Mr. Menai oversees CTBC Bank USA’s operations, including the Commercial and Industrial and Commercial Real Estate lending groups, as well as 12 branches in California, New Jersey and New York. He also oversees North American operations for the parent company, which is supported by US $67 billion in assets.
He has responsibility for US and Canada Corporate and Commercial Real Estate, Trade, Cash, F/X, Asset Based Lending, Syndications and Participations & Advisory, as well as business lines and trade finance for the China/North America trade corridor. He joined CTBC in January 2011 as Head of Governance and Retail Banking for the US, Canada, Hong Kong, India, Indonesia, Japan, the Philippines, Singapore, Thailand and Vietnam.
Prior to joining CTBC, he served for three years as Founder and Managing Director of Fajr Capital, a sovereign wealth fund-backed investment fund. He also previously served as President and CEO of Charles Schwab Bank, where he re-launched a deposit platform as the “World’s Best Checking” as part of a strategy to source additional money from existing brokerage-only customers.
For Citigroup North America, he served nine years in several senior roles, including Senior Vice President, Global Consumer Bank - US Credit Cards Division, Head of Consumer Portals, Head of Branch Profitability Programs, and most recently, Managing Director of the Corporate & Investment Bank, with responsibility for sales in emerging markets and supervision of 1,100 relationship bankers across 18 emerging market countries. Previously, he was a Director of Direct Financial Services at Bank of America. He began his career at JPMorgan Chase, where he was part of the Retail Banking Operations and Technology team during the integration period for mergers between Manufacturers Hanover, Chemical Bank and Chase Bank.
Mr. Menai holds an MBA and bachelor’s degree in economics, computers and information systems from the University of Rochester.
Boyden: You’ve held CEO roles before. How is this role different?
Menai: I thought of this as an incredible leapfrog opportunity. Asian banking is very muscular, and I think what’s different about this opportunity is that it’s a great marriage of the tremendous Asian capability for sustained hard work and the know-how that people like me acquire during our careers at places like Citi and JP Morgan. It’s what has allowed us to transform this company from merely working hard to working smart as well. We’ve had an incredible turnaround here with three years of record growth and some of the best financial strength or capitalization ratios in the industry. When you can marry our strength with the combined wisdom of global banks, then you have a script for sustainable growth. We really have an unbeatable combination. Competitively, I think a lot of Asian companies still struggle with this.
The challenge, of course, is how to get people who are driven by rigor to become truly independent and reliably innovative. To borrow from physics, it’s how power is turned into force.
Boyden: CTBC Bank is one of the world’s largest banks and it’s well known throughout Asia/Pacific, but it’s been under the radar in the US for the past 25 years. Is changing that a big part of your agenda?
Menai: In general, there are two trends that are the wind in our sails. Globalization is the first. We are a formidable force in Greater China, and local in almost all Pacific Rim markets including North America.
In the western world, people are used to listing Citi, HSBC and maybe even Standard Chartered when thinking about Pan-Pacific powerhouses. But their home-country centric risk culture and organizational inability for true integration into the local market forces them to only skim the cream of the top 10 corporates, and maybe a handful of really affluent private customers. It’s a kind of skin-deep banking model, with control centered in far-flung foreign capitals, so they’re not able to go deep. By contrast we have managed to go very deep in all the countries that we represent due in large part to our business model of being truly local.
We have carefully picked our international segments and have an unmatched reputation with Asian entrepreneurs as a partner bank that will build lasting relationships and help them grow in the markets that are important to them. For example, we have numerous clients who have grown from being the proverbial “garage entrepreneur” in their home markets to global exporters of well-known consumer items. We befriended them at birth and made it effortless for them to grow globally because we were local in every market they needed to be in and, crucially, our bankers spoke their language. By contrast the larger global banks prefer to deal with our clients only once they’ve “arrived,” by which time our bonds with our clients are unbreakable.
The second trend is global corporate governance as a competitive edge. We picked up on this trend early in 2010 and pay a great deal of attention to this matter at a very visceral level, which goes beyond board committees and solemn declarations of good citizenship. As a case in point, we are probably the only global bank to have instituted a detailed decision rights matrix that co-locates responsibility with authority deep within the organization.
We don’t experience the typical friction that causes nearly all governance breakdowns at large organizations – those multiple layers of white knuckled control that renders local executives impotent. It’s sad, but HSBC would not have had to pay out the recent nearly $2 billion fine it did if the local US management team - who warned HQ on multiple occasions that global practices were out of line with US law but were ignored - were truly independent of HQ. In sharp contrast, our professional management is not subject to random interference. This is largely why we have been able to attract a world class team of senior and mid-level executives to our bank.
Boyden: How are you able to go deep compared to other foreign banks?
Menai: That’s our business model. We are the bank that a tiny loom factory and struggling lathe machine guy and artisan parts manufacturer will come to in Vietnam, the Philippines, or Indonesia. These aren’t sexy businesses, but we are there for them in their country. We help these customers grow in leaps and bounds by properly risk grading them and giving them the capital to grow. We also offer them the know-how to optimize their supply chains and deepen connections to build their distribution globally.
This is what seems to elude the larger banks. From personal experience, we never ask a resource-starved entrepreneur to produce three years of audited tax returns and sales of at least $2 million because we know that they are not at that stage yet. But, we know enough about the industry and the export markets to know a bad bet from a good one and how to risk grade them. Our secret sauce is the ability to perform impeccable underwriting while adapting to local conditions.
Boyden: What is your agenda in the US?
Menai: Control, profit, growth. After the recent investment in people, process and technology we are now firmly in the growth stage. Strategically we’re looking to fill in the gaps left by the large banks that have retreated from our chosen markets or where they have never operated. The US banking market is anticipating the emergence of a new crop of trusted regional and global platforms, and we want to be counted as one of them.
My impression is that the regulatory authority in the US – and probably globally as well – is seeking platforms with people and processes they trust. And here’s what I think “trust” means: it’s the comfort that builds over time that the CEO and the board are competent, deeply in control of all aspects of the bank, and that the bank is in essence “governable.”
The most telling statement on this topic came from the former FDIC Chairman Sheila Blair when she described a former CEO as being unable to underwrite a loan if his life depended on it. Unfortunately and probably a little unfairly, despite being incredibly talented, nearly all sitting CEOs of large banks would probably fail this criterion. Once again in contrast, since we had the opportunity to rebuild our bank, all the senior managers know that the trust of the shareholders and regulators is earned by being practitioners first and generalists second.
Boyden: Is that really the case that some big bank executives aren’t able to write a loan?
Menai: It’s useful to understand here what the market values. There is “core” banking which is the old fashioned business of taking deposits and making socially responsible loans. This continues to be a very attractive asset class. However, large banks tend to drift away from this core and find themselves so incredibly diverse that at some point you have to give up on detail and embrace the big picture. People are promoted for their ability to “run a P&L” without anyone really parsing what that means.
To their credit, today’s top bankers would be just as comfortable running an investment bank or Home Depot or H&M. This is a tremendously valuable skill, but out of place for the new landscape in banking. Now, you need deep specialization in operational, hands-on banking. The financial crisis clearly showed that inherent and extant risk in the system was not understood by anyone above the rank of VP. If you’ve never underwritten a loan, penned a policy or worked in the back office, you shouldn’t expect admiration from your stakeholders.
Boyden: US banking will continue to undergo tremendous consolidation. Where do you see that going, and is this good for consumers and for the banks that survive it?
Menai: Most countries only have four or five banks. We’re [the US] the only country with nearly 7,000 banks, with the majority being smaller than $1 billion in size. Despite being valued by the government, these small community banks are having an increasingly challenging time keeping up with the slew of regulatory compliance and ever increasing demands on precious capital.
There is bound to be some rationalization sooner rather than later, and there will always be a need for the local community banks. They are essential for our growth as an economy. A large bank in New York with a Chief Risk Officer sitting in HQ is never going to be comfortable lending to a small business in the Midwest. But a Midwestern bank with a CEO who was recruited from around the corner will have a much better idea of whether he should lend to the local business or not.
If you look at other developed countries, prosperity tends to be concentrated only in the major cities. The US has largely avoided this phenomenon, thanks largely to the FDIC backstop and the resulting critical function that local community banks play in funneling the excess of savings to worthy borrowers. Our banking system in no small part enables the uniform prosperity that we enjoy in most parts of the US. That’s why I think our banking system will consolidate somewhat but not to the extent where we have only a handful of large banks.
Boyden: The Chinese are buying up real estate in California, and not just in glamorous Brentwood and Santa Monica. They’re really penetrating the market deeply. How is this playing out for CTBC?
Menai: That’s why one of our most popular products is our (CTBC) international mortgage. We help qualified buyers with their home buying needs in ways that once again the large banks cannot. We have the ability to credit qualify prospective customers in their home markets and transfer that knowledge asset here into the USA. It’s a key competitive strength and it allows us to play a crucial role in the phenomenal amount of personal and commercial investment that’s happening among Greater China and select markets in the US.
Boyden: In the last year, your bank was renamed from Chinatrust to CTBC, the US headquarters was moved to downtown LA, and you have almost a completely new management team. Was it a risk to make all these changes at once?
Menai: We thought it would be a risk not to change. The world changed drastically on 9/11, and then once again in 2010 as the repercussions of the credit crisis started being realized. The flow of finance around the globe was fundamentally altered. Everything that banks do was impacted – foreign exchange, trade, fixed income, yields, trading, retail banking, cards, and mortgages. Everything was fundamentally affected, so how could we not change?
For example, Americans were used to carrying large balances on their credit cards. Then, all of a sudden, they put them back in their wallets and didn’t take them out again for three years. For the first time in American history we deleveraged our personal balance sheets. The average American was carrying $6,000 to $7,000 in debt and they started saying we’ve got to pay this off, so they stopped using their cards.
With all this change around us, it would be foolish to not fundamentally reassess your business models. We have emerged from the crisis as a leaner, less concentrated, better governed and more focused bank.
Boyden: The world changed quickly, so you changed your team and adopted a different approach?
Menai: Absolutely. The world changed and everything we did in that world changed. Unfortunately, the vast majority of people in our industry still haven’t really internalized this change. They’ll say the words, but they haven’t really analyzed at a micro mechanical level how things have changed. We recognized this real opportunity to reinvent ourselves and present ourselves as the intermediary or the bank that provides tailor-made services to the “new normal” of customers peeking out again and wanting to grow with less risk and more partnership.
We changed our name to more firmly place ourselves in the pantheon of global banks with broad brand appeal and it’s already had a terrific impact.
Boyden: How did rebalancing your management team fit into the equation?
Menai: We needed people who understood real “mechanical banking,” but were also smart enough and had enough exposure at large banks to have memorized the blueprint for controlled growth. This team that we’ve built here is capable of taking us from a small start to a very significant part of the global banking landscape.
Boyden: Is there anything you’ve done to make this all work - to go through all this culture change in such a short time? What has your approach been?
Menai: I’m the “mechanic-in-chief.” I hold this together by making sure that I understand everything or that someone close to me and whom I trust understands it. My test is that I must be able to explain what we do to everyday intelligent people. I learned that lesson a long time ago. I am never the smartest guy in the room, but I have enough confidence to know that if I don’t understand something, someone is not explaining it to me well enough.
Boyden: Taking this further, all bankers and other pundits knew we were in trouble during the financial crisis when Robert Rubin said he didn’t understand the products and derivatives being sold by banks. In proper proportion, is that the right analogy to an extreme?
Menai: Bob Rubin was one of our most respected leaders at Citi and I personally continue to be in awe of him. He was the chairman of the executive committee, and I remember a time when he came into the room at our investor conference for Smith Barney. He advised us that he was “discounting risk” and people didn’t understand what that meant. That was more than 10 years ago.
That’s exactly what made me stop and think “ I’m in the room with a legend and he’s saying there’s stuff he doesn’t understand.”
You have to learn to live with feeling puzzled. There will always be stuff you don’t understand; it’s just important not to sell stuff you don’t understand!
Boyden: What do you think the next generation of banks will look like?
Menai: I believe that in the “new normal,” banks are going to be more about simple servicing and going back to their roots of being intermediaries, taking excess savings and channeling them in a safe manner to the best uses in our various industries, and customer needs that are realistic to their income levels.
Additionally, there are risks that weren’t recognized even four or five years ago. If you went to a CRO [chief risk officer] conference in 2007, all you’d hear about is credit risk models and trading models, trading strategies and so on. However, risk now encompasses much more than simple credit risk; equally important is compliance, operational risk, market risk, and pricing risk. Where do you find CROs with this combination, and the crucial ability to lead and influence? This used to be the job description of high profile CEOs.
Boyden: Do you think it’s going to take half a generation to bring this “new model” of CRO up to speed? Will the CROs who can carry out leadership roles be in huge demand?
Menai: Absolutely. The latter part I couldn’t agree with more. I think we can’t wait half a generation. I think the need is now. These people are extremely thin on the ground and the demand is incredibly high.
Boyden: You’ve served in C-level roles on basically every continent – North America, Asia/Pacific, Europe and the Middle East. How has that helped you bridge cultures?
Menai: If you’re the CEO of a company that has 14 divisions in different countries, in order to be successful you have to ask yourself, what are the friction points among the cultures in my markets? If you can identify these friction points you can start shaving off your own sharp edges.
For example, if you can identify what about your nature comes across as strange or irritating to the natives, then you can change. For example, Europeans don’t get American humor. They think Americans are too direct. If you understand that, you can check your humor in at the airport, and realize the locals have their own sense of humor. You can practice or think about being less direct, instead of bursting out that you don’t agree with something.
Boyden: Are there any specific things that you like about certain aspects of doing business in the US, Asia or Middle East?
Menai: Let’s say you’re in the Middle East and you know that in the Middle East business is done with a cadence all its own that appears glacial to westerners. There’s a whole ritual to doing business. You will never hear a “no” in any conversation. However, with experience, you pick up that there are plenty of “no’s” when you’re trying to do business in the Middle East, but it’s more subtle.
But, if you’re doing business in the West, you come to me and you give me a proposition. I pretty much tell you then that I don’t have the budget. That’s direct. In the Middle East, nobody would ever tell you that they don’t have the budget because that means they’re not important.
In China, it’s all about egalitarianism and value. It’s about am I getting the respect that my position deserves and am I getting a good deal? The concept of value is prevalent in almost every conversation. So it’s important to lead with the value proposition.
In other respects, the Chinese are extremely hospitable and respectful. They will talk to you as long as you want to talk to them, and they won’t interrupt you. But you will lose them unless in the first five minutes you’ve told them what the value proposition is.
After a while, if you’ve lived long enough in these different cultures, you can pick what works the best for you.
Boyden: Turning to your leadership, how would you describe your management style?
Menai: My style is rooted in my culture. I was 19 when I came here from Pakistan. Humility and respect for human dignity are paramount. Everybody you meet is a father or a mother or a figure of respect for someone. They have an inherent desire to be treated with dignity. That’s my number one rule. I’ve had situations where I’ve held that rule at my own personal cost.
The other part is that we need to not only paint a vision in order to lead but also be able to describe the steps to achieve it. I am vastly amused and then frustrated by all these guys who are supposed to be visionaries. They talk about a great vision, but cannot describe or carry out the steps.
That’s why I love the title of “mechanic-in-chief.” You don’t have to understand every last knob. But if you don’t know how to describe it at some level of detail, you have no business being a leader.
Boyden: What is your process when you’ve had to let someone go or make a strategic change in a business?
Menai: All good decision making is gut-wrenching and very lonely, but I crave input from trusted colleagues and advisors. I’m held responsible for many people and scores of small businesses and mortgages, and it’s a solemn responsibility.
But what it’s really about is that loneliness of knowing that in the end nobody can really help me with this decision because they just can’t see all the variables. If I consult the head of retail, risk or lending, he or she will give me the answer based on their specialty. So consultation is an essential part, but you have to bring it all together and live with it.
Boyden: At the senior level, what are your “deal makers” and “deal breakers” when you hire?
Menai: With me it’s passion, curiosity and humility. I look for passion first. People who aren’t passionate lack the stamina over the long run. Then I look for curiosity and humility, and for someone who doesn’t believe their own press. If you have all those three things and you know your space, then you are fit for the job.
We would like to thank William Farrell of Boyden Greater China for making this edition of Boyden’s Leadership Series possible.
The views and opinions expressed here do not necessarily represent the views of Boyden; only those of Mr. Menai.
For Mr. Farrell’s insight into talent in banking and Greater China’s global footprint, please continue to the Boyden View section.
William Farrell is a Boyden Board Member and the firm’s Managing Partner in Greater China
China’s investment footprint has expanded globally. How is that affecting movement of talent and what are the challenges for companies?
As China expands globally, Chinese companies need to identify and attract leadership talent for roles in North America and Europe as well as some emerging markets. In many instances this requires Chinese companies to adjust to international environments and the demands of leadership talent in those markets.
Companies continue to struggle to find leaders and management in Greater China. With China’s own global expansion, are western companies not adopting local cultures and are they still viewing situations from too western a perspective?
The challenge that MNCs have in finding leaders and meeting financial goals in China has a number of causes. Chief and foremost is the fact that leadership talent for MNCs in China is relatively scarce. The demand on this underdeveloped talent pool over the past several years has been under a great deal of pressure. As a result many in leadership roles in China advanced very quickly and perhaps have not had the opportunity to develop many management skills as fully as their counterparts in other less rapidly developing countries. Companies need to be willing to look across the region for the right talent and remain open to hiring expatriate leaders for certain roles.
Like all markets and cultures, China has its own unique characteristics. Therefore companies need to be willing to study and learn about these differences and ensure their strategies reflect market realities, not a set of preconceived impressions of the market. Today it is particularly important for companies to understand economic developments in China, as there is an ongoing shift in the market.
In what areas have US and European companies been better at adapting to change in Greater China, and in what areas are they still lagging?
MNCs have been relatively successful in leveraging Chinese manufacturing skills and working around weaknesses in the market. By and large we have seen leading multinationals gain relative success in the consumer market. They have caught on to local marketing tactics and the challenges of distribution. Financial services remain a challenge. The sector is highly regulated and joint ventures are required.
There is a current challenge and we are observing the changes. This involves the anticorruption campaign and the reduction in spending on luxury goods, a market dominated by foreign players. In addition there is an ongoing shift away from relying on FDI [foreign direct investment] to increase manufacturing capacity and build domestic demand. This represents an opportunity for foreign businesses as long as they adapt in time.
If you had to sum up in a few words the best approach to finding talent in Greater China, what would be your advice?
Companies should set aside preconceived ideas of what is “best for China” and instead focus on the top perhaps five “must-haves” for any role. Then be open to all candidates that meet those requirements. In other words, don’t localize simply to localize, and don’t insist on an expat when a local candidate may suffice. There is a need to cast a wide net, both geographically and experience-wise. Look at transferable talent from similar industries and markets.