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twimbit Purpose Index

Hong Leong Bank (Group financials) – An overview as of 31^st March 2020

Bank name	Hong Leong Bank Berhad (HLB)
Headquarters	Kuala Lumpur, Malaysia
Net income (31st March 2020)	USD 1.195 billion
Net profit (31st March 2020)	USD 624 million
Total Assets	USD 44 billion
Employees	29,363
Country of operation	6
Number of branches	254 in Malaysia
Information and communication technology (ICT) spend (31st March 2020)	USD 43 million
Bank ranking in the particular country	5th in Malaysia
Number of customers	1.7+ million
Market capitalisation (31st March 2020)	USD 7.44 billion
Operating revenue CAGR growth (2016-2020)	2.72%

Shareholder value (31^st March 2020)

Return on Equity (31st March 2020)	9.47%
Total Shareholder Return (1-Year)	20.9%
Net Income Ratio	52.21%
Common Equity Tier 1 Ratio	13.95%
Price Earnings Ratio (31st March 2020)	14.14%

Awards

2020	Excellence in Leadership in Asia 2020 award by EuroMoney ASEAN Finance Company of the Year at the Asian Banking & Finance Retail Banking Awards
2019	Best SME Bank in Malaysia by the Asian Banker Top 100 ASEAN banks 2020 by The Banker

HLB and its strategic focus areas 

• Customer experience

1. HLB makes banking easier for its customers by leveraging digital technology to deliver personalised banking products. It fulfils the individual needs of customers and makes the banking experience digital at the core by:
2. Providing an omnichannel customer experience that is convenient by eliminating pain points in the journey
3. Protecting customers’ personal data to uphold ethical banking practices
4. Rolling out multiple relief plans and funds to help individuals, SMEs, and corporates combat financial difficulties caused by the pandemic.
5. Launching a dedicated customer experience (CX) and usability lab to create a unique space for business, operations, and technical teams to collaborate and work with external parties such as fintech and startups. The aim is to leverage technology for evaluating and improving the digital customer experience.

Initiatives taken by HLB to enhance the customer experience in 2019-2020: 

1. Collaborated with WeEat, a WeChat mini programme designed for F&B outlets, where customers can order and enjoy meals seamlessly while avoiding queues.
2. Introduced the Brand Promise Built Around You to deliver personalised customer experiences. HLB worked towards establishing a deep understanding of its customer to anticipate their needs proactively.
3. Expanded its customer-centricity approach by launching a diverse range of digital banking services through its mobile banking platform, HLB Connect App and Connect Online Banking.
4. Introduced in-branch tablets to let their customers enjoy a ‘zero’ queue experience. This step has also empowered branch employees to perform more efficiently and deliver better value-added features through digital tools.
5. Deployed self-service banking kiosks with speech functions to serve the visually impaired.

• Employee experience

1. HLB aims to empower employees with digitalised tools and systems that can help them serve the customer better. The bank encourages a growth mindset in employees by providing ‘anytime, anywhere’ learning. HLB also empowers its people to continuously develop skills that equip them for the fast-evolving employment landscape.
2. The bank is creating an optimum and positive work environment that supports employee wellbeing to ensure a healthy and engaged workforce.

Initiatives taken to enhance capabilities and promote a healthy work environment in 2019-2020: 

1. Introduced Hackathons to discover talents and to inculcate an innovative mindset.
2. Used HALI, an artificial intelligence (AI) chatbot and virtual assistant, to support employees in human resource management and branch operations. The chatbot improves employees’ efficiency by learning from past queries and providing the requisite information on HR policies when requested. It further reduces repetitive and manual tasks of email and telephone inquiries carried out by the bank’s staff.
3. Piloted the use of AI and machine learning (ML) technologies to automate applicant screening, thereby increasing the efficiency of the hiring process.
4. Prepared employees for the future by incorporating design thinking into training modules.
5. Introduced Workplace by Facebook to ensure effective communication between employees.
6. Adopted a cloud-based Workday platform to streamline talent management, HR operational activities, as well as learning and development.

• Society and planet impact

1. HLB intends to improve the understanding of financial services (including Islamic finance) through knowledge-sharing and financial literacy programmes to drive inclusiveness.
2. It is integrating climate and environmental considerations within the bank’s business activities and internal operations via an inclusive approach involving key stakeholders.
3. HLB helps social enterprises nurture and grow through the initiative HLB Jumpstart.

Initiatives taken by HLB in lieu of the sustainable banking ecosystem: 

1. Through HLB Jumpstart, the bank has:
   1. Introduced the ‘Demi Kita’ campaign, which upcycles denim and provides financial opportunities and living skills classes to single and underprivileged mothers
   2. Partnered with Green Hero to support food wastage solutions across Malaysia
2. Introduced HLB LaunchPad and iStart@HLB to enable SMEs to access financial services easily through their smartphones.
3. Collaborated with SME Corporation Malaysia to offer a Shariah-Compliant SME Financing Scheme that provides financing assistance to eligible Malaysian-owned SMEs.
4. Launched the Responsible Consumption Activation Plan for environmental sustainability.

Digital Strategy

The bank’s digital strategy revolves around customer experience-centred digital-based services, products and solutions.

Initiatives taken by HLB in lieu of its digital strategy:

1. Pushed the digital banking envelope by launching the first digital branch in Penang at Burmah House.
2. Used Amazon Connect, a self-service cloud-based contact centre at HLB Singapore, to transform the way it handles customer support.
3. Launched First-in-Market eToken with biometric recognition for retail and business customers, making banking more secure and convenient.
4. Implemented ‘Cashless Lagi Senang’, which onboarded traders at over 20 public markets in Penang to accept cashless transactions. This move was in support of the state’s Cashless Pasar Awam initiative.
5. Evolved the PtoP@HLB platform, allowing staff to work remotely, anytime and anywhere with ease and convenience. Among other things, staff could raise claims, process invoice payments and submit purchase requisitions.
6. Initiated Hong Leong Connect First, a comprehensive online banking platform for corporate, commercial, and SME banking.
7. Collaborated with Emirates Skywards to benefit a growing Malaysian travel segment and add more value and rewards for Emirates Skywards members.

IT Strategy

1. HLB is working on bridging the technology gap between customers and the workforce by equipping staff with customer-serving technology, such as tablets at branches
2. It uses data analytics by integrating customer data insights into digital platforms
3. The bank is preparing to adopt an anti-money laundering (AML) system that leverages AI and ML for improved AML detection, monitoring and reporting.

Initiatives taken to support its IT objectives:

1. Enabled Financial Process Exchange (FPX) payments, allowing customers to conduct transactions 24/7 via Hong Leong Connect BIZ
2. Processed applications online for auto and personal loans, credit cards, and CASA (Current Account & Savings Account) openings
3. Piloted an in-branch mobile servicing solution, featuring iPad-equipped service ambassadors to greet and service customers
4. Launched HLB LaunchPad to nurture Malaysian technology and FinTech startups
5. Piloted Multilingual Robot Concierge services at its Damansara City Priority Banking Branch
6. Launched the Customer Experience and Usability Lab to provide a collaborative space for operations and technology teams to work together with external parties, such as fintech, startups and technology partners

HLB and its ICT contracts

1. Partnered with Soft Space for helping businesses reduce the cost of migrating to cashless
2. Partnered with Infobip to optimise its credit card PIN delivery

10 Growth and Innovation Opportunities

• #1 Cost to serve

1. The operating expenses for HLB were marginally higher by 0.6% from FY2019 to FY2020. It saw an improved cost to income ratio (CIR) of 44% in 2019 compared to 44.3% in 2020. Despite increased operating expenses, the bank was able to reduce its CIR due to prudent cost management across the year.
2. The bank’s personnel costs account for 56% of its total operating expenses. There was also a 1.6% increase in personnel costs due to higher salaries aimed at driving productivity. For the bank to rationalise personnel expenses going forward, it can adopt technology in the following ways:
   1. Reduce the use of its call centre for customer query management and sales, and instead invest in AI-driven virtual assistants and chatbots for iterative functions  
   2. Replace man-hours with cognitive process automation of routine and daily back-end tasks   
   3. Digitalise more functions and processes that are currently human-intensive, such as branch relationship management, cashier, and customer grievances   

• #2 Transformation of the branch and its branch networks

The bank is going through a transformation in its branch network. It is expanding and enhancing its in-branch tablet facilities through FY2020 for quick and effective customer service. In the future, the bank aims to reskill its branch tellers into product specialists who come equipped to provide deep expertise to customers. The aim is to become a more customer-centric bank that provides personalised customer experiences and solutions. While the bank is setting steps in the right direction, it must go beyond the ease of digitalisation and employee reorganisation to future proof its branches by:

1. Promoting online engagement with the bank’s staff through in-app video conferencing and virtual assistants rather than visiting a branch physically. 
2. Revamping the bank’s branch into a community hub where individuals can connect with executives and socialise. They will have access to all banking services and facilities. Some of the options are cafes, lounges, and pop-up stores. 
3. Conducting workshops in and around topics like investments, savings, wealth management, retirement planning, etc.

• #3 Customer experience

1. Advancing virtual chatbot capabilities- The bank can extend and utilise the capabilities of its AI-backed virtual assistant, HALI, beyond employee productivity. HLB can train the chatbot to support repetitive and regular customer queries without manual intervention and at a faster pace than visiting a branch executive or through phone banking. The bank can learn from its customers’ prior conversations and understand the behavioural patterns to utilise the chatbot’s full potential optimally. HLB can further support customers by:
   1. Giving specific recommendations according to the customer’s current portfolio
   2. Employing predictive analytics and algorithms to show customers relevant products based on their preferences
   3. Using sentiment analysis by integrating text, voice and video data to enhance its chatbot’s conversational capability and improve customer experience
2. In-app customisation– The bank’s mobile banking app is easy to navigate and available in three languages. However, to make the app aesthetically more appealing to millennials, HLB could allow for in-app customisation, such as theme settings, quick action menu and shortcuts for easier navigation.

• #4 Business segment expansion

1. The bank’s non-interest income saw a significant rise of 2.9% from FY2019 to FY2020 due to a strong performance in the treasury and wealth management business segments. The income generated individually by wealth management increased by 10.6% from 2019-2020.
2. HLB offers wealth management services through its priority banking centres in Malaysia and bank branches in Singapore and Hong Kong. Owing to the success of its wealth management business, HLB should consider converting its existing branches in Singapore and Hong Kong into priority banking centres to expand its revenue streams.
3. Since the bank already has retail bank branches in Cambodia and Vietnam, it can push and increase its client base for wealth management services in these countries.
4. HLB should launch a mobile-based wealth management application for customers to make transactions, monitor investment portfolio, and explore products such as mutual funds and bonds. The app can also support customers with contextualised recommendations in managing their portfolios.

• #5 Employee experience and productivity

1. The bank presents itself as an industry leader in adopting digital solutions to streamline the HR management and employee hiring process. It has also taken initiatives to future-proof its workforce by incorporating technical and design thinking modules in its training programs.
2. HLB should now direct its focus towards career progression initiatives for its employees by:
   1. Conducting leadership development training programs to prepare its workforce to be the future leaders and managers at the bank
   2. Supporting young graduates to pursue professional banking qualifications
   3. Providing scholarships and support for Master’s degrees
3. The onset of COVID-19 has given rise to increased mental health concerns. The bank can consider creating a wellbeing hub that offers tools, programs, or services to support its employees’ mental, physical, and emotional health. 

• #6 Migration of workload to the cloud

1. HLB was the first bank in Asia to deploy a self-service cloud-based contact centre solution, Amazon Connect, in its Singapore branch. It also uses a cloud-based platform to streamline various talent management and HR-related tasks.
2. Cloud adoption enhances various other operations that go beyond customer and employee experience to drive efficiency. The bank can extend data storage and data-driven activities across security, regulatory compliance, auditing and pan-organisation communication pipelines to transform its overall operational model.
3. It can also leverage cloud technology to provide complete end-to-end protection of all confidential data stored in the cloud.  This move enables the bank to maintain its customers’ trust and confidence in obtaining, analysing, and sharing personal information.   

• #7 Artificial Intelligence(AI) in everything

The bank uses AI in various aspects of its business, such as the anti-money laundering system, automating applicant screening for hiring, and its chatbot service. To further broaden the application of AI, HLB can focus on the following areas: 

1. Deploy cognitive process automation (CPA) to create more digitalised transaction banking solutions that go beyond online payment services. CPA can mechanise a set of tasks that in turn improvises on its previous iterations. These include monthly bill payments, changing subscription plans based on best offers, and alerts for stock updates, among others.  
2. Working towards a comprehensive and forward-looking credit profiling mechanism for business banking customers. It can incorporate analytics to access loan credibility beyond the financial statement analysis to include other key parameters. These include economics KPIs, market and industry trends, bank and system facilities overview, and more.  

• #8 Neo banking

In order to facilitate ease of banking for SME customers, HLB has introduced an online business banking platform. It also obtained recognition as the Best SME Bank in Malaysia at the Best Bank Awards 2019 by Asiamoney. Since the bank has already developed a niche in this segment, it should aim to penetrate the sector further and promote banking inclusiveness among the 38% unbanked Malaysian SMEs. HLB can do so through an SME-focused neobank that purely revolves around radically changing the way SMEs can access financial services. It can:

1. Identify and create a line of credit for SMEs who are potential first-time borrowers and don’t have access to credit facilities via traditional banks.
2. Facilitate initiatives such as ‘Agent Banking’ to reach the remotest of villages in Malaysia  
3. Develop business advisory and management tools that allow SMEs to make smart investment and banking decisions over digital platforms. 
4. Collaborate with e-commerce websites to extend credit to small vendors who wish to enter the Malaysian market. 
5. Reduce merchant interchange reimbursement fees and roll out tactical card acquisition and usage campaigns, including offering low merchant discount rates. 
6. Provide personal and business overdraft facilities in addition to offering basic loan services to the SME sector. 
7. Collaborate with fintech to provide personalised data-driven insights to SME customers and also help them set up digital presence to increase revenue streams.

• #9 Cybersecurity

1. HLB has curated early warning systems via its crisis management strategy to detect cybersecurity risks. It has also deployed intelligent solutions that provide real-time information. The bank is now preparing to adopt an anti-money laundering (AML) system which leverages AI and ML.
2. The bank also conducts Red Team exercises, where HLB considers tools, techniques and procedures used by threat actors to test its cyber defences and ensure cyber readiness. HLB can further incorporate predictive risk intelligence using analytics and AI. This move will provide advance notice of emerging risks, increased awareness of external threats, and improve the bank’s overall understanding of its risk exposure and potential losses.
3. The bank can undergo partnerships with third-party cybersecurity enterprises to protect its data from malicious bot attacks.

• #10 Society and planet impact

1. Grant low-interest lending for green projects and electric vehicles, among others, to spearhead the CSR initiative in the country.
2. Conduct summits and conferences to raise awareness about the importance of preserving the environment, diversity in the workplace, and responsible and fair lending and financing.
3. Launch supporting projects in impoverished areas, which help to preserve biodiversity and drive reforestation while furthering local economic mobility. 

Organisation structure: Leadership

Executive Profile

Domenic Fuda
Group Managing Director/Chief Executive Officer

Mr Domenic Fuda became the Group Managing Director/Chief Executive Director of Hong Leong Bank Berhad on 5^th February 2016. Fuda is a member of the bank’s Executive Committee and Credit Supervisory Committee.

Quotes

• Effects of customer-centric efforts (Annual Report, 2019-20)

The digital push has seen customers benefitting from more convenient ways to deal with us, allowing customers to bank how and when they want to, thereby building customer loyalty and goodwill.

• Employees as champions (Annual Report, 2019-20)

Over the past 12 months, we have undertaken a concerted effort to streamline processes, expand recruitment channels and invest in our talent to equip them with professional competencies fit for the jobs’ demand in today’s environment.

Malkit Singh Maan
Chief Financial Officer

Mr Malkit has over 29 years of banking, corporate and finance experience. Before joining HLB, he was with BIMB Holdings Berhad as the Group CFO. Mr Malkit is a director of HLF Credit (Perak) Bhd and Promilia Berhad, both wholly-owned subsidiaries of HLB.

Charles Sik Wan King
Managing Director, Personal Financial Services

Charles Sik joined HLB on 4 February 2015 as the COO for Personal Financial Services. He heads and manages the group’s Retail Banking portfolio and assumed his current position on 1 September 2016. Prior to HLB, Mr Charles Sik led the retail banking franchises for RHB Group and earlier OCBC Bank (M) Bhd.

Yow Kuan Tuck
Managing Director, Business and Corporate Banking

Mr Yow has over 20 years of experience in the financial services sector, having built a successful track record in growing corporate and financial institutions businesses, managing portfolios such as financial institutions, public sector and other industry groups.

Hor Kwok Wa
Managing Director, Global Markets

Hor Kwok Wa joined HLB in January 2011 as the COO for Global Markets. Hor obtained his current position on 1 September 2016. Before joining HLB, Mr Hor was Head of Global Markets for The Royal Bank of Scotland Malaysia.

Appendix A

twimbit Purpose Index

We evaluate Asia Pacific’s top banks to understand whether their strategic objectives, market positioning, and operational efficiency align with continued sustainability and profitability. In evaluating the respective bank’s focus areas and performance, we base our analysis on five purpose pillars and score each bank on them.

Endnotes

Hong Leong Bank Berhad, (2020, March 31). Annual Report.
hlb-annual-report-2020.pdf

Hong Leong Bank Berhad, (2020, March 31). Consolidated financial statements.
hlb-condensed-financial-statements-q1fy2021.pdf