Banks must be more realistic in their ROI, says Mohd Irwan


LOCAL lenders must be realistic in forecasting their return on investment (ROI) based on the present challenging economic and market conditions, says Treasury Secretary General Tan Sri Dr Mohd Irwan Serigar Abdullah.

Mohd Irwan said local banks must manage expectations and refrain from being too selective in their investments in order to achieve an ROI as high as 20% to 30%.

“If a local bank manages to secure between 10% and 15% of ROI, it is actually more than good enough.

“Gone are the days for a high double-digit growth in ROI,” he said in his keynote address at the RHB Regional Conference 2017 in Kuala Lumpur yesterday.

Mohd Irwan said that the local lenders need to depart from continued emphasis on problems and risks in any investment.

“One of the risks that industry players need to really talk about is how to become more competitive, coupled with faster adoption of financial technology in order to become relevant in today’s modern era.

“Other more developed countries within Asean and country like China, are always looking at are the positive aspect and the rapid adoption of the digitalisation which might just dominate the domestic scene, should local players’ performance remain stagnant,” he said.

Mohd Irwan gave the example of the landscape change in China where it is already moving towards cryptocurrency, block change and digital payment scheme, which allows cashless transaction everywhere.

“All they need are their digital devices — such as smartphones or I-wallet — to pay for entertainment, lifestyle and day-to-day activities.

“But things are not changing very fast in Malaysia as most bankers are still reluctant to change with the times. They are still being extra careful in adopting technology in their daily operations,” he added.

Mohd Irwan said the Malaysian government wants to work with Beijing to find more ways to create mutually beneficial partnerships between the two countries.

He also said Malaysia must do more to capitalise on Chinese tourists. He said eight million Chinese tourists visit Thailand compared to only two million to Malaysia.

“We need to open up in terms of visa, airports, facilities and reduce the charges as these are factors that can aid in creating a more competitive environment to attract at least six mil

lion tourists from China annually. “The influx of tourist spending from China will spur the overall economic growth as it is widely spread in various segments, such as food and beverage, entertainment, lifestyle and etc,” he added.

Meanwhile, Mohd Irwan said Bank Negara Malaysia’s (BNM) international reserves are expected to reach RM100 billion by year-end from the RM98 billion presently.

“In terms of the reserves placed by the banking system with BNM, they currently stand at RM169 billion, which is a huge amount,” he added.

Mohd Irwan said inflation is tapering at 3.9% as at May this year, compared to the 4.4% the month before.

“All these microeconomic factors have contributed to a stronger gross domestic product (GDP) growth in the first-quarter of 2017, of about 5.6%. I am optimistic that our GDP growth will stabilise at 5% for the rest of the year.

“Even the ringgit has been declared as the best performing currency on the back of strong inflows of foreign funds entering the country,” he added.