Asian Banker Research Consulting The Asian Bankers Survey

Asian Banker Research & Consulting The Asian Banker’s Survey on Benchmarking & Assessing Asia’s Transaction Banking Industry 8 April 2011 The Asian Banker Summit 2011 Hong Kong Copyright The Asian Banker 2011. All rights reserved /39

Today’ Agenda Assessing Cash Management Services for International and Domestic Banks Assessing Trade Finance Services for International and Domestic Banks The Future of Transaction Banking Cash Payment Service Scope Distribution Product and Technology Enhancements Survey by International Banks on their Preferred Domestic Peers Copyright The Asian Banker 2011. All rights reserved /39

We assess transaction banks on a balanced scorecard approach across 6 key dimensions in cash management Assessing Cash Management Services for International and Domestic Banks Source: Asian Banker Research Copyright The Asian Banker 2011. All rights reserved /39

We assess transaction banks on a balanced scorecard approach across 6 key dimensions in trade finance Assessing Trade Finance Services for International and Domestic Banks Source: Asian Banker Research Copyright The Asian Banker 2011. All rights reserved /39

Future business model looks at globally integrated suit of products for transaction banking backed by IT investments for service innovation 2011/12 2009/2010 Fragmented transaction services Integrated comprehensive suit of Transaction products Characteristics § Strong price competition, Single digit growth in transaction revenue that too backed by cost cutting § Single global platform to meet all transaction needs § Product innovation being considered as key competition driver § Transaction processing completely centralised. Real time transaction processing § Domestic banks still working on fragmented services on cash, trade and payments Service Integration Infrastructure Integration § Separate Touch points for client interaction in Cash and Trade § Service quality a key competing factor. Whitelabelled technology and Internet enhancements provide competing propositions § IT investment focused towards processing improvisation § Selected banks looking at processing centralisation Source: Asian Banker Research § Banks increasing risk mitigation measures, adding visibility and controls § Intra-Asia Trade forming a large component of trade transaction business § Customised and consultative approach, collaborate closely with Corporate, FI client & provide integrated product service § Supply chain financing to become a Copyright The Asian Banker 2011. All rights reserved significant revenue generator for banks

Cash consolidation solutions, liquidity management to corporate and payments are at the forefront in domestic banks’ service profile currently % of banks offering this service Cash Management Services Scope of Domestic Banks to Corporates and SMEs (2009/2010) Source: Asian Banker Research Copyright The Asian Banker 2011. All rights reserved /39

Cash management services scope of domestic banks to SMEs and corporates Distinguishing Features of Competitive Advantage Cash Pooling: • Inter subsidiary funding and Interest reallocation which includes a fixed slab tier structure. • Notional cash pooling facility offering a tailored account structure for the Institutional Bank and Top Tier Corporate client • Tailored interest disbursements back to individual accounts at rates set by the client. • Intraday Virtual Transfer among Group Company Account • Unlimited number of layers of companies Accounts Reconciliations • Virtual account structure to assist customers with a/c reconciliation. • SA/P & A/R Reconciliation -Integrated to Customer’s ERP. • Customized designed reporting for customer account reconciliation Account Reporting • Full range of liquidity management reports: interest scale report, interest reallocation report & sweeping reports. • Zero balance, Target balance, and Range balance. Outsourced Cash Management • Strategic tie up with Cash-in-transit providers. • Dividend Payments Service • Cheque Issuance service with variety of advice's template. • Tailored solution based on customer’s specific requirements. Payments • Complete suite of payments ranging from local and cross border. Both electronic and paper based payments. • Online business banking platform allows consolidation of cash positions into a single portal, reporting of balances & transactions, movement of funds at any bank, around the world • Guarantee Credit within 6 a. m. Of value date -Payroll on Holiday - Real-time and post-dated payment via card solution, Invoice Management: • Electronic Invoice Presentment & • Payment solution with ASPs. • Bill Placement and Invoice capturing for debt setting. Lockbox: • Positive cheque matching & exception reporting. • Intelligent matching of multiple document and automated reconciliation of payments against the customer’s Accounts Receivables. • Invoice data capturing service is provided by all branches nationwide Salary account: • Guarantee Credit within 6 am of value date. • The web-based payroll application service for the companies to do payroll calculations e. g. tax, social securities and generate payroll payment instruction file. • Electronics self-service web application for employees to view their payroll transaction details with SMS alert. • Salary Benefits Solution where special Retail products (e g Home Loan, Personal Loan, Credit Card, Investment, Mobile Banking) are provided. • Life insurance policy for employees. Liquidity Management: • Inter subsidiary funding and Interest reallocation which includes a fixed slab tier structure. Source: Asian Banker Research Copyright The Asian Banker 2011. All rights reserved /39

Relationship management between banks and of banks with their customers are the crucial components grow mandates and create loyalty Level of advancement in distribution Commonly used distribution channels by leading Domestic Transaction Banks Pan Asian Branches Best Practices Non traditional partners- Post office, mobile service provider, convenience stores Dedicated RM and specialist team Web portal and web service, customised direct service • Online targeted for more visibility and control to clients • Real-time reporting Key consideration • Clearing capability • Reach of branch network • Existing relationships of bank • Business objectives • Standards of service quality • Fee sharing negotiation Exclusive partnership arrangements with integrated technology Follow the clients. Dedicated SME and Corporate centers Relationship with domestic clearing systems Domestic branches and ATMs Relationship with correspondent banks/FI Straight through connectivity with SWIFT • Fully flexible E commerce facility Mobile devices Online banking platform Physical distribution Branches, ATMs Source: Asian Banker Research • Sophisticated analysis and user generated report Relationship with FI, service providers Copyright The Asian Banker 2011. All rights reserved • STP rate of over 90% via direct internet service • Mobile used for instant verification, alerts and reporting Alternate Channels Electronic channel /39

Most leading domestic banks are offering basic transaction services online but very few have integrated it for real time information and customized services Transaction Banking Services on the Internet of Leading Domestic Banks (2009/2010) Source: Asian Banker Research Copyright The Asian Banker 2011. All rights reserved /39

Banks focus on same day clearing and consolidation of global multicurrency payments in service innovation in payments business Technical Advancement International banks Consolidation of multicurrency global payments • SWIFT connectivity good. SWIFT traffic is 47% intra Asia currently and likely to increase. Real time reporting of balance, payment • Better service capability Enhanced electronic payment, replace paper based processes Intraday exceptions and investigation STP cross border, Same day settlement Extend bill payment thru phone, internet and convenience stores Integrate bulk transfer through SWIFT Clients can use US $ account to initiate local payment International Payments Bank B Bank A • Intraday turnaround on exceptions 3. 7 Million in 2009 • Strong packaged relationship • Compressed margins but target high volumes with value added services 3 % market share in domestic 4. 3 Million in 2009 USD 21. 42 Mln, ( 27 % share Asia) Bank D 37% market share in domestic Bank F Bank G Bank C 6 % market share in domestic Bank E 25% market share in domestic Domestic Banks • Leading Domestic banks are targeting same day clearing and reporting • SWIFT Connectivity low (less than 20%) among domestic banks • Sought by international banks for their local network and relationships Electronic payment system Payment Volumes in Asia Source: Asian Banker Research Copyright The Asian Banker 2011. All rights reserved /39

Trade solutions have been targeted at supply chain financing, improving working capital availability and risk mitigation Advances in technology products and online application in trade finance Areas where domestic banks are focusing on Trade transaction Technology Electronic channel application Trade products Centralised trade processing Online trade inquiry Account receivables financing with limited recourse Hub and Spoke model with disaster recovery Online trade transaction reporting system Innovative LC & export financing solution > 80% STP, 24* 7 Risk audit. Authentication matrix improved, risk reporting Trade origination, online or web portal Bilateral risk participation program and offerings Document Imaging and management Real-time transaction tracking and alerts Receivable financing without recourse Integrated platform for multiproduct, cash, trade, reporting and payment services Multiple product offering, customized reports Supplier financing, Document WC needs and management, immediate digitization of payment paper in Open ac. Factoring solutions Seamless end to end trade finance solutions Product and Technology Enhancements in 2010 Source: Asian Banker Research Copyright The Asian Banker 2011. All rights reserved /39

ICBC and Bank of China are the primary banks in China in the area of trade finance with international banks “What is your primary domestic client bank, accounting for more than 40% of the total international volume (as rated by global FI’s)? (2009/10) Country Rank 1 Strength Score Rank 2 Strength Score Rank 3 Strength Score Australia CBA 5 Westpac 5 N. A China ICBC 8 BOC 5 CCB 4 Hong Kong Bank of China 10 Hana Bank 4 HSBC 3 India SBI 15 IDBI 4 N. A Indonesia Mandiri 10 BNI 5 HSBC Japan Sumitomo Mitsubishi 5 N. A South Korea KEB 10 Shinhan Bank 5 Woori 4 Malaysia Maybank 15 Bangkok Bank 4 RHB 3 Philippines Banco De Oro 9 Metropolitan Bank 5 BPI 5 Singapore DBS 5 UOB 5 N. A Taiwan Mega International 10 Bank of Taiwan 5 First Commercial Thailand Kasikornbank 10 Bangkok Bank 3 N. A 4 Source: Asian Banker Research Note: Ranks were compiled from the input of 6 international transaction banks. For every rating as #1 primary client a score of 3 was given Copyright The Asian Banker 2011. All rights reserved /39

Currency clearing strength of large domestic banks in Asia rest with Chinese, Indian and Australian banks Source: Asian Banker Research Note: Ranks were compiled from the input of 6 international transaction banks. For every rating as #1 primary client a score of 3 was given Copyright The Asian Banker 2011. All rights reserved