BSN not cutting branches despite challenging outlook

KUALA LUMPUR: Bank Simpanan Nasional (BSN) will maintain its 403 branches, despite the challenging outlook for the banking industry this year, said BSN deputy chief executive of corporate support Frederick Siew.
“At this point in time, I believe the banking industry is on a more conservative approach. We will not be too aggressive in launching new products and things like that. Our prediction for 2017 is that our growth will not be as good as in the last few years. It is sustainable, but it won’t be as robust as in the last few years,” he told SunBiz in an interview.
BSN’s loan growth was at 10.2% for the financial year ended Dec 31, 2015.
Siew said the consolidation in the banking industry will continue this year, as banks continue to reduce cost.
“The number of branches may shrink further for banks. Banks may close and consolidate branches this year because, with technology, you do not require as many brick and mortar branches.
“It is the cost of running the branches that affects the industry, so the consolidation exercise will probably be more aggressive this year,” he said.
BSN does not expect to reduce the number of branches. Instead, it will focus more on mobile banking, internet banking, and especially agent banking.
“Agent banks can do basic banking transactions and can have many touchpoints. We have more than 7,000 agents now. This will cut down our cost in terms of delivery of banking services to the people at large and we can cover most of the sub-districts,” said Siew.
At the moment, BSN covers almost 99% of all the sub-districts nationwide, except those with no connectivity or WiFi facilities as the point-of-sale machines used require internet connection to perform transactions.
“For us, it’s more on financial inclusion, providing banking services to all the outlier areas in Malaysia,” he said.
Commenting on the outlook for the industry this year, Siew said it will be challenging due to high household debt, oil prices as well as uncertainties surrounding US President-elect Donald Trump’s policies and Brexit.
“What we are worried about is spending power. A lot of retailers are closing shop because consumption power has come down. In 2015, if I’m not mistaken, it dropped by 12%.
“Malaysia is driven by local purchasers. We are driven by retail sales in Malaysia and that is actually the first sign of difficult times ahead of us.
“People are not confident of the economy, therefore they are buying less and there will be more and more retailers moving away maybe from the expensive areas, the expensive shopping complexes to cheaper ones and the cheaper ones may not even be able to survive,” he said.
Siew said the dip in consumption will result in a slight downturn in the economy, which in turn will affect loan growth.
“For us, it comes up to whether I can lend to you. Do you have the ability to borrow? Why do you want to borrow? For commercial banks, they have to think why companies are borrowing if they are not expanding.”
In addition, Low said, the ringgit has weakened so much that Malaysia is importing inflation.
“We are facing that challenge now and I think that we will not know, until probably the middle of 2017, what the future is going to hold for us,” he added.