International Finance

‘BNU focusing on SMEs and retail banking’

Interview with Pedro Cardoso, CEO of Banco Nacional Ultramarino, S.A.

How is the Macau banking industry doing in recent years? Last year, BNU posted annual growth of 9.8 percent. What drove this growth?
First of all, let me highlight that Macau is a very competitive market. This territory has approximately 650,000 inhabitants, but has already 28 banks operating here.

Some of the banks are seeking to gain market share, resulting in a decline in the profitability of banking operations. However, in this challenging environment, the banking sector in Macau continued to perform steadily with good solvency, liquidity, profitability and asset quality indicators.

Since 2011 BNU’s total business has grown by an accumulated 107%, but during this period our loan overdue over 90 days ratio has also declined from 1.68% to just 0.97%.

The main focus of BNU´s expansion has been in the areas of SMEs and retail banking. We have been, above all, concentrated on Macau’s residents and companies but also exploring synergies with our parent bank’s very strong network in the Portuguese speaking countries.

For the progress achieved, we have put a lot of effort to better understand the customer´s behaviour and expectations through surveys and mystery shoppers.

Coupled with a better understanding of the customer’s need, we have also worked very hard to provide new and innovative products and services, provide extensive training and knowledge to our team members and motivate them to excel in the pursuit of common and ambitious goals. Without happy and motivated staff, we cannot have happy customers.

Although our main strategic focus is to improve our existing customer’s loyalty, we also gladly have seen an increase of our customer base of about 17% to around 225 thousand customers, over 1/3rd of Macau´s total population.

Our top line progressed quite smoothly with a 93% jump in net interest margin since 2011.

Pedro Cardoso, CEO of Banco Nacional Ultramarino, S.A.

Other areas like the operating efficiency are quite important since banking in general, and in Macau in particular, is a quite low-margin business. As an example, five years ago we had 1.32 staff in support and back-office areas for each staff in commercial areas. Now, we have less than one. This is only possible with technology and with the reengineering of the bank’s workflow processes.

As a result of the above, we have decreased the cost to income ratio from 35% in 2011 to just 29% in 2016. We in BNU are quite proud of this indicator because it is in line with the best international standards.

The increase of 73% in net income since 2011 reflects the mentioned improvement in top line and our prudent provisioning policy. We have currently a provisioning coverage of the over 90 day overdue loans of 146%, a quite comfortable ratio.

The Macau banking sector is becoming increasingly competitive. What sets BNU apart from its competitors in the region?
BNU is the first note-issuing bank in Macau, with 115 years of history on supporting and serving Macau´s community. The knowledge and experiences acquired have been essential to bring success to its customers’ businesses and projects in sectors such as retail, real estate, manufacturing, transportation, construction, public utilities and international trade.

Macau is also a platform designated by the central government to operate as a platform of the commercial relations between China and Portuguese-Speaking Countries (PSCs). BNU as part of the CGD Group, with an extensive global network present in 23 countries, including seven PSCs and a leadership position in five, has a unique role in this area. BNU has been promoting bilateral trade between China and PSCs and supporting Chinese investors and PSCs companies trying to expand in the Chinese market.

Unlike some banks that have the strategy of taking market share with low prices, BNU has structured itself to growth — acquire the necessary conditions to create value in an increasingly competitive environment;  create the structure to better meet the market demands; and, of course, be very observant in order to anticipate our client’s needs.

BNU pride ourselves in our diverse background and Portuguese heritage. BNU offers tri-lingual service to our customers. Our communication materials are in English, Chinese and Portuguese. We have front line staff that are proficient in English, Mandarin, Cantonese and Portuguese to provide service to our clients with a diverse background. BNU is one of the few banks that provides a 24-hour, non out-sourced customer service center to handle customer enquiries and we have also one of the biggest ATM network coverage in Macau and state-of-the-art, internet and mobile banking platforms.

BNU has recently opened a new branch in the Chinese municipality of Zhuhai. Why did BNU choose to enter the market in Mainland China?
The opening of the Hengqin Branch in an island located in Guangdong, Mainland China, side by side with Macau, will further provide a bridge for economic and financial cooperation between China and Portuguese-speaking countries, and provide financial cooperation between Guangdong and Macau, based on the ‘China and Portugal financial services platform’ and ‘Sino-Portuguese RMB clearing center’ policies, opens more opportunities to support Chinese investors and PSCs companies trying to expand in the Chinese market.

In equal measure, our objective is to assist Macau enterprises in expanding their businesses into Mainland China, to promote a closer cooperation between Macau and Guangdong province.

The Hengqin branch is a milestone to BNU. It was an innovative step in strengthening the economic cooperation between Guangdong and Macau, since it was:

  • 1) The first Macau local bank opening a branch in Mainland China;
  • 2) The first bank entering into Mainland China with immediate Renminbi business operation, benefitting from the ‘Agreement between the Mainland and Macau on Achieving Basic Liberalization of Trade in Services in Guangdong’ under the ‘Mainland and Macau Closer Economic Partnership Arrangement (CEPA)’;
  • 3) The first international banking group opening a branch in Hengqin Free Trade Area.

As the first international financial group to enter Hengqin Free Trade Area, we are very confident about the future of Hengqin within the overall development of the Pearl River Delta Region.

What are the new trends in the Macau banking sector?
Macau banking sector will continue to play the role of ‘booster’ in promoting the diversification of the Macau economy.  Macau is a world centre of tourism and leisure, but good progress has been seen in the economic diversification from its traditional core sector. Banks are now expanding their corporate resources to serve other types of industries. Construction and public works are an important customer sector for banks in Macau and growing. But other than large infrastructure projects, a new focus is now given to support the small and medium local companies, considered a pillar in the development of Macau’s economy.

Moreover, many opportunities will result from the ‘Belt Road Initiatives’ national strategy and the implementation of the 5-Year Development Plan outlined by the Macau SAR government. Banks will continue to promote construction of the Financial Services Platform between China and Portuguese-speaking countries.

On the retail side, since 2014, deposits have been growing slightly faster, banks are flooded with money and thus competition is keen in credit products, such as loans, credit cards, etc. And a new focus on technologies, especially on mobile payment, will be the future battle ground. With the experience and exponential growth of mobile payment in nearby Mainland China, we will surely see some interesting developments in Macau in the near future.

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