Property exposure of local banks

Further to The kind of FT turned citizen that S’pore needs, I tot I’ll share this so that someone overseas can KPKB about our banks very, very large exposure to the local property sector.

DBS estimates that approximately 44%-50% of Singapore banks’ loan books are exposed to Singapore properties via residential mortgages and via lending to REITs or other private vehicles may be captured under “financial institutions, investment and holding companies”

https://www.theedgesingapore.com/capital/brokers-calls/dbs-explains-what-higher-interest-rates-spell-banks-and-developers-cdl-uol

As the PM’s Mrs made me $ (Tempting fate but thanks again Ho Ching), and I’m not one of those PAP running dogs from our constructive, nation-building media who turn on the PAP like hyenas and jackals once they no longer get paid (Another running dog turned self-appointed tribune of the HDB plebs ), I’ll just keep quiet and look at my bank statement.

I also got exposure to UOB and UOL (via Haw Par: Haw Par: Rediscovered yet again) and Reits.

I’ve never voted for the PAP. But to quote the FT minister, “I’m invested in S’pore”and that is the way I show my appreciation of what the PAP does to keep me in prosperity.

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The kind of FT turned citizen that S’pore needs

Gupta makes DBS Great. Previous ang moh or pseudo ang mohs made it a laughing stock. CEOs Btw, he’s another Citibanker

Our other two banks are also looking good. Eat your heart out, the overseas based anti-PAP paper warrior. U should bot into them.

Which reminds me of a clueless tai tai (Tai tai’s luck runs out, heading for Woodbridge?/ Tai tai forgot this ), sold her SPH shares her elderly husband gave her when they married in the 90s, sold them and bot DBS when she panicked in 2020. She then sold DBS because she said UOB paid more in dividends (What an ass). Then sold UOB to buy SPH when it spiked from 1.20 to 1.90 last year, then sold out in panic when it weakened before it rebounded

. Her husband told her to buy back the UOB because it was cum dividend and there was 80 cents in it.

She didn’t sitting on cash. Then going into Hang Seng and Chinese techs: Tai tai keeps losing money

Tai tais’ guide to banks’ earnings

Every tai tai and her toy boy have invested in our banks because of the yield.

But when the results come out, they don’t understand what they mean.

Here’s a cheat sheet. Look out to see if there’s

A rise or fall in net interest income

A rise or fall in fee income

A rise or fall in provisions (allowances) for loans turning bad

A higher or lower cost to income ratio. The cost to income ratio measures the level of expenses the bank incurs to its revenue.

Finally is the CEO optimistic, guarded or worried about the prospects for the bank until the next reporting

Btw, I’m wrong so far in being bearish on our local banks: Can local bank stocks fall by 37%? (cont’d) and PAP a socialist party again?/ Banks doing NS.

Related post: Weath mgt is not the treasure chest local banks think it is

OCBC ATM machines missing, call centre hasn’t a clue

Sorry about yesterday’s cock up when I published “OCBC’s cock-up” but didn’t provide any text. It was an honest mistake.

Back to to story behind the headline.

Yesterday morning around 6.15am, my friend jogged to his nearest OCBC ATM machine to draw cash for his monthly expenses. The ATM machine at the Esso station was covered up. He then jogged to a 7-11 store a few hundred metres away. The ATM machine was also covered up.

There was a further OCBC ATM machine, 500m along at a 24 hr Fairprice store. But he decided it wasn’t worth the risk of jogging there and finding out that it too was shuttered.

Back home, he went online to see if OCBC had made any announcements about ATM closures in the East Coast area. He couldn’t find any.

He called the call centre and the girl was surprised when he told her about his experience as her records showed that there were supposed to be ATM machines in the locations he described.

She said the nearest available one was at Fairprice. He asked her what assurance he had that she was right given that she had no knowledge of the missing machines. She said he had a point.

He asked her to tell the bank to call him when the offices opened. He never got a call. But to be fair, she did say that it would take 48 hrs for the bank to respond because it was the weekend.

Later my friend called the Esso station and was told the ATM machine was shuttered on 1 October. So there was sufficient time for the call centre’s info to be updated.

But then since the call centre was in M’sia maybe it’s the usual case of M’sia Boleh aka M’sian inefficiency?

Can local bank stocks fall by 37%? (cont’d)

Further to Can local bank stocks fall by 37%? And other investment tales, here’s another good reason to think that bank stocks can really tank.

In the UK, where banks are usually generous dividend payers, after the authorities told banks to stop paying dividends until next yr, the banks decided to compete on seeing who could %wise have the largest loan loss provisions. HSBC (where I’ve owned shares since the early 1980s) won this show of macho, increasing provisions by a third more than expected. Shares fell by another 4% on Monday and 3% yesterday. The share price is near its 1996 lows and have already fallen below the late noughties low.

What I’m predicting is that our banks will be increasing their loan provisions beyond analysts’ expectations. They will be reporting their latest results soon.

So it’s possible that our banks’ share prices can fall by 37%.

Last chance to sell as shares recovered their Monday losses yesterday.

Good luck, yield chasers who tot banks were safe. Why not try industrial reits? They’ve held up pretty well. Buy the second liners (not the GLCs) so that I can smile when I look at their prices.

Can local bank stocks fall by 37%? And other investment tales

Last Thurday, DBS fell by 3.09%, UOB by 3.15% and OCBC 3.82% because following the Monetary Authority of S’pore’s July 29 announcement on capping Singapore banks’ FY20 dividends at 60% of their FY19 levels.

Analysts from DBS Group Research, OCBC Investment Research, and CGS-CIMB Research have maintained their “hold” or “neutral” recommendations for the shares of DBS Bank, UOB and OCBC.

But in the past, these analysts (and many others, to be fair) said that the banks’ share prices are underpinned (among other things, to be fair) by their dividend yields of around 6%.

So shouldn’t the dividend yields now adjust to reflect this?

Well if they do, share prices can fall a lot: up to 36-37% from their last traded prices.

Remember you heard this first here. LOL.

Btw, I have an economic interest in UOB via Haw Par:

Btw2, I missed a bullet. I was thinking of buying OCBC shares. Glad I didn’t but btw3 I’m into two dogs that I had tot had bottomed out: SingTel and SPH.

Btw4, I think I’ll stick to my industrial reits, sub-$1 stocks, and penny stocks. Less risky.

Btw5, hopefully if the bank stocks collapse, they bring the market down and I can get some penny stocks at decent prices. Juz grin and bear on SPH and SingTel: no averaging down. Juz collect dividend lor.

Hin Leong: Must be DBS and OCBC again

Dabbling in oil-related lending yet again and losing money. (Previous fiasco: see end of article.)

Honourable exception is UOB where I got economic interest via Haw Par: Haw Par: Rediscovered yet again. Btw, during the recent market falls, the Wee family co was buying Haw Par shares.

Local banks’ exposure (ex UOB) not as tiny as what our constructive, nation-buildng media try to picture it by emphasising HSBC’s exposure.

Here’s the truth, thanks to Seedly

S$411 million (US$290 million) owed to DBS — 0.11% of DBS’ loan book

S$354 million (US$250 million) owed to OCBC — 0.12% of OCBC’s loan book

S$209.7 million (US$148 million) owed to UOB — 0.05% of UOB’s loan book

S$850.7 million (US$600 million) owed to HSBC — 0.0005% of of HSBC’s loan book

https://blog.seedly.sg/hin-leong-scandal/?fbclid=IwAR39LRL8OX_kZLbm1qj201_2GuDl9R2A4zgLF-etv4L-y2BhOyNii1FNnZE

Good work Seedly. Go to the above cited link for a great blow-to-blow account of what happened to Hin Leong.

Here’s another schematic showing OCBC’s and DBS’s in exposure in perspective to other banks. Interestingly, only one US bank has a tiny exposure, and its not Citi.

The last time oil prices tanked a few yrs ago, DBS and OCBC were caught swimming naked with big exposures to the offshore marine sector (Think Swiber).

Weath mgt is not the treasure chest local banks think it is

Our local banks are trying to be big in weath mgt here and in their other regional markets. Of course given their dominant positions in S’pore, it’s a no brainer to do it here. Or so they think.

They should think of what happened in Oz to the dominant Oz banks who went into wealth mgt thinking they could screw or rip the faces off the sheep.

These Oz banks are now simplifying their product range and organisational structure with the main four groups — CBA, ANZ Bank, Westpac and National Australia Bank — all retreating from wealth management, a sector where some of the most egregious misconduct cases occurred.

As to the regional aspirations. Nothing to add from what I wrote yrs ago.

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.

S’pore banks: Is private banking the future?

Related post:Banks can lose money on private banking business

And what applies to private banking, also applies to wealth mgt for us plebs. And remember the retreat of the Oz banks.

Making yr money work harder for u

What with GST going up another 2 points soon, us coupon clippers got to find the difference so that we can continue eating Stilton, French butter, suckling pig etc.

The dividend yields on DBS, OCBC and UOB are 4%+. And so are the forecasted yields. Now for those of us who have second tier S-Reits up to our eyeballs, this is “peanuts”.

But instead of putting money into fixed deposits, maybe KS S’poreans should think of buying the shares of one of the local banks: remembering that you may not get back the amount invested if things go wrong. Equity premium risk leh.

And do remember: Using yr CPF OA as a savings account.

Why buy bank shares? Because PAP govt is friend of banks or so it seems: Why I hold Hongkong Bank and UOB shares

SingPass technical support versus that of OCBC and HSBC

But first, HSBC is boosting the headcount of its wealth management team in Asia. The focus is here, where the banks says it will launch new digital initiatives this year.

The bank should ensure that staff are trained in PR as well in the technical details. I have e-banking accounts with OCBC and HSBC. The OCBC staff are not that good in technical support as the HSBC staff, who really know their stuff. But when it comes to telling client about the features, the OCBC staff are really great.

As for SingPass support, what can I say? I had another bad experience yesterday. Gal hadn’t a clue. Worse gal never called back despite promising to call back later in the day: still waiting. Btw, a tech mole helped me solve the problem I had, a problem caused by the SingPass system. I’ll provide details later this week.

But for now, I can use SingPass: no thanks to the staff or the system.

Related post:  SingPass sucks, really sucks (Cont’d)

DBS: Money talks BS walks

DBS Visa Debit card, which gives 5 per cent cash back when you tap for your purchases. You can get up to S$50 back a month as long as you spend at least S$400 a month, which can be easy here even with the bank’s limit of S$200 a tap.

https://www.todayonline.com/singapore/benefits-tagged-debit-cards-can-help-savings

Meanwhile OCBC believes its customers only shop at FairPrice, Popular and Cheers

get a 4 per cent discount at NTUC FairPrice supermarket and a 3 per cent discount at FairPrice online, as well as 3 per cent off at Popular bookstores or Cheers convenience stores.

UOB’s debit card is nothing to write home about.

Tun not happy with MayBank

No not because it financed Tuaspring helping S’pore give him the finger over water.

But because Maybank (“May” is short form of “Malayan”) is saying that M’sians are buying our banks because they are of better quality, and pay higher dividends, thanks to the M$ being up s**t creek.

Maybank Kim Eng is keeping “positive” on Singapore’s banking sector while noting significant interest among Malaysian investors in Singapore banks from a flight-to-quality angle, and for their high dividend yields as the SGD appreciates.

This comes post a meeting with 15 Malaysian investors from a mix of long-only, hedge and private-banking funds to discuss Singapore banks and Maybank’s stock calls on them – for which the research house says was very little pushback on its top picks DBS and UOB, both rated “buy” with the respective target prices of $29.56 and $29.71.

OCBC, on the other hand, has a “hold” rating and price target of $10.73.

https://www.theedgesingapore.com/singapore-banks-shine-despite-regional-macros-competition-fintechs-maybank

Note of all three banks, OCBC has the most exposure to M’sia because of its extensive branch network in Malaya and its life insurance biz via Great Eastern M’sia, 100% owned by Great Eastern.

Downside of banks heavy IT spending

All three local banks are spending big time on sophisticated IT investments to build digital platforms to among other things win customers, and lower credit costs and loan defaults. DBS has won awards and, better still, a premium rating vis-avis other regional banks for its efforts.

But Suruga Bank shows what can go badly wrong.

Suruga Bank was the poster gal in Japanese banking. It spent money on sophisticated IT inves tments to lower credit costs and loan defaults. And it had lower credit costs and loan defaults compared to its peers despite being an aggressive lender. But this IT spending resulted in higher running costs.

Well a recent report found that the bank was riddled with office bullying, fraudulent activity and impossible sales targets. These were all related to the need for revenue to fund its higher running costs.

 

 

Robo advisers underperform

Recently, on the same day that I read OCBC had introduced robo investment advice here, I read

Low-cost robo advice companies billed as investment services for the masses have failed to deliver market-beating returns over the last year according to new research,

Companies such as Nutmeg offer ready-made investment portfolios of low-cost passive funds and have boomed in popularity in recent years amid a growing need for financial advice in the UK. Investors are automatically placed into portfolios based on an online risk assessment.

But according to research by consultancy Boring Money, customers would have earned more from a fund tracking the FTSE 100 than even the best-performing high-risk portfolio, and low-risk investors could have earned more in a cash [special tax account]

FT.

Lose-lose for OCBC and Barclays

FT reports that Barclays has raised almost a third less than expected from the US$225m sale of its wealth and investment management business in Singapore and Hong Kong to OCBC.

 When the deal was announced in April this yr, Barclays had indicated it could fetch US$320m from selling the business, which had US$18.3bn of assets under management at the end of last year. It had tot the unit was worth US500m.

When the unit’s clients were given the choice of whether to join OCBC, some of them decided to either stay at Barclays or to leave for another bank. This reduced the price OCBC paid, which was fixed at 1.75% of assets under management.

While OCBC paid a lot less (one third less), it can’t be happy that so many clients don’t believe the BS about Bank of s’pore, it’s private bank.

Our banks are sway kees even in SE Asia

I’m surprised to learn that the State Bank of India is bigger than DBS. And that Bank Central Asia is bigger than OCBC and that ICICI Bank and Bank Rakyat Indonesia are bigger than UOB.

OCBC pays price for biz model

While

United Overseas Bank (UOB) posted a 4.4 per cent fall in first-quarter net profit, as lower wealth management fees and trading income more than offset higher net interest income. (CNA)

OCBC had a 14 per cent decline in quarterly net profit. Unlike UOB and DBS it has adopted a bankassurance model which depends on income from its life insurance division.

Oversea-Chinese Banking Corp (OCBC), Singapore’s second-biggest lender, announced on Friday (Apr 29) a 14 per cent decline in quarterly net profit, as its insurance income dipped and allowances rose.

For the three months ended March, net profit was S$856 million, down from S$993 million a year ago.

Profit from its life assurance unit plummeted 58 per cent, a fall of S$116 million, largely due to unrealised mark-to-market losses from subsidiary Great Eastern Holdings’ bond and equity investment portfolio, the bank said.

Wealth management income, comprising income from insurance, private banking, asset management, stockbroking and other wealth management products, was down 17 per cent to S$482 million, from S$583 million a year ago. (CNA)

DBS’s results should be a lot closer to UOB’s than OCBC’s, unless there’s something really nasty at DBS’s Indonesian business.

 

S’pore banks under some pressure

Too much capital: The average Tier 1 capital ratio at OCBC, DBS and United Overseas Bank was a unhealthy 14% at the end of last year.

Worse

each dollar of Oversea-Chinese Banking Corp.’s assets earns only 1.2 cents in operating revenue before provisions, compared with 1.6 cents for Hang Seng Bank in Hong Kong. 

The narrow wiggle room for liquidity calls for caution. Hang Seng Bank’s loan-to-deposit ratio is less than 72 percent, by Bloomberg’s calculations, and 85 percent for OCBC. It’s hard to see Singapore lenders aggressively expanding their loan books if deposit growth doesn’t keep pace. But as Bloomberg Intelligence analyst Diksha Gera noted recently, HSBC and Malaysia’s Maybank are joining Citigroup and Standard Chartered in locally incorporating their Singapore retail banks. Growing competition for deposits at home could whittle away margins. 

http://www.bloomberg.com/gadfly/articles/2016-04-06/singapore-s-broken-piggy-bank

DBS, OCBC, UOB: peanuts

They are tiny in private banking, not only globally but refionally too.

In October lat yr, it was reported by CBA DBS’ private banking arm is now the eighth largest in the Asia Pacific, according to a widely followed industry ranking released on Friday (Oct 16), after assets under management (AUM) grew by by 35 per cent last year.

Private Banker International (PBI), an industry journal, said DBS’s AUM for high-net-worth clients rose 35 per cent to US$73 billion last year, helped by the Singapore lender’s acquisition of Societe Generale’s Asian private banking business.

No where near the global giants

See if you can spot OCBC or UOB.

 

End of private banking boom in Asia?

Citigroup plans to double the number of wealth management clients in Asia in the next five years to one million, as the bank seeks to capitalise on an emerging middle class in the region.

Going by Citi’s track record in joining any party when it’s about to end (sub-prime lending, commerical property lending etc) our local banks who are trying to get big in privaye banking should be wary.

DBS’ private banking arm is now the eighth largest in the Asia Pacific, according to a widely followed industry ranking released on Friday (Oct 16), after assets under management (AUM) grew by by 35 per cent last year.

Private Banker International (PBI), an industry journal, said DBS’s AUM for high-net-worth clients rose 35 per cent to US$73 billion last year, helped by the Singapore lender’s acquisition of Societe Generale’s Asian private banking business.

“Other factors that contributed to (DBS’) success are a focus on digital banking, innovation, and the ability to retain customers as their individual wealth grows,” it added.

PBI had ranked DBS number nine in its previous ranking. Overall, PBI estimates that total AUM in Asia Pacific increased by 12 per cent to US$1.54 trillion last year.

(CNA sometime back)

Ho Ching has a problem; so have our local banks

As readers will know Ho Ching has big markers on StanChart and Chinese banks.

Once regarded as a proxy for the growth of Asian markets in commodity-rich nations like Indonesia, StanChart has today become a victim of the reversal of fortune suffered by many emerging markets and their heavily indebted corporate borrowers …

Much of the lending to Asia outside of China assumed the region would grow on the back of insatiable demand from China. Much of the lending to China itself was based on that same expectation. That faulty thinking was then compounded by assuming that the value of the Chinese property used to back the loans would also continue to rise. But local banks in China, such as Agricultural Bank of China, are beginning to report that their bad loans have doubled — although officially they remain under 3 per cent. (Excerpt from recent FT article)

Ho Ho HO.

But it’s our problem too now that Tharman is now using projected long term returns from Temasek to spend our money on ourselves. Cybernuts might want to note that their heloo, Ong Teng Cheong, wanted to lock-up all the returns from the reserves (more LKY and Dr Goh). It was Ah Loong that fought him. Ah loong is the real people’s hero. if Ong had his way, we’d be pressing our noses on the iron bars guarding our reserves: Money, money everywhere/ Not a cent to spend/ Give thanks to Ong Teng Cheong

But the pix’s not that great for our local banks either: what with DBS’s exposure to Greater China and Indonesia, OCBC’s exposure to Greater China, and UOB’s and OCBC’s exposure to M’sia. Btw, OCBC has FTs as its Chairman and CEO, while DBS and UOB have true blue S’porans (Yes, I’m counting Gupta as a local. He’s a real talent.)

And if property prices tank here …

SG50: They kept my money safe

My “rediscovered” OCBC savings box full of old 50-cent coins (M’sian and S’porean). It is a representation of the OCBC HQ sometime in the 1960s. It was torn down to make way for the present building. Note I changed the photo to remove the word “OCBC” on 23 March 2015.

Local banks interested in Queen’s bank

DBS, UOB and MayBank are reported as interested in the intl side of Coutts Bank, while is for sale.

http://www.reuters.com/article/2014/12/08/us-rbs-coutts-sale-idUSKBN0JM0VQ20141208

Hope they realise that the Queen of England banks with Coutts Bank, UK, which is not for sale.

Interesting that OCBC is not interested. Regretting it overpaid for ING’s Asian private bank? Unlike DBS which got a great deal for SOCGen’s Asian private bank. 

 

Desperately seeking “core plus” or “value add” Reits

When it comes to Reits, I’m almost like Pussy Lim saying the PAP is doomed (since 1990s), though she recently nuanced her remarks and Roy on the govt “stealing” (my take on what he is claiming, not his word) CPF. Same old messages.

Here’s a variation on my Reits tale. I’m looking at a Reits’ strategy to guard against the effects of likely interest rate rises*. I’m looking at a“core plus” or “value add” strategy: Reits that buy underperforming assets, for example a building with empty space, and focuses on improving returns, for instance by increasing occupancy.

Or Reits outside traditional core commercial real estate include student housing, medical offices, storage and even social housing. I’ll be looking at the Jap Golf Reit.

If I find Reits that are executing this “core plus” or “value add” strategy competently, I’ll switch to them even if their yields are lower. Let you know my conclusions after I do the switches.

BTW, Bank of S’pore, OCBC’s private bank, is recommending Reits and other income plays.

Sounds like what I’ve been doing, suggesting the last few yrs. Maybe I can be Bank of Singapore’s strategist?

Singapore equities will remain range-bound for the short term, but dividend plays will continue to attract interest, said BoS’s CIO on July 3.

“… certain interesting themes in the Singapore market, and one of which … there are many opportunities in the dividend yielding sector, ‘REITs’, some of those Temasek-linked companies** do give you a very nice yield in the context of a very low yielding environment in the world,” said Chief Investment Officer Hou Wey Fook.

BOS says the impact of a slowing Chinese economy on Singapore’s growth will likely be offset by the pick-up in the developed economies. This combined with the steady performance of emerging economies will deliver the best global economic outlook in 2014, since three years ago. (BT report)

BoS, like me, says it prefers equities to fixed income due to falling bond yields and soaring stock market indices. It also expects the improving growth momentum to spur companies into increasing their capital expenditure and M&A activities.

——-

*Keep an eie on the junk bond market. It’s going through a serious correction that could turn into a collapse given that many say the junk bond is a bubble.

**https://atans1.wordpress.com/2013/10/03/temaseks-fab-5-spore-blue-chips/

Problems at Temasek’s StanChart & DBS/ OCBC ovepaid for HK bank?

Standard Chartered has said first-half operating profits will be 20% lower than a year earlier, blaming a slump in income from its financial markets business.

The warning comes only three months after the Asia-focused lender reported its first fall in annual profits for a decade.

The UK bank had been expected to show a modest bounce-back this year.

But it said tougher regulations and low market volatility had hurt revenues.

…

Standard Chartered said its interest rate and foreign exchange trading had been particularly hit.

Chirantan Barua, an analyst at Bernsteinm said: “Cyclical headwinds are yet to arrive in full force in the bank’s two key markets – Hong Kong and Singapore. Not that Korea or India is out of the woods either.

“Pack that in with a challenging and uncertain capital regime that won’t be resolved until the end of the year and you have a great deal of uncertainty around the stock.”

http://www.bbc.com/news/business-28031504

StanChart shows the peril of investing in a stock listed overseas overseas that operates internationally. When profits were gd, sterling was weak against all major currencies. When sterling is strong, profits no gd. Note the value of sterling is irrelevant to the underlying profits or losses of  most of bank’s international operations.

——

ON AN afternoon in early summer a prospective customer walked into the gleaming new branch established in Shanghai’s free-trade zone by DBS, a Singaporean bank that, like many of its international rivals, has long touted China’s great promise for its business. The lobby was empty, save for a guard playing a video game. A log showed that the branch was attracting just two or three visitors a day. DBS remains optimistic about China and says that most of its free-trade-zone transactions are routed through other locations. But the torpid atmosphere at the branch points to foreign banks’ struggle to crack open the Chinese market.

—–

To be fair to DBS its New Citizen CEO is not like the FT CEO of OCBC who may have blundered.

OCBC is offering to buy Wing Hang Bank’s shares for 125 Hong Kong dollars (US$16.12) each, in a big bet on China’s sustained economic growth. OCBC hopes the deal will springboard its growth into mainland China through the Hong Kong bank’s cross-border operations, and give it a foothold in Macau.

OCBC and Wing Hang Bank, one of Hong Kong’s last remaining family-owned lenders, began discussions on a possible deal late last year, and in January entered exclusive talks (after ANZ and UOB balked at the family’s asking price), which were extended twice as they argued over price.

The most recent comparable transaction (and bargaining benchmark for the family), the 2013 sale of Chong Hing Bank, went for 2.35 times book value including the value of a special dividend related to Chong Hing’s real estate. Accounting for the increase Wing Hang ascribes to the value of its property, the OCBC offer is closer to 2 times book value, a discount, compared to the Chong Hing deal, considering Wing Hang’s return on equity averaged 11.3% for the past three years, versus 7.8% for Chong Hing, according to Capital IQ.

Still OCBC shareholders were not that happy and its share price suffered.

What is unknown is the value of Wing Hang’s Hong Kong real estate, on some of the busiest shopping streets in the world. These could be worth even more than the bank says. A government index of Hong Kong retail properties has risen 400% over the past decade. Yet the company’s revaluation over the acquisition cost of the property is less than 100%.

If enough of Wing Hang’s minority shareholders refuse the price on offer, however, OCBC might prefer to raise it or offer* or bear the cost of maintaining the Wing Hang listing, and the cost of failing to fully integrate the bank.

Update at 6’00am: Here’s someone who thinks OCBC got sold a dog.

Wing Hang gives it greater opportunity to finance trade between China and other parts of Asia such as Malaysia and Indonesia, where it already has a foothold. Wing Hang’s strong funding base – loans were just 73 percent of deposits at the end of last year – is another advantage, as is its ability to capitalise on the yuan’s growing international popularity. About 17 percent of Wing Hang’s deposits are currently in the Chinese currency.

Nevertheless, the purchase brings risks to OCBC investors. China’s economic slowdown is creating credit wobbles, while Hong Kong’s property boom is bound to have led to some lending excesses. Meanwhile, rising interest rates in the United States could reverse the cheap deposits that have flowed into both Hong Kong and Singapore in recent years. Shareholders, who will probably be asked to help finance the purchase, may pay a high short-term price for OCBC’s long-term China ambition.

 http://blogs.reuters.com/breakingviews/2014/04/01/ocbcs-chinese-ambition-comes-with-hefty-price-tag/

 ————

*OCBC has said the bid, a 50% premium to the then stock price, is generous.

Tightening FT immigration helps S’poreans PMEs

Al least for finance and accounting professionals.

Salaries for finance and accounting professionals in Singapore are expected to rise, with the tight labour market likely to force companies to increase wages to attract and retain employees, said recruitment firm Robert Half on Thursday in a press release.

55 per cent of companies in Singapore plan to increase wages for professionals in their finance and accounting department. Only 1 per cent of firms plan to cut wages, while the remaining 43 per cent plan to maintain salaries.

This is in contrast to the other five markets surveyed. (CNA last week). These markets are China, Hong Kong, New Zealand, Australia and Brazil.

So waz this rubbish that welcoming FTs with open arms helps S’poreans get better wages? The extract implicitly shows that a liberal Ft policy helps repress wages of locals PMEs; and even ST reported that the liberal FT immigration policy deprive young of jobs:https://atans1.wordpress.com/2013/10/28/proof-that-fts-displace-sporeans/.

An example of tightening polices: a Pinoy couple and their son are PRs, but their young two-month old child only has a long-term pass. The couple are KPKB about discrimination and fear. I think they are barking up the wrong tree. But then they are Pinoys , playing the “victim” game, like PIDCS . ST reported:

PIDCS is currently being targeted, presumably by Singaporeans who oppose the staging of the event (‘Organisers of Philippine event targeted’, 17 Apr).

PIDCS is said to have received anonymous phone calls demanding the cancellation of the event. The organisers have reportedly felt harassed.

“The callers say we have no right to hold the event in Orchard Road,” a PIDCS spokesman said. “We do not dare to pick up phone calls now if we don’t recognise the number.”

As I told a Pinoy community adviser, “S’poreans, unlike Filipinos, don’t go round shooting people in malls. Nor do they go round burning the Filipino flag. So pls tell the organisers not to BS their fear. This is S’pore not Manila or Mindanao.”

(Related post: https://atans1.wordpress.com/2014/04/25/grandfathers-place-is-it-pidcs-finest-filipino-talents-at-work/)

But let me end constructively. Three cheers for OCBC and may others follow it. I’ll let BT tell the story

For the first time, a local bank will be giving its employees payouts from the Wage Credit Scheme (WCS), instead of using the funds for training and development initiatives.

OCBC Bank will be disbursing $3 million of its first WCS payout to 1,500 eligible Singaporean employees of the bank and its securities subsidiary …

Introduced in Budget 2013 as part of the three-year Transition Support Package, the $3.6 billion WCS helps firms cope with rising wages in a tight labour market. It also encourages businesses to channel resources towards enhancing productivity and subsequently share productivity gains with employees. The WCS payouts co-fund 40 per cent of pay rises given to Singaporeans who earn a gross monthly income of $4,000 and below.

The 1,500 recipients of OCBC’s WCS payout make up about 25 per cent of OCBC … total staff strength in Singapore. Most of these recipients are junior executives and unionised employees, serving as assistant managers, bank officers and clerical staff in the bank’s consumer financial services as well as operations and technology divisions. They will receive the payouts in June and July.

Recipients can opt to have their payout credited to their Central Provident Fund (CPF) accounts or to invest in shares through the OCBC Blue Chip Investment Plan, which is open to all employees of the bank. Employees can choose only one of the two payout options.

 

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

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?

——————————-

*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.

https://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

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 https://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

https://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

————————

*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)

Asean round-up

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

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.

CIMB, OCBC interested in stake in Thai bank

OCBC and CIMB have signed non-disclosure agreements as they consider bidding for General Electric’s stake in Bank of Ayudhya, Bloomberg News reports. MayBank is interested as usual, but doing nothing, as usual. I’m surprised that OCBC is interested.  

Bank of Ayudhya is Thailand’s top or second-ranked provider of credit cards, car loans and personal finance, having bot businesses from HSBC, GE and AIG, among others.

DBS screws its customers again, and again?

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?

 

 

F&N: ThaiBev the bidder?

As you will know, OCBC and its Great Eastern Holdings insurance unit said they had been approached with an offer to buy their combined 18.2% stake in F&N as well as their 7.9% cent holding in Asia Pacific Breweries.

FT reports that the bidder is “a unit of ThaiBev”.  It is Thailand’s largest and one of the largest beverage alcohol companies in South East Asia. Listed on SGX. Interestingly it has distilleries or breweries  in Scotland, Poland, Ireland and France, in addition to Thailand and China. Makes Chang Beer.

Why our banks will be issuing more perps

(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

(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.

Euro crisis R perpetual securities & our local banks

(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?

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.

DBS & UOB

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.

Casinos: Good for our banks

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.

OCBC: Standards even lower than PM?

PM said abt his ministers as reported in the media: Negligent or dishonest ministers will be sacked, but short of that, there is a need to handle exits decorously and with dignity – and not turn them into public spectacles that deter more good people from entering politics.

“If a minister doesn’t perform well despite his best efforts, then I will move him to a less demanding portfolio where he is able to perform or, if necessary, I may have to phase him out discreetly,” he said. “Not every person who comes into government will succeed as minister. It’s a difficult job.”

What the Fish? Where’s the accountability? Looks like once a minister, can skive or tuang, juz need to show trying. No wonder Lim Hng Kiang is still a minister. Bet you he is the MR3 minister who gets more than other ministers except PM and DPMs. He’s got the senority being a cabinet minister since 1994. Raymond Lim and Mah should cry,”Not fair, PM”, and “Why us, and not Yacoob?”.

But WTF? OCBC is going one step “betterest”.

“After the succession, OCBC’s corporate bank will be divided into corporate banking and commercial banking, which will be led by Mr George Lee, currently head of investment banking, and Mr Linus Goh, currently head of enterprise banking and financial Institutions”.

I mean OCBC’s investment bank is a complete failure and the guy running it will run the corporate bank? Albeit one that is less impt than the previous corporate bank. At least PM moves duds to portfolios where he thinks they can’t do much damage. OCBC moves an underperformer to where he can damage the brand seriously.

Think I’ll stick to UOB, that I hold via Haw Par.

Banks can lose money on private banking business

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’pore banks: Is private banking the future?

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

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

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

Local bank investors are strange

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:Takeover target?

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.https://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

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.

DBS safer than OCBC and UOB

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).

Is GE Life fairly valued?

Based on friday’s closing price of $15.66,  GE Life is trading at  1.18x 2009 ‘s  Embedded Value (the sum of net assets plus the current value of future profits from existing policies) of $13.167 a share. I have argued that based on what PRU is paying for AIA, GE Life’s value should be unlocked by OCBC https://atans1.wordpress.com/2010/04/26/ocbc-value-to-be-unlocked-ii/

According to FT’s Lex, when an insurer is sold at  EV, this means it is assumed it will write no more new business, nor make any gains on its investments.  That is why most recent deals in mature markets have been completed at about 1.2 times – a small premium for control, for cost synergies, and for growth potential. The 1.69 times that the UK insurer is proposing to pay seems bullish, given that AIA’s two biggest markets by gross written premiums are Hong Kong and Singapore, already overrun by agents.

Then there’s the question of what the new owner will be allowed by regulators to keep. Some of the licences AIA holds were acquired decades ago, under old rules on foreign ownership. Factor in forced disposals, likely to be at multiples below 1.69, and the effective price for the remnants could become even higher. Korea Life, another insurer talking up an Asian growth story, recently went public at one times embedded value. Japan’s Daiichi Mutual, ditto, went at 0.6 times.

So if FT is right, the Pru is overpaying for AIA, and by implication GE Life at $15.66, is priced about right at about 1.18x EV. And that I talked nonsense about how much it was worth to OCBC, if sold.  If Pru’s shareholders vote against the deal, I talked rubbish.

DBS: How to get M’sian exposure

A flaw in DBS’s Asian strategy is the lack of  something decent in Malaysia: how can one be a leading regional bank without a sizeable Malaysian operation. As Citi, HSBC, and Standard Chartered; and OCBC and UOB know, banking in Malaysia is very, very profitable.

DBS’s FTs blotched a takeover bid for OUB about 10 years back, which would have given it a sizeable retail and SME presence in Malaysia: something that OCBC and UOB have. UOB took over OUB and in the process enlarged its Malaysian presence.  And the no FTs,  hereditary principle looked better than the FT policy.

So, DBS should look at taking over OCBC because of its sizeable Malaysian banking business: 25% of pre-tax profit in FY2009.

Now the rest of OCBC’s banking operations don’t fit into DBS because of the overlap in Singapore, HK, China, Indonesia and Thailand. Both banks have crummy operations in the last three countries, while in HK, DBS has a sizeable operation while OCBC has a small operation. As for life insurance, DBS has eschewed the bankassurance model that OCBC has adopted via its control of GE Life. So unless the FTs now want to do bankassurance, it has to sell the 87% of GE Life that OCBC has.

So one alternative is for DBS should bid for OCBC, retain its Malaysian operations and sell off its banking operations in Singapore and Asian other countries  to ANZ Bank. As for the GE stake, if ANZ Bank is not interested, try MetLife and Zurich. https://atans1.wordpress.com/2010/03/09/ocbc-more-on-ge-life/

Or persuade ANZ Bank and an insurer to make a three-way bid, with the intention of dismembering OCBC ala what happened to ABN Ambro when RBS, Fortis and Santander bid for and dismembered ABN Ambro. True RBS and Fortis promptly went bust and had to be nationalised, but history does not necessarily repeat itself. And if ANZ Bank wants GE Life, make a two-party bid.

OCBC: Value to be unlocked II

Sometime in March, I analysed how valuable GE Life is to OCBC based on the price that Prudential is paying for AIA. I said  (now revised post to take account of the embedded valued -EV – revealed in the just released 2009 annual report) that the value to OCBC of its GE stake (based on the AIA valuation that the Prudential is working on) is S$3.15  share or S$10.5 billion in total. https://atans1.wordpress.com/2010/03/08/ocbc-value-to-be-unlocked-cash-returned-to-shareholders/

But I doubted that the value would be unlocked given that without GE Life OCBC would be only an SME bank its pretensions in private banking and investment banking notwithstanding.

https://atans1.wordpress.com/2010/03/17/ocbc-reward-for-avoiding-balls-up/
https://atans1.wordpress.com/2010/04/13/ocbc-close-down-the-investment-bank/

But given the rumours that OCBC is on ANZ Bank’s target list, who knows except the controlling shareholder of OCBC whether value will be unlocked.

Tomorrow I will discuss why DBS should organise a consortium to takeover and dismember OCBC.

OCBC: Close down the investment bank?

Anthony Soh is suing OCBC Bank. He claims in court that  said serious breaches on the part of OCBC Bank were behind his failed takeover bid for Singapore-listed Jade Technologies in April 2008 because  the bank failed in its duty to advise him.

He says OCBC did not advise that a financial resources confirmation letter he had provided was insufficient for the purpose, and also did not verify the authenticity of the letter until it was too late.

The bank also did not review the terms of a share lending agreement that he had signed with an Oz broker. Millions of Jade shares lent to the brokerage were seized by its creditors when it failed and Dr Soh was forced to withdraw the offer because of his diminished holdings.

If he can prove his allegations, it would be interesting to see OCBC’s defence. What he claims OCBC failed to do would be par for the course stuff for M&A experts, or so I’ve been told.

The failed and clownish bid resulted in  the Securities Industry Council, which later investigated the issue, censured Dr Soh and OCBC for breaches of the takeover code.

Dr Soh was banned from making any takeover offers in Singapore or sitting on the board of any Singapore-listed company for five years, while OCBC and an Allen & Gledhill lawyer voluntarily abstained from takeover work for six months.

DBS for all my rants abt its FT policy trumping S’pore’s meritocratic policy shows that the FTs didn’t ruin the investment bank. Unlike OCBC’s and UOB’s investment banks, DBS’s investment bank has not caused any problems for DBS. UOB’s investment bank was caught out when it tried avoid an undersubcription of an IPO. Prosecutions and convictions followed.

Local banks: Underperforming their regional peers

Our local banks were thrashed by Malaysian, Thai and Indonesian banks when measured by relative total shareholder return (RTSR) of mid-cap banks over the last five years according to a  Boston Consulting Group (BCG) report.

OCBC was 11th, with a 2.4 per cent RTSR while UOB with 0.4 per cent RTSR was 18th. In the previous five year period 2004-2008, OCBC and UOB were placed 24th and 23rd respectively. They have improved.

DBS has a negative RTSR. It was ranked 35 over the five-year 2005-2009 period with an RTSR of minus 4.6 per cent. Previously, DBS ranked 49 out of 50 in the mid-cap bank category. Still bottom of the class but our national champ. Or shld it be our national chump?

“The rankings were for the biggest 100 banks as measured by capitalisation for which a five-year RTSR could be calculated; they were then split into two categories – large-cap and mid-cap. RTSR measures total shareholder return based on the change in share price and that includes gains from reinvesting dividends adjusted to the performance of the local stock market,” BT reported.

The following table is taken from BT.

OCBC: Reward for avoiding balls-up?

OCBC Bank granted chairman Cheong Choong Kong more than 230,000 share options – the most he has received since being appointed chairman in July 2003.

Could this I wonder be for avoiding the investment mess-ups that happened at SIA when he was CEO? Make no mistake, he was a vv gd CEO: operationally. SIA went from “strength to strength” as the cliché goes.

But during his tenure, there were two big investment mess-ups — buying into Virgin Atlantic at a very gd price for one Richard Branson (at a time when he needed money) and Air NZ. Air NZ went bankrupt (mainly because of the crisis that hit the airline industry post 9/11) and it could have been worse. SIA wanted to increase its stake sometime before before 9/11 but was blocked by the NZ government because Air NZ was a “strategic asset”. While the Air NZ investment was only a peanuty S$403m, the 49% stake in Virgin cost £600m (US$960m).

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.

But to be fair to OCBC and its chairman, HSBC is rumoured to have also bid US$1.46bn but was unwilling to give an assurance that there would not be staff layoffs. OCBC was willing.

Update 22 April 2010

The media have reported that OCBC’s inhouse prvate banking team is unhappy, with resignations etc being made.

OCBC: More on GE Life

OCBC mgt could also try MetLife of the US. Metlife is buying AIA’s sister company, Alico, from AIA for a reported US$15.5 billion.

Alico has Asian insurance operations in Japan, Pakistan, Bangladesh and Nepal. Yes thaz all.  Buying GE Life can add S’pore, M’sia, Brunei, Indonesia and China (the last two admittedly smallish, but still better than Nepal or Pakistan. Both are almost failed states.)

And Zurich Financial Services Group which together with Axa and Allianz according to Reuters are the European insurers looking for a bigger slice of Asia’s high-growth markets considering  unsolicited bids for ING’s Asian businesses

Reuters reports further that, “Analysts say the AIG sale supports the valuation of ING’s businesses and that ING will be able to exit insurance at book value of around 16 billion euros  or more before the end of 2013, by when it must sell the business … UBS research analysts put proceeds of a divestment of the Asian business at 5.6 billion euros [US$7.6 billion]… ‘ING’s Asian business is not the likes of AIA, but it is good. I thought we could see some unsolicited bids even before the Prudential deal was announced,’ said a second investment banker who asked not to be named.

“ING, splitting off its global insurance operations as part of a restructuring deal mandated by the European Union, has made clear since late October that it preferred an IPO rather than a trade sale for the insurance unit … made no secret of the intense trade interest in the business, with chief executive Jan Hommen famously saying he had to use ‘hands and feet’ to count all the suitors who had called him.”

I doubt Axa would be interested in GE Life or ING Asia as it is in the midst of trying to privatise Axa Pacific which is listed in Oz Land.  The latest bid by NBA is worth US$12 billion. NBA will keep the Oz operations, and sell to Axa the Asian operations.

OCBC: Value to be unlocked, cash returned to shareholders

[Note on 26 April 2010 11.30 am, this piece was updated as the 2009 annual report was made available on website]

If OCBC mgt wants to unlock value and return cash to shareholders, this is how to do it.

First by reading the FT. “Prudential, trading at roughly 1 times embedded value, appears to be overpaying by offering 1.7 times EV for a business [AIG]with lower-quality profits. The valuation appears less outlandish, however, when compared with prevailing multiples in Asian markets of about 1.7-1.8 times”. EV means embedded value.

At its present share price (S$15.90), OCBC’s GE Life is trading 21% above its 2009 embedded value because GE LIfe’s free float is tiny: OCBC has 87% of GE Life.

At 1.7 X EV share price shld be 22.35 or 41% up.

And in 2009, AIA had 5% growth at operating level. Based on GE’s annced results, GE’ s is several times that. So given GE life’s smallish size and profitability, 2 X EV would be fair (even taking into account its very weakish presence in China: but then it is building up mkt share in Indonesia) .   At 2 X embedded value, share price is almost $26.30 — 65% up.

OCBC mgt:  Time to call, Allianz or Aviva? Or Temasek? That bull on Asian financial stocks.

After all, OCBC  can keep the bankassurance model (OCBC retains exclusivity in branch selling insurance where it has a decent branch network) ), and can buy shares in an insurance co that is buying GE Life (to participate in growth of insc biz). And remember OCBC has no access to GE Life’s cash flow. It can only equity account GE Life.

The sale would bring in around S$10.5 billion in cash to OCBC or $3.15 a share.

But I doubt whether mgt or the controlling shareholder would want to do this deal. The downside is that OCBC would shrink and be smaller than DBS once shorn of GE Life. Its engine of growth would be gone and it would be a takeover target. So long term, one could argue that deal would be bad for OCBC.

Still if I were the OCBC Lees, $2.8 billion(assuming all the proceeds are paid out)  is not to be sneered at.

Wondering why writing abt this fantasy deal? Showing off that my CF skills as gd as my writing skills. Hoping that sumeone will contact me offering me some freelance analytical work instead of word spinning work. Here’s hoping!