Yesterday the three local banks did well with investors demanding their shares.
In a Bloomberg survey on the world’s strongest banks, S’pore banks occupied three of the top 10 positions. OCBC was number one, DBS was 5th and UOB was 6th.
If I were a shareholder in one of these three banks, I’d be upset that the banks were such inefficient users of capital because the stronger the bank is, the less its earnings potential.
Standard Chartered was ranked 15th. It needs to have plenty of capital around because it does business in some really difficult markets like places like the Ivory Coast where its operations were closed for several months.
It also does some risky business like lending for M&A transactions in India.
Our three local banks operate in safe markets. OCBC and UOB are heavily dependent on S’pore and M’sia while DBS is dependent on S’pore and HK. Yes they also do business in riskier places like Indonesia (all three), mainland China (again all three) and India (DBS). But these places contribute “peanuts” to earnings and assets.
They are also conservative in the businesses that they do.
So they don’t need to be such inefficient users of capital. They can easy operate safely with capital ratios similar to that of Standard Chartered. Thois would increase earnings.