China Merchants Bank: Leading from the front
Rivals did not pay much attention to CMB up until 2017, but since then its stock has almost doubled, and now all eyes are on this Chinese financial institution.
Tian Huiyu, president and chief executive of China Merchants Bank
China Merchants Bank has become a pioneer in its domestic banking system, winning plaudits for skills ranging from digital solutions to capital market execution.
The Shenzhen-based lender, founded in 1987, has quickly become the envy of other joint stock banks in the country. Its revenues and profits are growing fast, its approach to digital banking has won lavish praise from rivals and its investment banking savvy has allowed it to steal business from much more experienced firms.
One senior executive at another mainland bank puts it simply: “China Merchants Bank is the best.”
This praise will come as little surprise to those who have been paying attention to CMB over the last few years. But what surprises Asiamoney is the reaction of Tian Huiyu, the bank’s president and chief executive, to these comments.
Most bank CEOs take kind words as an indication they are doing something right; Tian says they point to the short-termism of other bankers in the market.
Between the start of 2017 and the end of August 2019, CMB’s stock almost doubled.
“Our rivals didn’t talk about us much before 2017, when our stock started to rise,” Tian says. “Now, they’re all paying attention, but the truth is we’re not fundamentally different today from the bank we were back then.”
This no-nonsense attitude is surely a big part of what has made CMB the success it is today.
Tian, who took over in September 2013, has made CMB stand out from its rivals in large part because he has attempted to address the bank’s weaknesses, rather than dwell on its strengths.
One obvious area is the digital transformation. Tian does not talk like a banker enraptured by digital for digital’s sake. Instead, he paints the bank’s push towards digital banking – it invested Rmb6.5 billion ($905 million) in technology in 2018 alone – as a necessary strategy in a market dominated by big, state-owned banks.
“Unlike the state-owned banks, we cannot afford to open branches in every city, so we need to be a lot more selective,” he says.
It is not just in digital banking where CMB has excelled. The firm has become a big player in China’s capital markets too
CMB is entirely owned by corporations, although some of them ultimately have government backing.
“That is why digital banking is so attractive to us,” Tian says. “It means we can reach the same clients as the state-owned banks without having to maintain a similar branch network. We cannot depend on external resources.”
Like many of his rivals at China’s big banks, Tian acknowledges the threat posed by Ant Financial, WeChat and other technology companies attempting to steal market share from banks. But he has a more combative attitude than most, sounding determined not to give up any ground to these fintech upstarts.
“The big advantage the big technology companies have over banks is data,” he says. “They have so much information about their customers’ behaviour. But banks have a lot of data, too. If we don’t compete with the technology giants, what value will there be for our future existence? Banks need to build their own capacity when it comes to data.”
It is not just in digital banking where CMB has excelled. The firm has become a big player in China’s capital markets too: its underwriting volumes are growing at a rapid pace and it is becoming an established member of the top 10 in the debt and equity markets.
Its offshore unit, China Merchants Bank International, launched a debt capital markets business in 2015. Determined not to be a bit-player, it has focused on winning global coordinator roles on a swathe of dollar deals from Chinese companies, working on transactions including a pair of jumbo alternative tier-1 bonds for Guangzhou Rural Commercial Bank and Zhongyuan Bank this year.
CMB is even more impressive in the domestic market. It has gained a reputation for innovation, working on deals including the first corporate perpetual bond for Guangzhou Yuexiu Holding and a series of asset-backed green deals.
This pedigree was enough for Asiamoney to recognize CMB as the best corporate and investment bank in the country this year.
But digital banking remains the area where CMB has most convincingly stolen a march on the competition, as well as where it sees the biggest sources of revenue growth in the future.
Tian talks philosophically about the future of banking, but it is clear he knows what is at stake.
“Banks have been around for centuries,” says Tian. “We’ve seen banks endure wars, plagues, revolutions, economic crises and political changes. But these factors have not truly changed the nature of banking. Technology has the potential to change everything. It will totally disrupt the business model.”