's population of 26 million, Citigroup has 8 percent of mortgages, a fifth of the credit-card market and 4.5 percent of the country's bank assets, the bank said in March.
Malaysia's nine remaining banking groups are expected to enter a second round of mergers this year to strengthen themselves ahead of further liberalisation in 2007, and face competition from foreign banks, armed with more branches.
The Asian financial crisis of the late 1990s triggered a first round of consolidation among Malaysia's banks and some are still seen as ill-equipped to grapple with the likes of Citigroup and HSBC.
Market watchers have said that despite rosy government statements on bank liberalisation, the administration is extremely wary of fully opening up its financial markets to giants like Citigroup.
Even with the curbs on ownership and distribution, foreign banks have a big share of the Malaysian market, with more than a fifth of total loans, though this is said to be partly a legacy of colonial times when British banks dominated the landscape.
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