KUALA LUMPUR: With much of the South-East Asian market cornered, the way forward for investment banks (IBs) in Malaysia and the region is to grow in Asia, where they will be up against the formidable Western IBs, said banking stalwart Tengku Datuk Zafrul Tengku Abdul Aziz.

"The challenge for our IBs used to be expanding their franchise overseas. The big players have achieved this despite stiff competition from foreign IBs.

"The challenge now is to grow outside of South-East Asia, not in Europe or America, but within Asia. It's a tight race between regional and Western IBs for deals," he told StarBiz in an exclusive interview on the sidelines of the recent Young Corporate Malaysians summit.

"How it works currently is that local or regional IBs receive jobs because they have the balance sheet and can provide funding. The foreign IBs, however, don't rely on their balance sheet to win deals, but on the depth of their expertise," he said.

While Malaysian IBs have some way to go, "we're learning, we're getting the skills and understanding valuations and negotiations," Zafrul said.

"Once we reach that stage, our challenge will be to grow outside of South-East Asia without the backing of a balance sheet, but on the strength of our expertise," he said.

Zafrul, who left the top post at Maybank IB in September, is rumoured to be joining the CIMB Group as deputy chief executive officer and CIMB IB chief in January, taking over from Datuk Charon Wardini Mokhzani who has decamped to Khazanah Nasional.

Zafrul is also speculated to have been picked as one of five internal candidates to be groomed as CIMB head honcho Datuk Seri Nazir Razak's successor.

But Zafrul declined comment when asked.

"Officially, I don't have any position anywhere. I'm on gardening leave," he said, adding that he had been travelling and taking it easy. "My golf has improved," he joked. "We just came back from Legoland and my children loved it."

Malayan Banking Bhd (Maybank) recently saw the departure of two key executives - Zafrul and Datuk Khairussalleh Ramli, who had helmed Maybank's Indonesian operations - leaving a leadership vacuum at the country's largest lender. Both were part of Maybank's 13-member exco.

Khairussalleh resigned some weeks before Zafrul and is expected to join RHB Capital Bhd as deputy CEO and head of the commercial bank, replacing RHB Bank Bhd managing director Johari Abdul Muid, whose contract was not renewed.

Maybank has since appointed Taswin Zakaria as president director of PT Bank Internasional Indonesia, while John Chong is filing in for Zafrul in the interim.

On Asean, Zafrul said that while he was a proponent of the region's potential, the Asean Economic Community, which aims to integrate its 10-member countries into a single market, may not take off in its entirety by the 2015 deadline.

"Politics will be an issue. There are national agendas that cannot be compromised by certain groups. But I strongly believe it needs to get going," he said.

The often under-appreciated TIPM economies - Thailand, Indonesia, the Philippines and Malaysia - continue to hold promise, quipped Zafrul, who is president of the KL Business Club, a grouping of Malaysia's industry captains.

"These countries are slightly ahead. That's where our challenge is - not just Asean. The gross domestic product of Malaysia is only 10% of South-East Asia's. Companies need to look at other markets to grow.

"Myanmar, Cambodia and Vietnam are also starting from a low base, and as corporates we have to start building foundations there," he said.

In light of that, the smaller brokerages will have a tough time navigating an increasingly globalised market without a sizeable balance sheet and access to the region, Zafrul said.

"Even retailers now want to invest outside of Malaysia," he said.

By JOHN LOH

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