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Tag: UOB

  • UOB sells Brunei retail banking business to Baiduri Bank for $46.6m

    UOB sells Brunei retail banking business to Baiduri Bank for $46.6m

    The Brunei unit of United Overseas Bank (UOB) has offloaded its retail banking business to Baiduri Bank Berhad for BND65 million ($46.6 million).

    With the approval of a court declaration, banking and credit facilities made to customers of UOB Brunei and the current, saving and fixed deposit accounts maintained by the clients of UOB Brunei will be transferred to Baiduri.

    According to UOB, the sale consideration of $46.6 million, less the deposits in transferred accounts, will be settled as a cash payment. Arrived at on a willing-buyer-willing-seller basis, it took into consideration account income potential and estimated loan defaults of the retail banking business.

    The sale is part of a move to “rationalise its businesses and operations to achieve cost efficiencies and to focus on building a business platform that is consistent with the business prospects in the country”.

    According to official statements, the sale of its Brunei retail banking unit is also not expected to have any impact on UOB Group for FY2015.

    UOB Brunei will continue to offer wholesale banking services to Brunei clients, as well as continuing its asset management presence there through UOB Asset Management.

    This latest move gels with UOB’s aim of developing itself as a super-regional bank and growing its presence in the Asia Pacific (APAC) region, given the opportunities presented by the growth narrative defining the current economic climate of the region – notwithstanding China’s market turbulence – and the growing middle class of the region.

    In August 2014, Wee Ee Cheong, the CEO of UOB, explained to The Straits Times that due to the acquisition of Overseas Union Bank (OUB) in 2001 and its integration into the UOB Group, the large market concentration in Singapore forced them to take a regional growth approach. Wee had told the Straits Times: “How would the group grow from there? And so we said it would be timely for us to expand regionally to have an effective presence in South-east Asia.”

    Wee explained: “…growing our intra-regional businesses would make our earnings more sustainable and deepen existing relationships. If I have a regional banking relationship with my customer and the banks with me in Indonesia and Thailand because of my footprint, it will be easier for us to grow the banking relationship.”

    Since 2013, its profit growth has become skewed to foreign markets beyond its base and global headquarters in Singapore. The divestment reflects a move to consolidate its holdings in the region, as Brunei is the smallest market in the Southeast Asian region. This move is aligned with its decision to pursue organic growth and M&A opportunities as part of expanding its business operations.

    In June 2015, it disclosed that it was in the process of pursuing a digital revamp, given the recent growth of the worldwide financial technology space. As of 21 October 2015, a Bloomberg quote placed its market capitalisation at S$32.03 billion (US$23 billion).

  • Identifying Asia’s regional bank champions

    Identifying Asia’s regional bank champions

    Bank of China is seen as the strongest challenger for Asian leadership

    A swelling population, exponential economic growth and broad financial development are transforming Asia ex-Japan into a global finance hub.

    It is the opportunity to service retail and wealthy clients in Asia that has fired banks’ ambitions to extend their regional networks and boost their distribution power.

    But the odds are stacked against them. They have nowhere near the scale of the international players Citi, HSBC and Standard Chartered. This trio has resources, customer networks and relationships acquired from a century of operations in Asia.

    Asian banks, on the other hand, face constraints in their ability to expand cross-border, including fierce domestic competition and national protectionism.

    Nevertheless, they have become increasingly vocal about their regional ambitions, centred around expanding their wealth management businesses.

    Our leading contenders come from China, Malaysia and Singapore. Hong Kong banks appear content to focus on Greater China, where they will seek to be facilitators of trade flows rather than competitors in regional distribution.

    “From a geographical standpoint, the footprint of the Singaporean banks is wider,” said Michael Wu, senior equity analyst at Morningstar. “They might be in a better position to access Asia.”

    Bank of China is seen as the strongest challenger for Asian leadership. It has the balance sheet and is willing to suffer in the short term to expand, notes CLSA.

    BOC has a network of 11,514 offices, although 10,693 are onshore. Overseas, it has 628 offices in Hong Kong, Macau, Taiwan and in 37 other countries.

    It was first to offer private banking onshore in 2007 and now manages Rmb720 billion ($116 billion) for 74,000 private banking customers, with more than 7,000 wealth management centres and 34 private banking hubs. It has private banking operations in Singapore and Hong Kong and has ambitions to grow in Asia, including Australia, where it opened a branch in 2010.

    Singapore’s largest lender, DBS, has 280 branches across 15 markets in Asia. But Singapore and Hong Kong remain its major markets, despite its attempts for regional leadership. As CLSA points out, its operations in the growth markets of China, India and Indonesia have remained sub-scale.

    DBS is building wealth management/private banking operations. Its private banking business was bolstered by its $220 billion acquisition of Société Générale’s private banking business in Asia last October, boosting its AUM 22% to S$133 billion ($97.4 billion) as of December 2014. DBS’s total wealth management AUM stood at S$141 billion and its private bank AUM at S$95 billion.

    Maybank was a late-comer to private banking, but has been building a solid Asean network. Its regional operation only started 18 months ago, with Singapore as its hub. But it has been hiring aggressively and expanding its proposition, including launching a discretionary portfolio management service.

    Steven Seow, Asia head of wealth management at Mercer, pointed out that Maybank has succeeded in converting long-time Asian corporate banking entrepreneurs to its wealth management business. In terms of private banking assets, Maybank has S$6 billion in overall AUM, having added S$2 billion in new assets over the past year.

    Historically OCBC has focused on Southeast Asia. It has a strong position in Singapore and is one of the largest foreign banks in Malaysia, providing conventional and Islamic finance. Last year it acquired Wing Hang Bank in Hong Kong for $5 billion.

    That increased OCBC’s branches in Greater China from 25 to 120 and deepened its operations in the Pearl River Delta, although it paid a high premium given Wing Hang’s operations in Hong Kong and China were marginal.

    In private banking and wealth management, OCBC’s 2009 acquisition of ING Private Banking (renamed Bank of Singapore) for $1.46 billion has given it the scale to compete with DBS and global banks. The acquisition trebled its private banking AUM to $23 billion.

    As of March this year that AUM had since doubled to $51 billion. It enjoyed 15% year-on-year growth in wealth management income in 2014.

    Among Singaporean banks, UOB’s focus is on Southeast Asia, with universal banking operations in Malaysia, Thailand and Indonesia. But outside of Singapore its strength in Malaysia – it has the largest foreign bank network in the country with 45 branches – is not replicated in Thailand and Indonesia.

    Without the help of an international acquisition, UOB has invested in building its wealth management and private banking capabilities out of Singapore.

    It saw the combined AUM of wealth management and private banking grow 67% to S$80 billion in the four years to 2014, during which time the profit contribution of wealth management doubled to 47%.

    But while it has plans to offer private banking outside of Singapore, its current proposition is acknowledged as behind city-state peers DBS and OCBC.

    The full article appears in the July 2015 edition of AsianInvestor magazine