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Posts Tagged ‘DBS’

DBS CEO proves worth of FT where “T” stands for Talent

In Banks on 25/03/2014 at 4:50 am

DBS Bank yesterday said that it will buy the Asian private banking business of Societe Generale for US$220 million, accelerating its ambition of becoming a leading wealth manager in Asia.

The deal will also widen the gap with DBS’s closest rival, the Bank of Singapore, a unit of OCBC Bank.

The price represents about 1.75 per cent of assets under management (AUM), based on the AUM of Societe Generale Private Banking Asia (SGPB Asia) of US$12.6 billion as at last Dec 31. This is a steal: OCBC in 2oio paid US$1.46bn which represents 5.8% of the unit’s assets under management, after adjusting for surplus capital of US$550m*.

Last Tuesday’s BT went on: DBS’s AUM will go up by about 23 per cent to S$85 billion from the current S$69 billion with the purchase, seven months after it was reported the French lender wanted to divest the business to redeploy capital into its core markets.

Swiss bank UBS is the largest private bank in Asia-Pacific, followed by Citi Private Bank and Credit Suisse, in that order according to trade journal Private Banker International in a 2012 survey.

That survey ranked DBS and Bank of Singapore ninth and 10th, respectively.

DBS is onto a winner with this FT and his FT COO. Well DBS deserves it, given the FTs it has had where “T” stands for Trash. SGX needs that kind of luck where both its CEO and COO are FTs where “T” certainly doesn’t stand for Talent. They did Temasek no favours by saying everything was kosher about the share price movements of Olam (More on this next week).

Coming back to OCBC. Its CEO is a Hongkie FT with great credentials. But he hasn’t shown whether the “T” is for Talent or Trash. So far the mkt inclines to the latter. OCBC’s share price crashed (and have yet to recover) when OCBC annced purchase of Hong Kong’s Wing Hang Bank few months ago. Deal is still pending. Hopefully, it dies a natural death.

My fav bank is still UOB where the chairman and CEO are true blue S’poreans. But UOB has limited visions which suits my taste here. DBS is for those who want to own a bank can be the leading regional bank in place of CIMB. It always had the vision but the FTs leading it let it down. Gupta has the talent (and luck) to make it the leading regional bank despite DBS not having significant presences in Indonesia and M’sia. It’s expansion plans in Indonesia were thwarted. S’pore has to play ball with Indonesia (allowing Indonesian banks more privileges here) for DBS to be able to buy Temasek’s Bank Danamon stake.

Finally, yesterday’s BT had a story about the difficulties our three banks were facing. UOB’s finance director said “Funding pressures will serve as a growth constraint for mid-sized banks like us outside of Singapore, particularly amid a backdrop of tightened liquidity conditions in the region. UOB has always emphasised funding stability. We must also be selective in the customer segment we engage in and avoid large concentration risks.” Taz straight talk.

So is [C]ompetition in US-dollar funding is likely to intensify, given the anticipated growth in trade financing, and the liquidity requirements of Basel III, says OCBC’s Mr Tan. Trade financing is still mostly greenback-denominated.

DBS’s Ms Chng says: “The so-called ‘balkani-sation’ of the financial landscape is an emerging risk, potentially resulting in captive capital and liquidity pools within each jurisdiction and impacting the pursuit of synergies across regional operations.”

But  sadly they couldn’t resist sprouting PR rubbish

“From a capital perspective,” says Darren Tan, chief financial officer of OCBC Bank, which is negotiating to buy Hong Kong’s Wing Hang Bank, “we prefer to acquire majority stakes where possible. However, in instances where a majority stake is not immediately available, we will still give the opportunity due consideration if there is strategic value in the acquisition.”

United Overseas Bank’s approach to overseas growth is to expand the platform for customers to tap trade flows within the region, says its CFO, Lee Wai Fai.

DBS puts priority on pursuing organic growth, and adopts “a disciplined approach” to M&A, says Chng Sok Hui, its CFO … She adds that DBS is adopting a digital strategy to expand its footprint in growth markets.

What do they mean?

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*My 2010 analysis: But maybe OCBC shld have waited. The purchase of ING’s Asian private banking business could come to haunt OCBC. A few days before this deal was annced, ING sold its European biz, at a fraction of the multiple that it got for Asia. Only time will tell if the growth in Asian wealth and OCBC’s ability to grow the private banking biz will justify the hefty premium that OCBC paid.

It paid US$1.46bn which represents 5.8% of the unit’s assets under management, after adjusting for surplus capital of US$550m. This compares with the 2.3% measure paid by Julius Baer for ING’s Swiss assets which is in line with another European purchase by an American private equity group of a smallish private banking outfit — RHJI’s purchase of Kleinworth Benson from Commerzbank.

http://atans1.wordpress.com/2010/03/17/ocbc-reward-for-avoiding-balls-up/

Trumpets pls. BTW, I don’t blame the previous FT CEO of OCBC, Richard O’Connor. He was retiring. In such circumstances, usually the CEO would not take the lead in such a move: he’d go with the flow. Rightly, as he wouldn’t be the person running the show.. This is what happened here, I’m reliably informed. BTW too, he did a great job. Ngiam Tong Dow (remember him) called him an honorary S’porean, I think.

S&P: Tough year for S’pore and regional banks

In Banks, Economy, Property on 20/02/2014 at 4:14 am

Lower economic growth prospects and tighter credit conditions could create a tougher operating environment for the banking sector here and in the region, said a report by Standard & Poor’s (S&P) late last week.

S&P expects S’pore’s GDP) growth to fall to 3.4 % this year, from 3.7% last year.

The report also notes that corporate and household indebtedness has been on the rise here. The situation could worsen this year, in anticipation of interest rates rising; higher borrowing costs amid rising. See DBS’s CEO’s tots below* and related post http://atans1.wordpress.com/2014/01/16/why-banks-tested-for-50-plunge-in-property-prices-and-other-wonderful-tales/

Related articles: The three local banks posted their reports last week too and for quick snap-shots (not the usual ST or BT fluff)

http://sbr.com.sg/financial-services/news/5-highlights-you-should-know-about-uobs-2013-results

http://sbr.com.sg/financial-services/news/find-out-what-badly-hurt-ocbcs-fy13-results

http://sbr.com.sg/financial-services/news/dbs-braces-itself-looming-30-35-drop-in-mortgage-loan-applications

Charts on banks’ loans etc

http://sbr.com.sg/financial-services/news/10-charts-prove-singapore-banks-mixed-finish-2013

Cheap way of owning UOB shares

http://atans1.wordpress.com/2011/09/05/haw-par-rediscovered-yet-again/

Update at 6.ooam:

South-east Asia’s three biggest lenders, DBS, Oversea-Chinese Banking Corp and United Overseas Bank, have seen their share prices rise this week after posting solid results last Friday. Common trends in the fourth quarter were better margins, trade finance-driven loan growth, seasonally softer treasury earnings and no asset quality weakness, CIMB noted.

UOB has been the star performer this week, gaining 3.5 per cent, while OCBC has risen 2.3 per cent and DBS 0.4 per cent.

UOB, despite being the smallest of the trio, has been particularly impressive with its fee income and regional strategies, CMC Markets Analyst Desmond Chua told TODAY.

“In terms of fee income, it has performed relatively well while the market has been lacklustre, in part due to a higher interest outlook. Its diversification to grow in regional emerging markets has also helped it maintain loan growth despite weaker mortgage demand in Singapore,” he said.

“On the other hand, OCBC’s share price might have been affected by the prospect of its overpriced acquisition of Wing Hang Bank in Hong Kong while DBS hasn’t been able to impress with its fee-based revenue in recent times despite aggressively attacking this space,” he added.

UOB’s net interest margin, which is the highest among local banks at 1.72 per cent full-year, is another advantage for the lender, Voyage Research’s Deputy Research Head Ng Kian Teck added. “UOB has historically been good on this front, and it means the bank can churn the most value out of every dollar loaned — that’s what’s attracting the investors,” he said.

All three banks ended last year on a positive note, with their fourth-quarter net profit rising between 6 and 11 per cent on the back of strong growth in net interest income.

The banks have also continued to solidify their regional presence, drawing more revenue from overseas than before.

….

“Their return on equity is healthier vis-a-vis the other industries, which are facing greater margin pressure due to higher wages. But the banks have been able to control this issue better.”

CMC Markets’ Mr Chua is also bullish, saying: “I’m looking at the banking space being an outperformer this year even though interest rates are bound to rise. Their tactical diversification across this region allows them to tap into Indonesia’s emerging affluent segment, for example.

Update at 5.15pm:Can Singapore safely deflate its property market? http://www.cnbc.com/id/101409247

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*DBS Bank chief executive Piyush Gupta expects home prices to fall by 10-15 per cent this year – more than the 10 per cent forecast by property consultants – but says that this decline would not make a material impact on the bank’s loan book. Speaking at DBS’s Q4 results briefing, he said it is likely that the prices of high-end homes will slide 15 per cent, and that for lower-end ones, by 10 per cent.

As for the higher interest rates expected with the shrinking of monetary stimulus policy by the US, he said he was not expecting it to have any effect on DBS. “The Singapore portfolio is really driven on income considerations . . . As I’ve said before, the pressure will likely start coming when unemployment rises – more than when property prices change.” Singapore’s unemployment rate is now at a low 1.8 per cent.

Mr Gupta said: “All our stress tests in the past have shown that we can easily withstand a 20 per cent reduction in Singapore property prices without material impact on our portfolio. We stress-test (for a) 20 (per cent fall in property prices), but don’t expect it to happen; our stress tests are always calibrated to go off the charts. My own sense is that there will be a correction of 10-15 per cent.”

He noted that the market was already stabilising and that the froth was running off, but that if this continued, the government would roll back some of the macro prudential measures. Sales of new mortgages have plunged 30-35 per cent at DBS, and by 40-50 per cent at OCBC Bank as a result of the stricter loan rules.

Mr Gupta likened the Singapore property market to that of New York and London, where prices held up even during the financial crisis between 2008 and 2012. While prices in the rest of the US fell by about a third, prices in New York slipped by only 10 per cent. It was a similar situation in London, another city where the demand is not dependent on the state of the domestic economy.

Mr Gupta said he expects regional money buying properties here to also put a floor under prices. With the slower sales, DBS’s $49.1 billion mortgage book is likely to grow by $2 billion to $2.5 billion this year, down from $3.5 billion last year and $5 billion the year before that, said Mr Gupta.

OCBC Bank chief operating officer Ching Wei Hong said of the new mortgage sales having declined across the board: “That’s expected, given all the cooling measures that have been imposed. We’ve built up a healthy inventory level. The inventory drives the growth of (the loan) book, going into 2014 and 2015. Beyond 2015 H2 and 2016, if conditions remain the same, we’ll see a bit of tapering in that period.”

(BT article last Saturday)

DBS doing NS on HDB loans?

In Corporate governance on 13/11/2013 at 4:26 am

If it’s one thing S’poreans who are paying off the mortgages on their HDB flats can agree on, it is that the govt is stretching the truth when it says that HDB mortgage payments are affordable because mortgagors can use CPF money leh. They are not that daft not to realise that it affects their old-age funds. And anyway, it’s always nice to pay less.

So it’s interesting that DBS has a very gd scheme for HDB borrowers. So gd that only the daft wouldn’t apply for it. I’ll let BT explain:

Thousands of HDB homeowners are turning to DBS Bank for a mortgage product that guarantees savings.

Those who took up a POSB HDB loan when it was launched in April could be looking at savings of as much as $1,600 by next month, calculations from DBS showed.

The first POSB HDB loan pilot launch – where homebuyers enjoyed a floating-rate loan with interest capped below the HDB concessionary rate for 10 years – was fully sold.

The bank is now into its second offering, which charges the same rate but for eight years, said Ms Lui.

The current POSB HDB loan charges for the first eight years the three-month Sibor (Singapore interbank offered rate) plus 1.38 per cent, capped at the CPF Ordinary Account rate. The current CPF Ordinary Account rate is 2.50 per cent.

Thereafter, the loan charges three-month Sibor plus 1.48 per cent. The September three-month Sibor is 0.374 per cent.

The HDB concessionary loan now charges 2.60 per cent, which consists of 0.10 per cent plus the CPF Ordinary Account rate of 2.50 per cent. Based on the three-month Sibor of 0.38 per cent, borrowers who switch from the HDB concessionary loan will pay a lower interest rate of 1.75 per cent.

For a homebuyer refinancing from the HDB in April, based on a loan of $400,000 and 25-year tenor, the potential savings over six months amount to $1,684.

And should interest rates rise over the next eight years, DBS guarantees that it will be capped at the CPF Ordinary Account rate of 2.50 per cent or 0.10 per cent below the HDB concessionary rate.

http://www.cpf.gov.sg/imsavvy/infohub_article.asp?readid={563079109-19246-5011258124}

Nice to see DBS returning to its roots as “Development Bank of S’pore”., and using the POSB brand which some Foreign Trash CEO tried to get rid off. Fortunately, he went before the POSB brand went. Gd work ,New Citizen Gupta.

But if DBS is doing gd, is this mortgage making money, on a risk-adjusted basis, for DBS? How come OCBC and UOB don’t have similar schemes? Maybe DBS is helping out in constructive nation-building? Err what about shareholder value for non-controlling shareholders and gd corporate governance?

Never mind, I don’t own DBS shares.

Temasek’s Chinese banks pay great dividends but there’s a catch

In Banks, Financial competency, Temasek on 20/08/2013 at 5:01 am

ICBC pays 6.1%, while CCB and BoC pay 6%. If it had AgBank, it would get 6.4%.

Contrast this with the dividend yield it gets from

– DBS: 4.4% (UOB’s yield is 2.9% and OCBC’s is 3.2%)

– Bank Danamon: 2.4%

– StanChart: 3.5% (BTW,  earlier this month the bank said  that it was no longer targeting double digit revenue growth this year. Year-on-year revenue growth in the first six months was less than 5% for the first time in 10 yrs.)

But Chinese bank yields are so gd largely because Chinese banks are not popular with ang mohs: one-tenth share price falls this yr helped produce these yields. http://atans1.wordpress.com/2013/07/02/time-to-worry-about-temaseks-strategy-on-chinese-banks/

And there are gd reasons to be fearful. One is concern that there could be more bad debts building up in the system as the economy slows/

Another: ChinaScope Financial, a research firm, has analysed how increased competition and declining net interest margins will affect banks operating in China. The boffins conclude that the smallest local outfits, known as city commercial banks, and the middling private-sector banks will be hit hardest, but that returns on equity at the big five state banks will also be squeezed (see chart). They think the industry will need $50 billion-100 billion in extra capital over the next two years to keep its capital ratios stable.

The bigger worry for China’s state banks is the signal sent by the PBOC’s move. The central bank has affirmed its commitment to reform. If those reforms include the liberalisation of deposit rates, then something far more serious than a minor profit squeeze will befall China’s banks. Guaranteed profitability would end; banks would have to compete for customers; and risk management would suddenly matter. In short, Chinese bankers would have to start working for a living.

http://www.economist.com/news/finance-and-economics/21582290-chinas-central-bank-has-liberalised-lending-rates-does-it-matter-small-step

And two of China’s four “bad’ banks (they bot portfolios of dud loans from Chinese banks, the last time the Chinese cleaned up their banks in the late 1990s and early noughtie), are planning to raise capital via IPOs. They have impressive returns. But maybe China is preparing for the day it has to recapitalise the banks again. In such a case, the UK and US experience is that the other shareholders get diluted, and can lose serious money. Think UBS and RBS.

Even if there is no recapitalisation, there are likely to be rights issues, something that ang moh fund mgrs don’t like.

But to be fair, this big chart shows a possible reason why Temask is optimistic. Despite loan growth, bad loans are falling. But the economy was growing rapidly. And sceptics point out that the numbers may be flakey. In the 1990s, the real bad loan position was 20%, not the lowish figures reported at the time. Investors forget this ’cause banks were 100% govt owned.

Related (sort of) link: http://wikileaks.org/cable/2009/06/09SINGAPORE588.html

Graphics from FT.

DBS, Temasek, Indonesia all lose

In Indonesia, Temasek on 06/08/2013 at 5:02 am

Maybe DBS should blame VivianB (and the PM) for taking a hard stand on the haze issue, even though this blog supports their stance because the Indon govt is naturally devious on this and other issues.

Seriously, DBS, Temasek and Indonesia all lose following DBS’ decision to allow its agreement to buy Temasek’s stake in Bank Danamon to lapse after the Indons only allowed it to buy up to 40% of Bank Danamon. It wanted DBS’s entire 67% stake and more: see Backgrounder at end of article for details.

Why DBS loses

Piyush Gupta, pulling his [US]$6.5 billion bid for PT Bank Danamon Indonesia, said his ambitions in Southeast Asia’s largest economy may be set back by about five years.

The lender had sought a controlling stake in Danamon as part of a strategy to expand in markets outside Singapore and Hong Kong, which jointly accounted for 83 percent of its profit in 2012. Average net interest margins for banks in its home market are 1.82 percent, according to data compiled by Bloomberg based on the latest company filings, lagging behind lenders in the rest of Southeast Asia. In Hong Kong, the measure is even lower at 1.66 percent, the data show. [Note that DBS gets 80% of its profits from S'pore and HK.]

In contrast, Indonesian lenders are the most profitable in the world’s 20 biggest economies, data compiled by Bloomberg show. Banks with a market value of at least $5 billion boast an average net interest margin of 6.6 percent, the data show.

DBS’s net interest margin shrank to 1.62 percent last quarter from 1.72 percent a year earlier, today’s earnings report showed. That’s the 15th straight year-on-year decline.

http://www.bloomberg.com/news/2013-07-31/dbs-drops-6-5-billion-danamon-bid-after-failing-to-win-control.html

Note too that DBS doesn’t have much of an Asean presence outside S’pore. It has no retail network in peninsula Malaysia, unlike UOB and OCBC: a failure of its botched attempt to takeover OUB in the early noughties. And unlike Maybank and CIMB, its M’sian rivals, it has only “peanuts” in Indonesia. They, Maybank, in particular, have thriving and biggish S’pore operations.

“DBS missed out on a value-creation opportunity,” Kevin Kwek, an analyst at Sanford C. Bernstein & Co. … The bank “will have to build up a presence in Indonesia the longer and harder way.”

“Indonesia was supposed to give them a leg up in terms of growth,” said Julian Chua … at Nomura … “There may not be that many willing sellers of such a sizable bank.”

If you are wondering why the shares are up then, investors think DBS may use the $ to return some capital. Besides, the issue of shares to Temasek would have been dilutive. And Indonesia’s economy is slowing.

FTs can be blamed for these historical failings, though Gupta and his deputy are exceptions to the rule that in DBS the “T” stands for “Trash”, not “Talent”. They have stabilised DBS’ operationally. And are trying to repair the damage done by DBS’ earlier FT inspired strategy of buying non-controlling stakes in regional banks.

Why Temasek loses

Its involvement as a shareholder in both banks helped spark an anti-Singapore political backlash in Indonesia. The value of its investment has also been reduced by new Indonesian restrictions which limit single bank shareholders to a 40 percent stake. That makes Danamon a less attractive target because Basel capital rules make it expensive for banks to hold minority stakes in other lenders.

However, Temasek can also take comfort. It is under no immediate pressure to sell. And though Danamon shares fell by more than 13 percent on Aug. 1, Temasek’s 67 percent shareholding is still a highly successful investment.

The Japanese banks are seen as interested in the 40% stake that it can sell. They have been buying minority stakes in Indonesia and the region http://atans1.wordpress.com/2013/07/06/asean-round-up-30/, http://atans1.wordpress.com/2012/12/29/jappo-banks-step-up-presence-in-asean-region/

Why Indonesia loses

lost http://blogs.reuters.com/breakingviews/2013/08/01/indonesia-biggest-loser-from-bank-merger-flop/

Here’s an alternate view that DBS and S’pore lost more than Indonesia: http://www.themalaymailonline.com/what-you-think/article/singapore-loses-much-more-than-indonesia-in-dbs-decision-vincent-lingga. I’m sure TRE posters and Balding would agree with this view.

Backgrounder from Bloomberg

DBS had proposed acquiring the 67.4 percent stake in Danamon held by Fullerton Financial by allowing it to swap its Danamon holdings into DBS shares. The exchange was to be at a price of 7,000 rupiah for each Danamon share and called for DBS to issue 439 million new shares to the Temasek unit at S$14.07 apiece, increasing the stake held in DBS by Singapore’s state-owned investment company to 40.4 percent from 29.5 percent.

Following that transaction, DBS would have made a tender offer for any remaining Danamon stock at 7,000 rupiah a share, taking its holding in the Indonesian bank to 99 percent.

Asean round-up

In Banks, Indonesia, Temasek on 25/05/2013 at 6:20 am

Growing faster than Greater China

South East Asia is expected to drive growth in the luxury market in Asia this year. Analysts at Bain and Co predict that luxury goods sales will grow by 20% in 2013: Greater China only 6% http://www.bbc.co.uk/news/business-22564297

How Myanmar will connect up Asia

http://www.economist.com/blogs/graphicdetail/2013/05/daily-chart-9

Great graphics: explains how the opening up of Burma will allow ships to by-pass the Malacca Straits.

DBS’ woes

DBS Group Holdings is hoping it will have to settle for the minority stake (40%) it has been offered in Indonesia’s Bank Danamon. It hopes that talks between the central banks of Indonesia and Singapore will clear the way for a majority takeover. Pending these, it may ask for an extension from seller Temasek Holdings.

Note that because UOB and OCBC have a bigger regional presence (thks to legacy branches in M’sia), they trade at a 25% to DBS in terms of book value.

Local banks

In Banks on 11/04/2013 at 6:18 am

Finally DBS has a FT CEO where the “T” stands for “Talent” not “Trash”. He had a bad start when its consumer banking IT systems failed at the beginning of tenure, for which he can’t be blamed. An earlier FT CEO where the “T” stood for “Trash” outsourced its  IT systems, only for the process to be reversed by another FT(rash).

(Gupta, who oversaw a 29% jump in DBS shares last year, was awarded a S$3.5 million cash bonus and company stock valued at S$4.6 million as part of total compensation, according to the annual report. His base salary totalled S$1.2 million.)

In the early noughties, OCBC was the bank that never failed to screw-up. It had an FT (Still has one as CEO). Fortunately his replacement was a Talent (can’t call him Foreign, as he has been in and out of S’pore for decades). DBS became the “go to” bank for mess-ups. Now Gupta has got DBS into a “stable” state: gd for him and Temasek must be grateful.

And UOB’s true blue hereditary banker got a 30% pay rise last yr. Well those of us who hold UOB shares (indirectly in my case via Haw Par) can’t complain. UOB has avoided the “Trash” risk by keeping things local. And avoided problems.

Coming back to OCBC, pls send yr COO to PR class. OCBC’s  COO said its differentiation strategy has been to re-orientate the consumer finance business from being product-centric to one centred on the customer. BT’s headline rightly screamed “OCBC shifts strategy to focus on the customer”, but this sadly sells OCBC short: it never was into product pushing like DBS where FD customers were targeted for HN5 Notes and were then left to swing in the wind, when Hongkies were compensated for similar notes.

As my mum still has her OCBC fixed deposits, I’m grateful. If she had been a DBS customer, she’d have been targeted by Team HN5, and lost her money.

DBS: Why it needs to buy Temasek’s stake in Danamon

In Banks, Indonesia, Uncategorized on 14/02/2013 at 9:30 am

Indonesian lenders the most profitable among the 20 biggest economies in the world, according to data compiled by Bloomberg. The average return on equity, a measure of how well shareholder money is reinvested, is 23 percent for the country’s five banks with a market value more than $5 billion … Returns in Indonesia, Southeast Asia’s largest economy, are driven by net interest margins, the difference between what banks charge for loans — an average of 12 percent, according to the central bank — and what they pay for deposits. The average margin for the country’s big banks is 7 percentage points, the highest of the 20 economies … Indonesia’s high net interest margins have prompted banks such as DBS Group Holdings Ltd. in Singapore, where the figure averages 2 percent, to look at acquisitions. DBS, Southeast Asia’s biggest lender, made a $6.8 billion bid in April for 99 percent of Bank Danamon and is awaiting regulatory clearance.

http://www.bloomberg.com/news/2013-02-04/world-s-most-profitable-banks-in-indonesia-double-u-s-returns.html

UOB and OCBC have an easier time because of their relatively large M’sian contributions to earnings. Malaysia is generous to its banks.

DBS’s core markets of S’pore and HK are very competitive and mature markets.

Around Asean: recent financial news

In Indonesia, Malaysia on 14/10/2012 at 6:51 am

Shares in the London-listed Indonesian coal miner Bumi rise sharply for a second day after a proposal from Indonesia’s powerful Bakrie family to split from the firm. The dynastic Indonesian Bakrie family has proposed a split from Bumi that they helped to create with the British financier Nathaniel Rothschild. Wonder what the guy who bot at 11 thinks?

A.I.A. to pay US$1.7bn for ING’s Malaysia business. A.I.A. said the acquisition will catapult it to the No. 1 position in Malaysia’s lucrative life insurance market. For the Dutch insurer ING, it is the first major deal in its plan to divest its Asian assets.

The founders of Malaysia’s AirAsia, Tony Fernandes and Kamarudin Meranun, are set to launch three IPOs in 2013 worth more than US$500 million (S$614 million).

Tune Group, a financial services-to-discount hotel conglomerate owned by Fernandes and Kamarudin, is expected to launch US$65 million IPO of its insurance arm, Tune Insurance, not later than the first quarter of 2013, according to two sources with direct knowledge of the deal.

Meanwhile, AirAsia’s long-haul arm, AirAsia X, recently hired CIMB, Malayan Banking Bhd and Credit Suisse Group for a US$250 million IPO expected early next year.

The group is looking to list its Indonesia operations, Indonesia AirAsia, by the first quarter of next year in a deal that could raise up to US$200 million.

The listing plans also come at a time when Fernandes is stepping down as the chief executive officer of the Malaysian-listed airline to focus on regional growth through Indonesia. The group’s plan to buy up to 100 Airbus jets, potentially worth about US$9 billion, is designed to fuel the growth of what is becoming a cluster of related airlines under Fernandes, who placed a record order for Airbus jets last year.

With an operating fleet of more than 116 aircraft, AirAsia has ordered a total of 375 Airbus jets as part of dramatic expansion plans that include the acquisition of Indonesia’s Batavia Air.

DBS Group, South-east Asia’s largest lender, is selling more than half of its 20.3% stake in The Bank of Philippine Islands (BPI) to conglomerate Ayala Corp for 25.6 billion pesos (S$757.3 million). “With the divestment of a 10.4 per cent interest in BPI, DBS will hold an aggregate 9.9 per cent investment in the bank. DBS will continue to have representation on the BPI board.”.

DBS, which has been a strategic investor in BPI since 1999, would realise a gain of about S$450m against the carrying value of the investment.

Ayala is the biggest shareholder in BPI, the Philippines’ largest bank by market capitalisation.

DBS is selling the stake at a time when the Philippines stock market is among the best performing markets in South-east Asia. The Philippines main index has gained some 23% this year, with BPI 42%.

Nice little profit in a rising market. Can’t blame DBS for not trusting the bullishness that the Philippines has got its act together finally.  It’s cyclical, juz like another peace treaty signed with Muslim rebels in the South.

Japan intends to start lending Burma money aiming to help transform Burma into a production and investment hub to rival Vietnam.  “Japan’s big trading companies are at the forefront of the investment effort. Mitsubishi, Marubeni and Sumitomo have signed an agreement with the Myanmar government to develop the initial phase of Thilawa, a 2,400-hectare site close to the southern port of Yangon, which will feature housing, commercial space and an industrial park,” reports FT

DBS screws its customers again, and again?

In Banks on 27/08/2012 at 7:26 am

A few years ago, DBS sold HN5 Notes to its valued Treasure customers, blowing the buyers to kingdom come and discriminated against locals when it came to compensation.

So when early in 2011, when it started pushing yuan deposits and other investments linked to the yuan to its customers, I tot “No, not again”. By early May 2011, it had sold more than 27 billion yuan (S$5.2 billion) of investments linked to the Chinese currency to wealthy investors here it boasted.

Well 2011 wasa not a gd year for the yuan, and 2012 has been a disaster. 

While most economists expect the renminbi will stay flat or rise slightly over the next year, financial markets tell a different story.

In the non-deliverable forward market, where traders place bets on the future exchange rate, the yuan or renminbi is priced to fall 1.3 per cent against the dollar over the next 12 months.

Some experts say the decline will be much more substantial. Jim Walker, an economist who predicted the 1997 Asian financial crisis, forecasts a 5 per cent depreciation over the next year because “corporate financials in China are deteriorating dramatically. Extract from last week’s FT.

And we know S$ has been appreciating vis-a-vis the US$.

 Interestingly OCBC, Singapore’s second-biggest bank, was not aggressively promoting offshore yuan deposits to Singapore customers due to the risk of near-term losses as the local currency is likely to appreciate at a faster pace.

“We’re pretty cautious with regard to offshore RMB business in terms of deposits. For a Singaporean, we think it is not very wise,” CEO David Conner said at an earnings briefing in May 2011.  

“Our forecast has always been that the Singapore dollar will appreciate faster than the renminbi so we are not pushing that hard with our customers.”
 
OCBC’s comments came shortly after aforesaid boast by DBS. So it looks like although Rajan the FT Indian who blew up the “treasured’ clients moved on, the culture of screwing clients still remains?
 
(BTW, O’Connor is the kind of ang moh FT, we don’t get enough of. We get trashy FTs like SGX’s CEO (ang moh) and president (Indian Indian) who talk the talk of attracting IPOs but who underperform.)
 
And DBS is now using rocket science to make customers spend and spend  http://www.bbc.co.uk/news/business-19286426. More “treasures’ getting shafted?
 
 

Why our banks will be issuing more perps

In Banks on 12/06/2012 at 5:03 am

(Or “Another reason why perps are so popular among coporates”)

As the sovereign debt crisis drags on, international lending by global banks in the fourth quarter last year fell by the largest amount since the Lehman Brothers crisis in 2008.

http://dealbook.nytimes.com/2012/06/04/global-banks-cut-lending-in-response-to-economic-slowdown/?nl=business&emc=edit_dlbkpm_20120604

Gd news for our three local banks. They can expand their US$ lending activities (US$ is preferred currency of borrowers).

Expect them to raise more perps. They will be exploring the possibility of selling US$ perps to our local retailer investors to avoid having to swap the proceeds into US$. But retail investors don’t like foreign currency issues: juz look at Hutch Ports.

Why our local banks shld stop wasting resources on China proper

In Banks, China, Investment banking, Temasek on 07/06/2012 at 5:14 am

(Or “Why Temasek’s big bet on Chinese banks makes sense“)

DBS is the 6th largest foreign bank in China proper. It has a strategy of expansion into China. So have UOB and OCBC.

Well, its a tough biz to be in. Non-Chinese banks have only 2% market share. Even HSBC, StanChart and Citi have problems http://www.bloomberg.com/news/2012-06-04/china-wall-hit-by-global-banks-with-2-market-share.html

DBS, OCBC and UOB shld juz not bother abt China.

Test needed to ask questions at co. meetings

In China, Corporate governance, Financial competency, Humour, Property on 04/06/2012 at 5:01 am

(Or “Shume really stupid shareholders” or “Why SGX shld pay Mano Sabnani to conduct courses on asking sensible qns at AGMs and EGMs”)  

Sometime back, the media reported that some daft shareholders (same people as those who complained at DBS AGM that DBS paid 50% premium over Bank Danamon’s share price to get controlling stake? I mean these people never ever heard of a premium needed to secure a controlling block?) abt CapitaLand’s China exposure and share price since 2008 or 2007 at its AGM.

Don’t they read the int’l media?

Example from BBC Online:”China has, thus far, avoided the much-feared hard landing,” said IHS Global’s Ren Xianfeng.

“Expect no major property meltdown or construction bust. Expect no deflationary spiral or banking crunch.”

Analysts said that given the steadiness of the property market, policymakers were likely to continue to ease their policies to boost growth.

Ting Liu of Bank of America-Merrill Lynch forecast that China’s economy was likely to grow at an annual rate on 8.5% in the second quarter, up from 8.1% in the first three months of the year.

And on the share price: don’t they realise that equity markets have had a choppy ride since 2008. And that China-related stocks have been the target of bear raids and that CapitaLand is an obvious target to short given that the stock is liquid and shares can be easily borrowed

In case anyone doesn’t understand the reference to Mano, he asks vv intelligent questions at AGMs and EGMs. Only one I can bitch abt is at K-Reit EGM when he queried the price paid for Ocean Towers from its parent. Shumething like Ocean Towers seldom gets sold at mkt price, except perhaps in distressed sale. Kanna pay premium.

Indonesia does DBS shareholders a favour

In Banks, Indonesia, Temasek on 01/06/2012 at 2:38 pm

By planning to allow financial institutions a maximum of 40% in an Indon bank (applicable only to new investors), the Indon central bank has blocked Temasek’s plan to sell its 67% stake in Bank Danamon to DBS Bank where it has a controlling stake.

On a day when banks (and other blue chips) are weak in local trading (UOB -1.5% and OCBC -0.5%) fact that DBS is only -o.6% shows that investors are not upset over the failure of the deal.

One reason is that institutional investors don’t like big “strategic” deals by their investments because they usually overpay and are prone to destroy shareholder value. Here while the price is decent, the issue of lots of new shares to Temasek is dilutive to earnings.

Ah well back to the drawing board DBS mgt to find a new driver for growth. Same too for Temasek’s financial enginners. The deal would have reduced Temasek’s direct exposure to Indonesia while increasing its exposure to DBS.

Euro crisis R perpetual securities & our local banks

In Banks, Financial competency on 22/05/2012 at 9:45 am

(or “The next, next disaster for retail investors & DBS”)

While reading this , I saw Calvin Yeo’s reply to a question on why corporates were issuing perps

 … one reason is to diversify the sources of funding. Another reason is that the market cannot withdraw the financing facility like the bank can in a credit crunch. Investors also have generally less bargaining power than the banks, so it is harder for them to take action against the issuer or place restrictive covenants. As you see, the terms of the bond are drawn up by the issuer rather than the lender. For most loans, banks tend to be the ones giving the terms of the loan.

Another main reason is that banks don’t normally issue perpetual loans, you would have to issue perpetual bonds or preferred stocks for that.

On the issue of diversification, most European banks have been cutting back their lending outside their home markets because they are shrinking their balance sheets to meet the new capital rules. No-one wants to invest in them (on terms acceptable to the banks) because of the Euro crisis.

In Asia, the French banks (like Soc Gen, BNP and Credit Agricole) were once very big USD lenders, the currency of choice, to corporates. They have now withdrawn*. So corporates that used them, now have to find other lenders. Seems to have found a new source of suckers in the retail mkt here.

See related post on central bank’s concerns.

Asian banks (including our DBS, OCBC and UOB) are increasing their USD lending to these corporates as the European withdrawal have improved USD lending margins (the Frogs were very, very aggressive) .

Let’s hope DBS doesn’t get too aggressive in USD lending. Not concerned by OCBC’s and UOB’s increased lending (I own Haw Par shares as partly as a play into UOB). They have conservative controlling shareholders and mgt (I’m assuming the newish CEO of OCBC is as conservative as O’Connor**). Can’t say the same abt the cowboys at DBS and Temasek, though DBS’s chairman and CEO have reputations as conservative bank executives. The Bank Danamon deal shows otherwise in my view.

——

*But European banks still have lots of exposure to S’pore or rather the other way round. See chart in http://www.zerohedge.com/news/why-stability-stalwart-singapore-should-be-scared-if-feta-truly-accompli. Nothing to worry abt as most of this exposure is not to locals because it’s offshored in turn. Do remember that S’pore is a major global financial market.

**Anyway someone in OCBC is a tough taskmaster. O’Connor earlier this yr said that working in OCBC for 10 yrs felt like 40 yrs. No wonder Tony Tan and Yong Pang How (remember him?) preferred to be cabinet minister and chief justice respectively. And remember O’Connor was from Citibank, not known for its relaxed style.

OCBC: KPI for new CEO?

In Banks, Corporate governance on 15/05/2012 at 8:33 am

OCBC Bank was recently named as the world’s strongest bank for the second straight year by Bloomberg Markets Magazine. (The ranking featured 78 global banks with at least US$100 billion in total assets.They were assessed based on factors such as their Tier 1 capital ratio, loan-to-deposit ratio, ratio of non-performing assets to total assets and their efficiency ratio, which compares costs with revenues.)

OCBC said the bank’s strength is partly built on its “disciplined credit management practices and robust risk management capabilities”.

If I were the controlling shareholder of OCBC, I’d be very upset at this ranking because what it means is that OCBC is not making its assets work: it has too much capital. I’d tell the board that the most impt KPI should be that OCBC drops out of the top 10 on the list.

It can be done. UOB was at seventh place, down from sixth last year, while DBS fell three spots to eighth this year.

UOB and DBS are doing the right thing. Their core market (like that of OCBC) is S’pore and it’s a safe, boring, stable market where margins are only so-so. So not much capital is needed, if one sticks to the basics of banking, and not try to be a hedgie.

As to the right amount of capital, look at StanChart at no.12. It operates in a wide range of emerging markets, some in unstable parts of the world like West Africa and so needs to have capital lying around. If S’porean banks have abt the same level of capital, they should still be safe.

Analysing Temasek’s investment in another Chinese bank

In Banks, China, Financial competency, Temasek on 16/04/2012 at 7:06 pm

Temasek has agreed to buy Goldman Sachs’s shares in the Industrial and Commercial Bank of China (ICBC), the world’s largest bank. It will buy US$2.3bn worth of ICBC shares, taking its stake to 1.3% in the bank.

In an interview with Reuters at the end of March, Ho Ching’s presumed successor-in-training, Temasek’s head of portfolio management,acknowledged the heavy allocation to financials, but noted that it holds four very good banks: Bank of China, China Construction Bank, DBS Group and Standard Chartered. Well it has added ICBC to this list, and at a price close to the market price, unlike the stakes in the other two Chinese banks where it got a “special” price as a pre-IPO cornerstone investor.

But is it a wise move?

True, since the lows last October of the Chinese and HK stock markets, the shares of the four leading Chinese banks (including Bank of China, China Construction Bank and ICBC) have gone up by more than half, easily outperforming the broader market.

But since March, prices have been off (but masked by general market falls) because of concerns abt China’s growth, bad loans and comments by the  Chinese PM, Wen Jiabao, who hinted  of breaking the monopoly state-owned lenders have enjoyed in China’s banking sector. (The sector is dominated by four big state-owned banks and Temasek now has significant stakes in three of them.)

Mr Wen said that their monopoly was hurting businesses in the country, as they had few options to raise capital.

“Frankly, our banks make profits far too easily. Why? Because a small number of major banks occupy a monopoly position, meaning one can only go to them for loans and capital,” he was quoted as saying by China National Radio. “That’s why right now, as we’re dealing with the issue of getting private capital into the finance sector, essentially, that means we have to break up their monopoly.”

The lack of easy availability of capital has often been cited as threat to growth of small and medium-sized businesses in China. There have been fears that some of these businesses, seen as key to China’s growth, may turn to unofficial sectors for capital, increasing their borrowing costs substantially

But Temasek could be betting on, “Wen has one year left [in his term].” This was said by an unnamed Chinese state banker quoted by Reuters. “This is a task for the next generation of leaders. It cannot be accomplished within one year.”

But the banker could be wrong, Wen could be telling us what has been agreed upon between his generation and the next generation of leaders.

Remember, It took a beating on its finance industry holdings after the 2008 crisis, losing about $5 billion in stakes held in Barclays and Merrill Lynch, now part of Bank of America. It has since trimmed its financial holdings by 4 percentage points to 36 percent of the portfolio. Last month, it sold a 1.4 percent stake in India’s No.2 lender ICICI Bank. From said Reuters reported.

And of the remaining two “very good banks” where Temasek has significant stakes, DBS has juz decided to buy Temasek’s stake in Bank Danamon. Management will now be preoccupied with getting the deal approved by the Indonesian authorities, then integrating the bank into DBS. Before this deal, management had finally got to grips with DBS’s operational problems. The danger is that the focus on the Danamon deal may lead to backsliding in the area of operatons.

The genuine jewel is StanChart, but by global standards, it is “peanuts”.

Err Temasek can do savvy deals too

In Indonesia, Temasek on 08/04/2012 at 7:36 am

TRE’s and TOC’s readers, and other S’porean netizens may not realise it, but Temasek doesn’t always lose money on its overseas investments.

In 2008, just before the financial crisis, Temasek sold its majority stake in BII for a price that put a value of the Indonesia bank of 4.6 times book value. The  sucker buyer was MayBank of M’sia. It paid Temasek US$1.13bn. NYT article. MayBank later justified its cock-up by pointing out that around the same time, HSBC paid around the same price (book value wise) for another Indon bank. Critics pointed out that in the context of MayBank’s financials, the amount was a big a sum while HSBC’s purchase was “peanuts” relative to HSBC’s financials.

Analysts now say that MayBank’s plans to sell a stake in BII for the same price as it paid Temasek is unrealistic.

Well the price that DBS is paying Temasek for its majority stake in Bank Danamon works out to be 2.6 times book value, and is considered reasonable but pricey. The premium over book has dropped substantially. But it is a gd deal.

And going back in history, Temasek got a great deal when it sold its PosBank stake to DBS. Foreign broker analysts (though not local broker analysts and our constructive, nation-building media) were grumbling that Temasek was getting DBS shares at a big discount to DBS’s fair value. FTR, no foreign analyst is arguing that Temasek is getting DBS shares at a big discount to its fair value in the Bank Danamon deal.

Moral of these examples: Temasek can do savvy deals with M’sians and DBS. Nothing to do with fact that DBS is controlled by Temasek. It’s that DBS likes to do “strategic” deals and, there are studies (dispued) which show that because strategic deals involve paying over the odds, shareholder value is destroyed in the process.

And consider this too.  RRJ and Temasek have been big backers of the trend to use natural gas. Last year they put US$250m into Nasdaq-listed Clean Energy Fuels, a US-based group that provides natural gas fuel for transportation at gas stations in the US at a saving of US$2 a gallon.

That transaction, which closed in January or February this year, has already more than doubled in value.  

And this looks pretty savvy too. Singapore state investor Temasek Holdings and private equity firm RRJ Capital bought nearly half of the shares in the $1.34 billion offering by PetroChina Co’s unit Kunlun Energy Co Ltd, two sources with direct knowledge of the deal said on Tuesday. $=US$

Kunlun Energy and Clean Energy Fuels have a similar mandate and RRJ hopes to bring the two together, according to one report. BTW RRJ is founded by a Malaysian Chinese.

Bang yr balls in frustration Ho Ching detractors, and all haters of the S’pore government and its agencies. Temasek can do savvy deals if M’sians are involved. Either as suckers buyers or as co-investors.

Jokes aside, remember the lines from “If”

If you can meet with Triumph and Disaster
And treat those two impostors just the same;

Well in investing, as in other aspects of life, the line between success and failure is very, very narrow.

Examples:

 KKR and TPG, giant US private equity investors invested billions of their investors’ funds in TXU. One of the things they were betting on was that natutal gas prices would be priced-off oil prices for the foreeable future. Err now even Buffett has lost money buying TXU bonds. The problem is that recent  technological developments mean that natural gas can be extracted from shale, decoupling its price from that of oil. Natural gas is no longer a scarce commodity.

Now all three have extremely gd track records as savvy investors. BTW Temasek’s Merrill Lynch deals would be like this deal. The conventional wisdom was that the deals were risky but that the prices paid reflected the risk and that in all probability the deals would work out for the investors.

Now the conventional wisdom was that the investors got things wrong* . But as FT’s Lex reports:

They paid too much. That was the consensus when 3G Capital took Burger King private in 2010 for a total enterprise value of $4bn, or nine times trailing earning before interest, taxes, depreciation and amortisation. How did things go? Well, Justice Holdings has just paid $1.4bn and will get 26 per cent of Burger King’s common shares in return. This now puts the enterprise value of Burger King at $8bn – an ev/ebitda multiple of 16 times (14 times if you follow Burger King’s practice of excluding restructuring and other costs). By comparison, the multiples for global powerhouses McDonald’s and Yum Brands are 11 and 14 times. Arcos Dorados, the largest Latin American McDonald’s franchisee, trades at 12 times.

3G’s partners put $1.2bn of cash into the original deal and borrowed the remainder of the price. They also paid themselves a near $400m dividend last year, thank you very much. If they had sold the whole company at the price Justice has paid, 3G would have more than doubled its money in a year and a half. Over the same period, McDonald’s and Yum shares have returned 38 per cent and 64 per cent, respectively. Consensus now: would you like fries with that, gentlemen.

*Bit like Temasek’s Shin deal. Brokers were telling their clients with shares in Shin to tender the shares. They would never see such a price again. But our nation-building, constructive media failed to report these views here.

DBS & UOB

In Banks on 04/04/2012 at 6:40 am

So investors sold DBS on news of its Bank Danamon purchase. It closed 0.39 lower (2.75%) to 13.79. About a quarter of the sellers seemed to have bot UOB which closed up o.36 (1.97%) to 18.64.

As to OCBC, it closed down 0.03 (o.33%) to 8.96. Unlike DBS and UOB, a large chunk of its profits comes from life insurance. Hence, it was of no interest to those who wanted out of DBS but wanted exposure to S’pore banks. And there is the uncertainity of what the new CEO will want to do. The retiring CEO did a good job: he stuck to the basics of banking and life insurance.

DBS: Investors don’t like the Indon deal

In Banks, Corporate governance, Indonesia, Temasek on 03/04/2012 at 11:34 am

Well DBS is down 0.44 to 13.74 some 3% from Friday’s close.

Despite all the propoganda from our constructive, nation-building mainstream media, aided and abetted by the wires and most brokers, investors don’t like the Bank Danamon deal. To be fair, investors nowadays don’t like their investee companies doing mega strategic deals (like Pru’s attempted purchase of AIA last year) because the historical numbers (still disputed) seem to show that strategic deals destroy shareholder value.

Well the non-Temasek shareholders of DBS will have an opportunity to reject the deal, if they think that Temasek benefits far more than DBS? BTW, did you know that when DBS bot PosBank from Temasek all that many years ago, it was a great deal for Temasek, not so gd for DBS .

Casinos: Good for our banks

In Banks, Casinos, Economy on 12/03/2012 at 4:48 am

No, not profits from lending to gamblers and loan sharks but from raising money for Sands.

Las Vegas Sands, controlled by Sheldon Anderson, hired DBS Bank, OCBC Bank and UOB to coordinate a S$4.6bn loan for Marina Bay Sands, Bloomberg News reports. The loan may be split into a S$4.1 billion term facility and a S$500 million revolving credit facility.

DBS customers and investors: Be glad that hackers were only M’sian

In Banks on 08/02/2012 at 6:34 am

If I had an internet banking account with DBS, given its track record in IT , I would be afraid, very afraid. Read how smart hackers can be: http://www.bbc.co.uk/news/technology-16812064

If you bank with HSBC, Citi, OCBC or UOB, relax. These banks have gd IT track records here, even though HSBC and Citi have a lot of FTs from India, more possibly than DBS. UOB and OCBC: true blue S’poreans in their IT departments (OK, more than in DBS).

If I had shares in DBS, I’d be afraid that another security problem could cause very serious damage to DBS’ reputation and pockets.

When SPH & DBS team up well, S’pore Inc can be Awesome

In Banks, Media, S'pore Inc on 10/01/2012 at 5:51 am

If anyone thinks that SPH’s publications have lost their clout because of new media, citing the bad reception that Pay Wayang, SMRTgate and PondingGate got from the public despite these publications spinning all the way for the White Side, the way that they covered DBS’s CloneGate shows their clout, even in the age of new media.

Customers were reassured, and the usual moaners were ignored by the public even though DBS is part of the Temasek Group (that S’poreans love to hate partly because its CEO is the wife of the PM), and the public and its customers often view DBS as dysfunctional.

SPH’s publications when combined with an effective public communications strategy is a fearsome tool.

DBS got its strategy right, moving “quickly to assure customers that their losses will be covered and investigations are underway. Experts were immediately put on air not to put a spin on why it’s not a big deal, but rather explain concisely how the scam probably occurred and is being carried out,” Words of the Cze. (If it had tried to weasel its way out, I for one would have asked how come the data theft could have occured at two high traffic ATMs, and why OCBC or UOB were not hit first? Why was DBS so dysfunctional?)

Don’t believe me? Reading ST (and MediaCorp’s freesheet) even I tot DBS was being generous in quickly compensating its customers until I read this in ST’s Forum. It reminded me (a trained lawyer who did a lot of banking legal work) that  it was DBS that lost money, not the affected customers, “When someone deposits money with a bank, he is in effect lending money to it. Property rights to the money pass to the bank. In return, the bank owes its customer a debt. At that point, any money stolen or pilfered from the bank is its money, not its customer’s,” SMU academic. (BTW, I get the impression that a very impt KPI for SMU academics is how often they are quoted in the local MSM. One wonders if they have time to do other things.)

The PAP, SMRT and PUB did not get their public communications strategy right (see the above link on what PUB and SMRT did wrong) and SPH could not play its traditional constructive, nation-building role in helping out the White Side.

Coming back to DBS. When its CEO early last week ( his second anniversary at DBS) came out boasting of his achievements, I tot, “Nemesis” and “What bad news is he foreshadowing?”. Well Nemesis has struck and DBS has reacted very, very well to what could have been a major public relations fiasco. As to the bad news, “Watch and wait”.

But DBS is no longer dysfunctional. Could it be a turnaround situation, worth investing in? In Q3 2011, DBS’s return on equity was ahead of OCBC and UOB. BTW I own Haw Par shares which is a play on UOB.

Banks can lose money on private banking business

In Banks on 17/12/2011 at 5:38 am

Our three local banks are targeting private banking because Asians are getting richer and richer, it’s a steady, cash generating business providing a great annuity revenue, and it allows them to take advantage of their large capital base (they are among the safest banks in the world) which is a drag on earnings. One report has DBS as the “strongest bank” in the world, while another has OCBC. Me, I say OCBC because less FTs there, even its ang moh CEO is more-or-less localised. And it has the Lee family as a contrilling shareholder. They are super conservative.

But Investec, a South African investment bank is a lesson for our local banks. In November 2011, it posted a 2% decline in first half earnings after recording a loss at its private banking business and a sharp drop in deal flow.

It had been reducing dependence on lending and deals, and asset and wealth management now account for 40% of operating income, compared with 29% a year ago.

But the private banking division lost £4.9m, hurt by real estate woes in Ireland and Australia. Operating profit before exceptional items totalled £223.63m in the six months to end September, compared to £228.16m in the same period last year.

So losing money in private banking is a possibility

Worse our banks have to spend a lot juz to be in the game. OCBC despite acquiring ING’s Asian private banking biz*, is still a midget even in regional terms when compared to Citi, HSBC, UBS and Credit Suisse. The Bank of Singapore (OCBC’s private bank) expanded its assets under management by 11% in the first nine months of 2011 to US$29 billion. Peanuts by int’l standards.

——

*It paid, in 2010, US$1.46bn which represents 5.8% of the unit’s assets under management, after adjusting for surplus capital of US$550m. This compares with the 2.3% measure paid by Julius Baer for ING’s Swiss assets which is in line with another European purchase by an American private equity group of a smallish private banking outfit — RHJI’s purchase of Kleinworth Benson from Commerzbank. To be fair to OCBC, it was rumoured that HSBC was willing to pay the same price, but lost out when it was unwilling to give promises that staff would not dismissed. OCBC was willing to give this promise.

S’poreans get justice in US?

In Investments on 04/11/2011 at 7:37 am

A US court has decided that it would hear a lawsuit brought by Pinnacle Notes’ investors (see below for extract of BT report).  It ruled that “generalised warnings of risk and of the possibility of adverse interests” between Morgan Stanley and the Pinnacle Notes investors were not sufficient to protect Morgan Stanleyagainst all allegations of fraud.

Meanwhile the S’pore court of appeal has told DBS High Notes 5 investors to bugger-off: “In view of our decision in this appeal, we think it apposite and timely to remind the general public that, under the law of contract, a person who signs a contract which is set out in a language he is not familiar with or whose terms he may not understand is nonetheless bound by the terms of that contract … The principle of caveat emptor applies equally to literates and illiterates.”

Wonder why the investors never alleged fraud by DBS? The S’porean legal system (like that of the English) requires a very high standard of proof if the plantiffs’ allege fraud. And if they fail to prove fraud, the consequences for the plaintiffs can be very serious in monetary terms. The US system is a lot more lax.

Poor DBS HN5 investors: their Hongkie cousins were treated better by DBS http://atans1.wordpress.com/2010/08/06/what-abt-high-notes-sm-goh/

Read the rest of this entry »

“Insufficient funds”

In Banks, Wit on 26/10/2011 at 6:49 am

What worries me most about the credit crunch, is that if one of my cheques is returned stamped ‘insufficient funds’. I won’t know whether that refers to mine or the bank’s.

Not true of our three local banks, they got lots of capital. They are using it to attract private banking clients. Even DBS, who blew up S’pore clients but compensated HK clients.

S’pore banks: Is private banking the future?

In Banks on 07/10/2011 at 9:18 am

It has been a regular complaint of mine that our three local banks have too much capital for their own good. See this and this.

This excessive capital requirement is the reason why OCBC paid such a high price for the Asian private banking business of ING and why DBS and UOB are trying harder to build up decent private banking businesses, despite repeatedly failing to do so in the past.

While private banking itself does not use up much capital, clients and prospects want to put their money in banks that have plenty of capital. A very high capital  base is a great comfort blanket. As is the conservative nature of a bank. OCBC and UOB have both and while DBS’s FTs are more cowboyish, they have been kept in check, so far.

OCBC’S private bank claims that it is attracting assets from the Singapore branches of French banks as the euro region’s debt crisis frightens their local clients. Defections from French banks helped generate net new money of about US$4 billion for Bank of Singapore this year, the CEO said recently.

Private banking looks like a good use of the local banks’ capital, given that their conservatism and regulatory requirements require them to hold excessive amounts of capital.

But they are late in the game where economies of scale matter. Example: OCBC’s private bank (the biggest by far of the three local banks) had US$29.6 billion of assets under management at the end of June, less than 9% of the total at BNP Paribas’s wealth management unit. And this French bank is not a serious player in the either the Asian or international private banking industry.

OCBC: look after yr shareholders, not yr creditors or regulators

In Banks on 30/06/2011 at 10:57 am

First, Banking 101. The more capital a bank is required to hold, the less it can lend. It will make smaller profits, compared to a bank that needs to hold less capital.

Next some definitions. DBS Group, United Overseas Bank (UOB), OCBC Bank are required to hold a minimum Tier 1 capital adequacy ratio (CAR) of 6% and a total CAR of 10%.

International rules will require banks to hold a minimum common equity Tier 1 (CET1) CAR of 4.5%. MAS has decided that locally incorporated banks meet this rule from Jan 1, 2013 – two years ahead of the international 2015 timeline.

MAS will raise the minimum CET1 CAR to 6.5% from Jan 1, 2015. It will also bring the minimum Tier 1 CAR to 8%. The total CAR will remain at 10%.

MAS will also introduce a capital conservation buffer of 2.5% above the CET1 CAR. This will be phased in from 2016 to 2019.

So by 2019  locally incorporated banks will have to maintain a CET1 CAR of at least 9%, Tier 1 CAR of 8%. and CAR at 10%.

But one OCBC estimates that  its CET1 CAR would be around 10.8% cent based on the bank’s financial position as at March 31, 2o11. Its Tier 1 and total CAR are estimated at 14.1% and 16.9% respectively.

It’s only 2011 but OCBC’s CET1CAR is 20% above 2019′s required  levels, while  Tier 1 and total CAR are 76% and 69% more than required.

This is a lot higher than needed for a bank whose main markets (S’pore, Malaysia and Hong Kong) are safe, mature and well regulated markets. True OCBC is also into “cowboy” countries like China and Indonesia but these countries contribute little to revenue.

Too much capital relative to assets and liabilities is unfair to shareholders, while not benefiiting depositors and other creditors. It only makes life easy for regulators.

So OCBC should return excess capital in the form of dividends (I’m not in favour of buy-backs, something I’ll explain one of these days). Of course OCBC could decide to increase its balance sheet, but that usually leads to tears for shareholders.

Related post

http://atans1.wordpress.com/2011/05/12/local-bank-investors-are-strange/

Local bank investors are strange

In Banks on 12/05/2011 at 11:23 am

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.

DBS: Three gd moves in 2010

In Banks on 21/12/2010 at 5:32 am

DBS seems to be getting its act together. In November,  the CEO (FT turned citizen) said he planned to improve return on equity by building businesses that cater to wealthy individuals and small companies, and by expanding in China, India and Indonesia. Well with two moves made in December, he seems to be keeping to his word.

It will take over Royal Bank of Scotland Group Plc’s retail and commercial banking businesses in China, it was annced last week. This is possibly a  high risk move but if things work out reasonably well, it would have added bulk to its China operations, giving it credibility with potential customers. The risk is that it will assume US$900m of structured notes that RBS sold to its depositors.  We know what can happen when DBS plays around with these deposits: customers lose wealth, and if they are S’poreans, get screwed http://atans1.wordpress.com/2010/08/06/what-abt-high-notes-sm-goh/.

Earlier in the month, it annced the sale of  its asset management arm to Japan’s Nikko Asset Management for S$137 million. DBS will then acquire a 7.25%  stake in Nikko Asset and distribute Nikko funds through its branches throughout the region. This move shows Read the rest of this entry »

DBS no can lose on preference share issue

In Banks on 15/11/2010 at 5:21 am

But investors can lose possibly serious money. The reasons?

The DBS  4.7% preference shares are perpetual. This means you will not be able to get yr principal back unless the bank exercises a call option in 2020. The call option means that if in 2020, interest rates are lower than today’s pathetic rates, DBS can repay investors and borrow at a lower rate.

BUT if interest rates are say 10% (they are on average 0.6% today)  and rising, DBS will not redeem the shares. Holders are then stuck forever (but getting the 4.7%  per annum interest) unless they sell in the market.

When one sells in the stock market, the amount paid will reflect the prevailing interest rate and the creditworthiness of DBS. If interest rates have risen from the 0.6% average, you will lose part of yr principal. If interest rates are around 10%, one could possibly easily lose 10% of the face-value of the amount bought.

By buying this preference share, investors are betting that for the next 10 yrs, interest rates will trend lower. DBS is betting that interest rates will rise.

And remember DBS has form in selling a product that loses investors money. Investors in its HN5 Notes lost everything while investors in Lehman’s minibonds at least recovered 50% of their investments. And Lehman went bust!

BTW potential investors may want to recall what DBS did to investors of its HN5 notes http://atans1.wordpress.com/2010/08/06/what-abt-high-notes-sm-goh/

DBS:Takeover target?

In Banks on 14/10/2010 at 5:16 am

Could DBS be a takeover target for StanChart? The latter has just launched a 3.2bn sterling rights issue which would make it one of the top 20 banks by market cap. Temasek would surely be glad that one of  its best performing investments relieves it of a dog of an investment. StanChart is itself the subject of talk that JPMorgan wants it.http://atans1.wordpress.com/2010/09/22/stanchart-a-takeover-target/

The only advantage for StanChart to own DBS is that it will finally have a market where it is the dominant player. It has never had a market where it dominated, unlike HSBC which parlayed its dominance in HK into being a global player.

As to DBS’s other biz, they are dross compared to similar biz owned by StanChart.

BTW, DBS is late to another party.

In June DBS Group annced that it was looking looking to expand its Global Transaction Services (GTS) biz by doubling its current annual revenue of S$800 million in less than three years.

The newly appointed, Thomas J McCabe, managing director of Global Transaction Services, said the expansion will be carried out in a two-pronged approach.

This involves both building on its current Internet banking platform for its corporate clients and grooming GTS staff to meet their clients’ growing needs.

The bank is investing S$9 million on a new technology platform, including smartphone applications, to make its Internet banking service more functional.

The problem is that this biz which covers such services as corporate cash management, foreign exchange, trade finance, global custody and hedge-fund administration, is the new in-thing for much bigger and experienced banks because it provides steady income and is not too capital-intensive,. Some banks have moved investment bankers into this dull biz.

Looks like DBS has not changed, moving late into a fashionable biz where it has no special expertise. BTW Merrill Lynch and Citi had a reputation of moving late into biz where they had no special skills. Subprime is a classic example. Here’s an article on Citi’s latest possible folly: spending on new biz. Remember many of DBS’s FTs are ex- Citibankers, as is OCBC’s CEO. Only UOB is run by a true-blue S’porean.

OCBC: US broker very bullish

In Banks on 12/10/2010 at 5:21 am

Morgan Stanley is very bullish on OCBC and neutral on UOB. It ignores DBS.

Why Overweight OCBC: Our analysis shows that OCBC is more geared to upside from improved global sentiment than UOB is. In particular, it is likely to benefit sooner from improved capital markets revenues, given its greater exposure (23% of total revenues, compared with 13% for UOB) and its reliance on wholesale and private banking rather than mass affluent wealth management. In addition, as a more geared bank, it would benefit more from falling risk premia for banks.

In addition, OCBC’s greater overseas contribution and stronger growth track record give us more comfort in our higher growth forecasts for this stock.

Catalysts aplenty: We see many possible triggers for a rerating. These include an improving global economic outlook(more in line with Morgan Stanley estimates) or a lift in rates. Also, the 3Q results, due on October 29 for UOB and on November1 for OCBC, could act as a catalyst if the rate of margin compression seen in Q210 eases, or if the weak 2Q trading profit trends are reversed.

The main risk to our relative call would be rising leverage premia for banks, putting more pressure on levered OCBC, or a share buyback from UOB, which we estimate has the potential to raise its valuation by 15%. However, with UOB’s management keen to hold on to capital, the latter looks unlikely, and we believe OCBC’s higher growth offers better probability of returns.

I never realised that OCBC had the weaker capital base. But then by global standards it is overcapitalised. MAS never bot into into the view that banks don’t need capital if they are well managed.

IS DBS now a screaming buy?

In Banks on 17/09/2010 at 5:16 am

Remember DBS  sold S’poreans and Honkies toxic notes and paid off Honkies but gave the finger to S’poreans? http://atans1.wordpress.com/2010/08/06/what-abt-high-notes-sm-goh/

Well Raju Rajan was the then head of consumer banking. He has “decided to pursue new opportunities outside DBS’. BTW before he became head of consumer banking, he headed DBS’s IT team. The failure of the systems was on his successor’s watch.

Citing unnamed sources, Reuters reported he is going to Deutsche Asset Management. Death wish by Deutsche?

Now that Mr “destroyer of value” has left, is DBS a screaming buy?

It has a great chairman. It recently appointed two gd men as head of consumer banking and as S’pore country mgr. And it appointed Bertie Cheng as its adviser.  Mr PosBank had retired moons ago after DBS bot PosBank. Read the rest of this entry »

DBS safer than OCBC and UOB

In Banks on 13/09/2010 at 5:53 am

According to Global Finance, DBS is the world’s 23rd safest bank. In Asia, HSBC is the safest bank (19th). But in Asia Pacific region,  Oz banks are even safer with National Australia Bank, Westpac,  and Commonwealth Bank (at 11, 12, and 13 respectively)

French, Dutch and German banks occupy most of the top positions in the Global Finance survey, which uses  long-term credit ratings from agencies Moody’s, Standard & Poor’s and Fitch, and analysis of total assets owned by the 500 largest banks in the world to do the survey.

The safest bank is Germany’s KfW , followed by Frances’s CDC and Bank Nederlandse Gemeenten (BNG) of the Netherlands.

US banks are dogs (and taz insulting dogs), with BNY Mellon at position 30,  JP Morgan Chase (40), Wells Fargo (42) and US Bancorp (47).

Why investors don’t like acquirers

In Uncategorized on 16/08/2010 at 6:35 am

The reason: most deals destroy value for acquirers. The evidence.

And think of DBS’s purchase of Dao Heng, and PosBank. And even Singtel’s purchase of Optus. A dirty secret that the public are not aware of is that value of Optus is less than what SingTel paid for it. http://atans1.wordpress.com/2010/01/15/singtel-lost-at-least-a2-billion-on-optus/

DBS: A home grown talent to poach?

In Banks on 15/08/2010 at 11:30 am

Standard Chartered moved V. Shankar from S’pore to Dubai, a few months ago, to head the bank’s Gulf base in the Dubai International Financial Centre. He is chief executive responsible for Europe, the Middle East, Africa and the Americas.

He is a S’porean, home-grown talent, I’ve been assured by people from Stan Chart.

DBS: Analysing the write-off

In Banks on 03/08/2010 at 5:22 am

The market is taking DBS’s write-off of another S$1 bn (S$1.3bn in 2005) on its S$10bn Dao Heng purchase of almost 10 yrs ago pretty well. The stock was up 0.20 to 14.60. Without the one-time charge, DBS would have reported earnings of S$718m, a record.

I’m surprised that market is not reacting badly to the reason for the write-off: difficulty in getting funding in the HK inter-bank market is how I interpret the gibberish put out on the write-off*.

The spin suggests  DBS HK is a net borrower in the  inter-bank market. Surprising as a local bank usually  is a  net lender. So either DBS HK is anaggressive lender to consumers, or locals don’t want to deposit money. Or both.

If this imbalance in deposits to loans sounds esoteric, remember why RBS had to rescued and Black Rock was nationalised by the British government:they were too dependent on inter-bank loans to fund their loan expanding books, funding which dried up.

As HK makes up about 20% of DBS Gp’s income, net profit and total assets, problems in HK will affect the Gp. Read the rest of this entry »

DBS: Another case of discrimination against locals

In Banks on 15/07/2010 at 8:53 am

DBS’ Hong Kong unit has agreed to pay out $651 million Hong Kong dollars or about S$115 million to some clients who bought products linked to Lehman Brothers. As HK$1.3 billion of notes were sold, the compensation received works out to 50% of amount invested.

In S’pore, it sold a similar product, HN5 Notes. DBS issued, arranged and distributed HN5. A total of S$103.7 million worth of HN5 were sold to 1,083 retail clients between 30 March and 30 April 2007, according to a July 2009 MAS report.

The same report said DBS compensated investors S$7.8 million.

What this works out to is 7.5% of amount investments. “Peanuts” as Mrs SM could have said, but didn’t.

Some MP should ask in Parly SM Goh, chairman of MAS, why did DBS screw its HN5 investors, esp as DBS  said in a statement the settlement was made in the interests of its relationship with customers and of the Hong Kong financial system. So the peanuts paid to S’poreans was in the interests of its relationship with customers and of the S’pore financial system? Or it gives F#$%ALL to its relationship with S’porean customers and of the S’pore financial system?

DBS: What the systems failure report shows

In Banks on 14/07/2010 at 6:09 pm

By now, a lot has been written about what went wrong at DBS when its ATM and Internet banking systems went kaput for a while. This is a gd balanced article.

But I’m disappointed that no-one has pointed out that the failure shows that DBS tries to avoid telling the public and its customers things that negatively impact its image, while quickly giving out news that puts it in a good light. I find it strange that DBS could inform 10,000 of its customers that systems had been restored, yet failed to inform these same 10,000 customers that there was something rotten at DBS.

Next, while it kept the media informed of what it was doing to fix the problem, it didn’t alert the media immediately when it knew that there were going to be problems for its customers. The media could have advised DBS customers not to use the ATM machines and other affected services, making it a bit more convenient for customers.

Investors can reasonably wonder if DBS’s investor relation team will apply the same principles of “Delaying the release of bad news, while accentuating the good news”. Here’s hoping I’m wrong.

DBS: Heads must roll

In Banks, Corporate governance on 07/07/2010 at 5:44 am
As the inquest into the breakdown of DBS Bank’s network continues, it appears that the bank’s showing fell short of the reliability benchmarks laid out by the Monetary Authority of Singapore reports BT.
The head of IT is an FT ,and the head of Consumer Banking and a previous head of IT is an FT, “Weath Destroyer” Rajan.
If DBS fell short of MAS’s benchmarks, home-grown, true blue S’porean, Peter Seah, chairman of DBS, should axe these heads to show that FTs too have to be accountable in DBS, and to “encourage the rest”
Then, with the blood flowing on the floor,  DBS would be a screaming buy.
Update
BTW OCBC (FT CEO, but taz abt it) and UOB (proudly “home-grown” with some FTs) have not had a systems failure on this scale. Shows the lie to the “FT is best” policy, neh?

DBS: Look on the bright side

In Banks on 06/07/2010 at 6:55 am

Time to buy the stock?

Everything that could have gone wrong has — from blowing up customer (HN5), losing money (Islamic Bank of Asia), CEO dying of cancer, losing status of top dog in region, bad strategy (tiny stakes in regional banks) and now juz after trumpeting its return to retail banking, a blow-up in its systems that took eight hrs to fix.

The thing to watch is the fate of Rajan “the wealth destroyer” (he signed off on the HN5 notes as head of consumer bank). He is implicated the the latest failure because he is still the head of consumer banking, and because before he became head of consumer banking, he was head of IT.

If he leaves ASAP after this balls-up, then we know DBS is serious abt fixing its “countrymen” problems, they stock could be worth a buy. And oh and the head of IT in DBS is an ang-moh.

BTW OCBC (FT CEO, but taz abt it) and UOB (proudly “home-grown” with some FTs) have not had a systems failure on this scale. Shows the lie to the “FT is best” policy, neh?

DBS: There be value?

In Banks on 21/06/2010 at 5:08 am

I’m putting DBS on my “Value?” watch”list. I’ve never ever owned DBS preferring HSBC and UOB (this via Haw Par).

I never regretted not owning DBS esp since 1998 when the CEO post became an FT only post and FTs  dominated senior mgt.

Fat gd it did DBS’s shareholders including Temasek. According to the Boston Consulting Group, DBS has had a total shareholder return between 2005 and 2009 at negative 4.6%. OCBC had 2.4% relative total shareholder return and UOB 0.4%. OCBC has an FT CEO, but the rest of senior mgt is largely “home-grown”. UOB is on its third CEO from the Wee family (where banking is in the blood?), but the rest of top mgt is also largely home-grown.

But based on the relatively new home-grown chairman’s comments reported last week, DBS could be a different animal, if the FTs are willing and can execute his vision, this and this.

But first, let’s add to the FT balls-up list. I’m not the only one amazed to read in BT  that only now is DBS is rethinking the way it does wholesale banking in the Middle East, Europe and the United States, and is planning to focus more on supporting the overseas ventures of Asian businesses and rich clients, instead of broad corporate lending.

The bank will still lend to local firms in those markets, but will seek out those looking to invest in Asia or set up operations here.

Hell’s bells, I’m surprised that DBS is only thinking about this juz now. OCBC and UOB have been doing this from the day they set up overseas branches in faraway places.  They never did corporate banking but focused on trade financing. So did OUB.

A major test of execution is what happens to the head of Consumer Banking, “Wealth Terminator” Rajan. He signed-off on the HN5 Notes and targeting their sale to fixed deposit customers.

But the appointment of the last CEO of POSBank is a gd sign, as is the chairman’s desire that the next CEO be “home -grown”.

Hopefully DBS will no longer be a place where “FTs rule OK”, but a meritocracy,that gives the same opportunities to home-grown staff as to FTs.

DBS: Why is it “reviving” POSB?

In Banks on 18/06/2010 at 6:20 am

Apparently it is fashionable in the West to return to  “simple” banking.

What can be more simple than PosBank’s model?

Hence the return of ex-CEO of PosBank CEO (a true blue S’porean) as adviser to FT-managed (badly) DBS. some FT fiascos.

Update

Juz read what the new chairman (another true blue S’porean) has said abt the next CEO being a local. The bad news is that it may take another 10 years. Let’s hope the FT countrymen don’t gang up and get rid of him. DBS has been one mother cow for them.

DBS FTs: balls-up on top of cock-up?

In Banks, Corporate governance, Temasek on 15/06/2010 at 5:53 am

Islamic finance is set to play a bigger and more central role in global finance. This is because of greater awareness and adoption in more financial centres.

Trade and Industry Minister Lim Hng Kiang said this at the launch of the inaugural World Islamic Banking Conference Asia Summit in Singapore on Monday.

So why is DBS cutting back on the activities of its Islamic banking activities?

http://atans1.wordpress.com/2010/05/26/dbs-fts-goofed-again/

Temasek should sort out the “FT is best policy” that dominates the thinking at DBS. It is on its 6th FT CEO in a row. It’s costing Temasek (and ultimately us) shareholder value.

Remember it was an FT that overpaid for Dao Heng Bank, and messed up the takeover of OUB.  And the loss in market share in retail banking, so much so that the ex-CEO of PosBank has been brought back as adviser.

Other cock ups

http://atans1.wordpress.com/2010/05/14/dbs-fts-balls-up-contd/

DBS: Finally an admission that FTs goofed?

In Banks, Uncategorized on 05/06/2010 at 11:19 am

In an implicit admission that the FTs have messed up POSB very badly,DBS has appointed Bertie Cheng, the former CEO of POSB, as an adviser on POSB.

True-blue S’poreans; POSB customers; and investors can only cheer the move! And ask, “Why not earlier?”

Bertie Cheng was the man who via POSB brought basic banking services to the majority of S’poreans with a blend of technology and personal service.

Update

Extract from BT article

(If POSB so damned gd under under “Blow up Treasured Clients” Rajan, why the recent initiatives mentioned below and Bertie Cheng’s return? A spin too far?

Mr Cheng, who during his tenure as CEO of POSBank had helped to craft its identity as a people’s bank, was appointed as adviser on Tuesday.

Said Piyush Gupta, CEO of DBS Group: ‘I am confident that Bertie will help POSB to build on its heritage as the ‘People’s Bank’ and further entrench itself in the hearts and minds of generations of Singaporeans.’

‘Cheng, the iconic leader of the former statutory board POSBank, was associated with the bank for over 31 years, with the last 23 years as its CEO before he retired in 1997,’ said POSB.

Mr Cheng said he hopes ‘to provide insights on how the bank can build on its past to serve Singaporeans of today, and also tomorrow’.

In recent months, DBS Group has acted to fix its consumer banking business, particularly the POSB network, which – plagued by long queues at bank branches and ATMs – has lost market share to rivals that chipped away at its customer base.

In May, POSB announced that it would expand its distribution network as part of its move to reach out to customers.

It also announced in April two initiatives to make banking more accessible to Singaporeans on the move – increasing the number of self-service machines available and launching a mobile-phone banking service.

Why S’poreans should miss Chips

In Corporate governance, Temasek on 31/05/2010 at 5:38 am

Temasek last week annced a new president and portfolio team head.  We shld be glad that Temasek did not succumb to its flagship bank’s “FTs are best whether they perform or not”.

But let’s get serious. Let’s use this annc of personnel changes to reflect on why the departure of one Goodyear Chips could affect us.

Many moons ago (February I think)  BT carried an article that backhandedly criticised Chip Goodyear saying that despite his sudden, unexplained departure from Temasek, he is still in demand from the corporate worl.  (Can you see the spin for Temasek in this SPH publication, whose chairman is executive director of GIC?)

And well he should be in demand.

When he was hired to be CFO of Melbourne-based miner BHP in 1999, the “Big Australian” had lost its way.  In the 1990s, it made a series of ill-conceived acquisitions and failed projects (err sounds like you-know whom’s recent record of Shin, Merrill Lynch, ABC Learning and Barclays), amid historically low commodity prices.

The then former investment banker (he was a CFO at another miner) was one half of an all-American dynamic duo (Sorry, I’m a Batman fan). The other was CEO Paul Anderson, who came from Duke Energy.

In their first two years, BHP got rid of 2,000 employees and A$6.9bn worth of assets. They then merged BHP with Billiton, creating the world’s biggest miner. And best of all the merger worked, a rarity in M&A.

A key legacy of his stint as CEO, analysts say, is the financial discipline he brought to BHP. He ensured it grew fast enough to capitalise on the commodities boom while avoiding the ill-conceived spending of the past; and all the while,  returning cash to shareholders. A tradition that has continued.

Shortly after he took charge as CEO,  it was announced that BHP would increase its capital management programme by more than four times to US$13bn, beginning with a US$2.5bn off-market return in Australia.

With the Singapore government tapping the reserves, someone with a track record of returning  cash to shareholders while growing the portfolio is needed.

There is no Singaporean with these skills.

And as to the disagreement with the board, maybe he wanted to do big deals, while the board had already decided Temasek should become a hedgie.

And maybe his deals would have been in the extractive industry (mining and oil & gas). Remember MM had said GIC would not invest in mining ventures, because he didn’t understand mining? Though now that Temasek is dipping its toes in mining and oil & gas, Chips and the recently departed Michael Dee (ex-Morgan Stanley’s MD in oil town Houston) would be missed.

DBS: Another FT goof

In Banks, Temasek on 26/05/2010 at 5:53 am

Now it’s the Islamic Bank of Asia. Reading between the lines of the MSM spin, clear that its Islamic bank foray ran into serious problems. It now wants to focus on investment banking and become more active in private equity while remaining committed to growing its Islamic banking franchise in this region. And cutting back on financing because of losses when financing Gulf cos.

Sounds a bit like Aztech and Novena: having failed in what they were doing, they tried something new. “So easy meh?”

Why can’t Temasek exercise its prerogatives as controlling shareholder and get rid of the FTs. I mean the locals at CapitaLand are doing a gd job in Islamic financing. Juz being an FT doesn’t mean the right to “Fail, try again, fail harder” ; misuse of a misquote of Samuel Beckett.

Temasek itself is hiring locals in senior positions, ignoring the “FT is best policy” .

OK maybe I’m hard on the FTs at DBS http://atans1.wordpress.com/2010/05/14/dbs-how-to-solve-the-ft-problem/

But at the very least, they do not have the luck that Napoleon expected his generals to have. He expected his generals to be brave, competent and leaders as given in his meritocratic army: but luck was different.

Backgrounder on Islamic Bank of Asia

DBS owns 50 per cent plus one share in IB Asia’s capital of US$500 million.

The rest was contributed by investors from the Gulf Cooperation Council countries – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.

IB Asia said at the time [of its establishment] that it would offer commercial banking, corporate finance and capital market and private banking services, acting as a bridge for capital flows between Asia and the Middle East. (From BT)

Founding CEO retired last December. I’m not sure before or after Dubai World declared a debt moratorium causing problems for other Gulf companies.

StanChart: Who would have tot?

In Banks, Emerging markets, Temasek on 16/05/2010 at 6:21 am

Standard Chartered expects Indian profits to exceed HK for the first time next year, Richard Meddings, finance director, told the Financial Times. Hard to believe as HK is its core market.

But then StanChart executives, including Peter Sands, the group’s CEO, were in Mumbai to announce that the bank had obtained regulatory approval to become the first foreign company to list on an Indian stock exchange.

So a little cynicism is in order?

Seriously, Temasek with 19% of StanChart, must be commended for investing in a bank that now has as its two major markets, HK/China and India. Makes up for that FT dominated mongrel, DBS. Time to strip DBS to a local retail bank, and rename it POSB? Who needs one Asian champ and one Asian chump?

Update

When you think about it,  Temask’s banking strategy (Asian prong: stakes in two major Chinese banks, StanChart, and in Asian banks in Indonesia, M’sia, Pakistan etc) worked. Where it went wrong badly was in its Western investment banking  strategy buying into Merrill Lynch and Barclays and cutting its losses when the hedgies were buying.)

Moral of story, something Dr Goh could have warned them against: “Ang Moh tua kee” strategy does not work.

DBS: How to solve the FT problem

In Banks, Corporate governance on 14/05/2010 at 11:30 am

Do what MM suggests, or worse (from perspective of the underperforming FTs) what the British navy in the early 18th century did,  to those who mess up http://atans1.wordpress.com/2010/04/18/motivating-the-elite-learning-from-n-korea/

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