CITI, a leading provider of trade financing solutions, finds Malaysia's changing trade profile in recent times nothing short of interesting.
For instance, with exports being much in the doldrums from the want of external demand, the scenario has affected small trade-dependent countries like Malaysia.
But the domestic market's conditions have shifted requirements for import finance and supply-chain financing, especially for the small and medium enterprises (SMEs), says Noel Saminathan, Citi Malaysia managing director and head of transaction services.
Its trade finance portfolio boasts a 33 per cent increase in volumes from the commercial bank client segment. Over the past two to three years, the shift in domestic consumption and investment has pushed up the strong demand for trade finance.
"Our business shifted in that nature and this enabled Citi to be well positioned to facilitate trade finance requirements through our global footprint."
With these changes in the landscape, the bank has been leaning towards home-grown establishments from the traditional multinational corporations (MNCs) as in the past.
Citi's target market has been focused on MNCs and large companies based in Malaysia that chalk up turnovers of half a billion ringgit and above.
Admittedly, there may not be as many companies in that space as the bank would like to see but, nevertheless, those are brand names that fall within the space of those that play an important role in the economy.
Through its treasury solutions, Citi helps them to manage the finances efficiently, especially on the short-term side of the scale via working capital, cash management and trade financing.
"The outlook has been very positive because of the developments in the economy, which also means that these corporate leaders or large companies are also growing at healthy rates. With growth, there is clearly the need to manage and operate their organisations more efficiently - that's where treasury solutions can step in and help," he said in an interview recently.
These companies include a fast-growing number of local ones, which Saminathan described as "emerging market champions" and as the next generation of General Electric and Microsoft of the world.
The pace has been on an accelerating mode over the past two to three years.
"We see these companies expanding actively outside Malaysia, in markets where there are more complexities.
"They have to reckon with not only the regulations but also to be able to establish control over their operations, source for funding and manage liquidity in varied currencies."
The Malaysian corporations are diversified in a broad range of activities, ranging from plantation, telecommunications, transportation to oil and gas.
Likewise, there has been a rapid growth of corporations from the emerging markets like China, which are making inroads into Malaysia, an investment destination also targeted by the South Koreans, Japanese and Taiwanese investors in the past.
If the SMEs are big business for the bank's portfolio in most parts of Asia where it has a wider network of branches, the limitation has not hindered its efforts to grow in Malaysia.
"They may not be direct clients of the bank, but we help these vendors and suppliers through our corporate clients, which fund their businesses within the supply chains."
Moving into multi-channel solutions, such as mobiles and tablet PCs, has also enabled the bank to upgrade and expand its core Internet platform with CitiDirect Mobile.
This development has enabled key personnel in corporations retrieve real-time data. For example, a procurement manager can use his or her mobile device to find out if the letter of credit is in.
But for Citi, with accolades such as being the best in the country in terms of cash management and the leader in the large corporate segment, it is not surprising that it is constantly on the lookout for more channels for its clients as they veer from desktop banking.
The strong broadband penetration rate in Malaysia has enabled it to overcome the physical limitations of branches with strong adoption rates of more than 1,600 users and RM1 billion in transaction value within three months.
With its automated global cash management solutions, clients are able to control their offshore operations from Malaysia, supporting the development of the treasury management industry locally.
The current regulatory system in Malaysia pleases Citi although globally, the upcoming Basel III standards will see changes in the landscape as there are indications that trade financing that enjoyed preferential treatment under Basel I and Basel II may affect some players.
Given the limited capital resources, increasing demands on capital and the continued investment required to maintain competitiveness, only scale players are likely to be significantly profitable.
If the bank's headquarters has been through some trying times in the 2007/2008 period, its steadfast relationship with its clients has strengthened with its demand-driven innovation.
Technology innovations in transaction services like treasury and trade help improve operational efficiency, streamline processes, and minimise risks and lower costs.
Through its innovation labs across Europe, the United States and Asia that focus specifically on developing new solutions, it focuses on emerging technologies, such as mobile, and how they can enhance the experiences of institutional clients as well as consumers globally.
Its current initiatives include mobile payments, digital identity management, liquidity management and concentration solutions and working capital analytics.
Its operations in Malaysia have shown investments being stepped up in technology and its centre of excellence in Penang has also gained stature globally in the area of trade finance with the wider support given to Asia Pacific, the US and Europe.
Headcount has also doubled and will continue to grow over the next few years, added Saminathan, who has been with the bank for 16 years.
Its talent pool is envied by the industry, thanks to its programme of recruiting the best students.
On the growth outlook, Saminathan warned that increasing demands on capital and continued investment required to maintain competitiveness will only see scale players profitable.
The competitive landscape is also changing for transaction banking and it is contracting through the consolidation of providers, and at the same time, expanding through non-bank entrants.
Technology companies, web-driven networks and other businesses are seeking to gain ground.
"We believe providers that focus on industry-specific, client-specific solutions will succeed."
But, with challenges, there are opportunities for banks like Citi, with its proprietary network and operations in the growth regions.