Q&A | Pedro Cardoso, BNU CEO – Hengqin branch opens: ‘We will see more Macau banks taking the same step’

Banco Nacional Ultramarino (BNU) inaugurated its Hengqin branch last week. Having the historical role of being the first note-issuing bank in Macau, BNU has now become the first international banking group opening in the Hengqin Free Trade Area. In an interview with the Times, BNU’s CEO, Pedro Cardoso, said that the bank hopes to capitalize on the fact that the new branch can conduct business in Renminbi. As part of Caixa Geral de Depósitos (CGD) group, BNU also expects to take advantage of CGD’s vast network in the Portuguese-speaking-countries.

Macau Daily Times (MDT) – The new Hengqin branch will allow transactions in Renminbi. Can you explain what the main advantages of this arrangement will be?

Pedro Cardoso (PC) – With its Hengqin branch, BNU will provide services to our Macau customers, as well as to some selected mainland China customers within two main lines of business. The first has to do with Macau customers that have business or investments in mainland China, particularly in Guangdong Province, and the second line of business is more linked with our outstanding position within the Portuguese-speaking world. It involves Chinese companies that have frequent business with Portuguese-speaking countries [PSC] as well as PSC companies that operate in mainland China. For this line of business, Renminbi is an absolutely essential currency to operate with, in particular for the transactions related with PSC. The [Chinese] Central Government increasingly wants to have the Renminbi frequently and widely used in foreign trade transactions, as well as in investment, and we are fully cooperative with that line of thought. For our Macau customers that have businesses in mainland China – since their revenues tend to be in Renminbi – it is also quite important that they finance themselves in that currency.

MDT – And what about people interested in making real estate investment in China?

PC – The only case where eventually we see, at this moment, a less frequent usage of Renminbi is individual customers that want to buy property in mainland China. Due to the lower interest rates that we have in Hong Kong dollar and pataca, in some cases they will prefer to finance in those currencies instead of Renminbi, although I think that over time this may change a little bit.

MDT – BNU became the first local bank to open in mainland China, which is symbolic. During the inauguration of the Hengqin branch, the president of the Monetary Authority, Anselmo Teng, said other banks are interested in following the example.

PC – It is a normal step as we have been observing throughout the years a greater integration in the Pearl River Delta, including Hong Kong and Macau. This is the trend: more and more companies from Macau providing services in mainland China/Hong Kong and vice versa. This is the normal trend and we also believe, like Mr Teng, that we will see more Macau banks taking the same step.

MDT – You mentioned that the Hengqin branch will link entrepreneurs from Portuguese-speaking countries to the mainland. Will it make it easier for them to move capital to and from the mainland?

PC – That is not exactly the goal that we expect to achieve. The bulk of the business relationship between China and PSC is concentrated in mainland China. Hong Kong and Macau have, with all due respect, much less importance. So, if we want to be part of that flow of business we have to be in mainland China and the goal is to support the investments of Chinese companies in PSC, where we expect our colleagues from other PSC to have an important role in terms of supporting those companies in those countries. At the same time, countries like Portugal and Brazil already have a significant number of companies operating in mainland China – some of them quite small, others bigger, many of them more trade-related companies, like distributing products from those countries. We expect to support these types of companies that in many cases are already customers in those PSC.

MDT – And what will be the role of Caixa Geral de Depósitos in that strategy?

PC – Caixa Geral de Depósitos has an unique position within the PSC world, so we are in seven of the eight PSC  – we are not in Guinea Bissau  –  and in five of those
seven we are market leaders, so we have a unique positioning that we want to fully leverage. For some of these countries, China is their top trade and investment partner. For instance, in the case of Portugal, China is now amongst our top ten trading partners, but is our number one investor. The same happens in Angola, Mozambique, Brazil…

MDT – So, will CGD promote this new Hengqin operation in those countries?

PC – Yes. We have been very active in terms of the service and products in Renminbi for our customers in those countries, so we are having our sister banks and our mother company opening accounts in Renminbi in BNU and, at the same time, promoting amongst their customer base, in particular corporations, the service that we have in Renminbi. This was a first step that we took a long time ago in order to have this flow of business more developed. With this branch in mainland China, I think we can take further steps in this direction.

MDT – The banking sector was affected by the financial crisis. How has BNU coped with the period following the financial crisis?

PC – Since the big financial crisis almost ten years ago, the banking sector across the world has been facing a lot of challenges. They are not only related with the financial crisis but also with the business model of the sector. The development of new technologies and the change in the customer behavior pattern, has created a number of additional challenges to the banking sector. In the case of BNU, we have been developing quite smoothly over the last few years. Year after year, we have been providing more value-added services and products to our customers. We have also provided more value-added services to our shareholders through the consecutive increase in terms of business volume, as well as net income and dividends paid to our shareholders.

MDT – Would you say that BNU was not largely affected by the markets’ turmoil?

PC – In Macau, in the last few years we saw some significant correction in the main economic indicators, like GDP and real estate prices. This had some impact in the financial sector, which is not immune to the situation of the economy in general. But BNU has been going quite smoothly. Probably, had those factors not occurred, it would be going even better. Overall, all of us in BNU are quite happy about the development of the market.    

MDT – CGD is temporarily without a president [following the resignation of António Domingues], although a new head is due to be appointed soon [Paulo Macedo]. Has the recent instability in terms of CGD’s management had any effect in BNU, or is the operation autonomous here?

PC – As I told you, our operation has been going very smoothly, and very soon we will present our financial performance in 2016. It will be a good sign of how things are going here in the bank.

MDT – Going back to Hengqin: are there any plans to open new branches there or in mainland China?

PC – Not for the time being. This branch is not like what we normally see in our day-to-day life in Macau. It is not a sort of ground floor branch, where people just walk in. It is a branch in the high floor building and with a very specific niche target. Although it is a niche market, we believe it is quite big and has a lot of good business opportunities that will be fully exploited in the next few years. Our strategy is following our customer base and with that branch we think we can fully exploit that strategy. For the time being, we don’t have any further plans in mainland China.

MDT – Hengqin is becoming a large city. The plan is to make it even larger than Macau. Do you see a lot of potential there?

PC – The potential is huge and there’s a very strong commitment from the Central Government and from Guangdong Province, as well as the Zhuhai municipality government and the Macau government to develop Hengqin. But I have to stress that although our branch is centered in Hengqin, our target market is not just Hengqin. In the medium-long run we are extremely positive that Hengqin will further support Macau’s economic diversification.