2021 remains a challenging year for the banking industry in Hong Kong. The economy is picking up in spite of the uncertainties caused by the COVID-19 pandemic. Many new initiatives are being taken in Hong Kong and the Greater Bay Area. Digital transformation has become imperative due to the pandemic. Sid Sibal, Regional Director with Benedict Chan, Managing Consultant of Hudson - a global recruitment firm recently interviewed Mr. Bi Ming Qiang, President and Chief Executive Officer of China CITIC Bank International Limited. Mr. Bi shared insights on how CITIC Bank is responding to these new challenges as well as adapting to the ‘new normal’ business arrangements.

The impact of the global pandemic on the Hong Kong banking market

The Hong Kong economy rebounded sharply in Q1 2021 by nearly 8%. Bi, who previously served as Head of ICBC in New York is a banking veteran and has tremendous experience managing global crisis and business continuity planning. He successfully managed his teams out of the 2008-2009 credit crisis, 2015-2016 Brexit trading losses and now the COVID-19 pandemic.

He pointed out that the Hong Kong recovery will largely depend on the re-opening process of the mainland china border and it is important that Hong Kong continues to merge into the Mainland China growth strategy. However, the uncertainties of new variants particularly in South Asia and slow vaccination rates continue to threaten this.

There is a growing generation of “new rich” in the Greater Bay Area and a steady inflow of capital into Hong Kong. Bi is very positive toward this trend. He believes that there would be huge opportunities for Hong Kong, as Hong Kong’s retail banking business has roughly seven million potential customers, while the GBA population is more than ten times of that. The initiatives such as: “Wealth Management Connect” is a great step forward and banks shall actively prepare for this program (some banks are almost ready). Indirectly this program could create new jobs and liquidity in the capital markets.

With the global geopolitical and pandemic impact, what will the Hong Kong banking landscape look like by 2030? When asked about this, Bi said that the uniqueness of Hong Kong will remain with regards to the geopolitical structure, legal system, talent and long-term reputation. Overall in the long-term the landscape will become stronger but there will be reshuffle – vulnerable banks may leave or be merged. However, there will be new players such as Chinese Banks who will take advantage and become dominant.

Navigating China CITIC Bank during this dynamic and challenging period

Hong Kong has gone through 4-5 waves of COVID-19 outbreaks, and changes in working arrangements are necessary for the safety of the workforce. CITIC Bank is no exception. According to Bi, CITIC Bank has put in place BCP measures such as stress-test with regards to workforce, WFH arrangements, regular sanitisation & disinfection, flexibility in workplace, IT systems upgrades, mobile offices. On-going topic of discussion since the situation is dynamic.

The global, regional and local banks are doubling down on Wealth Management and headcount growth within this vertical. There is a clear lack of supply and a huge demand – will there become a talent war of sorts within this sector? Bi agreed that Wealth Management is an area most banks are focused on. And he said, in the short run – there might be a “talent war” due to the supply-demand pressure, but in the long run – eventually there would be a supply-demand balance. Universities are developing new programs and banks are also training employees who have an interest in this space even if they come from other functions.

Due to the sudden economic shock globally in 2020, banks became extremely conservative in their credit appetite, will this trend continue in 2021 and perhaps the post-COVID era? Bi believes that 2021 might remain similar to 2020, but with some improvement. Banks are looking for quality assets with acceptable risk profiles, due to the vulnerability of certain sectors due the impact of COVID-19, such as the F&B and aviation sectors. Last year the Hong Kong banking industry’s overall profitability took a dip, largely due to reduced margins. The “quality” borrowers have a lot of options due to the institutionalisation of fintech platforms and P2P lending.

Digital transformation

“Digital Transformation” is a hot-topic globally. CITIC Bank is inputting all its retail banking products and services into a mobile app and improving the user experience. Three years ago, the bank started its journey of digital transformation along with the collaboration with Mckinsey Consulting. In three years material progress has been made, especially due to the rapid digitalization due to the pandemic. CITIC is one of the first banks in Hong Kong to allow virtual customer onboarding.

Hong Kong witnessed the launch of eight dedicated virtual banks last year. They have a huge focus on retail and SME customer segments, will the more traditional players in the market, like CITIC, feel threatened? Bi replied that threat is from virtual banking, not necessarily “virtual banks”. All traditional banks are undergoing rapid and significant digital transformation already. Traditional and virtual banks are under similar regulatory frameworks at the moment.

While digital banking adoption is picking up, there is still a long way to go as traditional banking is still the main financing facility for retail, corporate and investment banking – will this trend be rapidly changing or is there still more user-end education required? Bi replied that early this year, CITIC Bank launched two future branches – combining online and offline activities in the branch. The branch has deployed ‘in-motion ambassadors” who are educating the end-users on conducting banking activities online using their mobile or tablets, which is also available in the bank. And this is a fast-growing part of CITIC Bank’s business.

Nothing is more important than safeguarding the bank from cyber security. It is an “endless war” against this threat. According to Bi, CITIC Bank has invested a lot of money and hired the best people to secure itself. It is definitely a top priority for the bank. So far, the bank has not much issue with this.

Bi also shares some valuable advice for young professionals who aspire to join the banking industry. The key takeaway from him on this was - “agility”. Banking is an old and traditional industry, but dramatic changes are underway now due to banks’ profitability been squeezed. The banks have no choice but to be more agile and adapt with times. The future of the banking industry remains strong and they will last forever, but the shape on how banks may look like in the future might change. He added that these days young people and professionals are very intelligent and have excellent technical skills. However, it’s critical for young bankers to have strong integrity and be prudent with their approach to work. These two key traits are mostly valued at CITIC Bank.