Posts Tagged ‘Dao Heng’

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.

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 »