Peter Seah Lim Huat when he was managing OUB

IT DOES NOT TAKE A GENIUS TO UNDERSTAND the inexorable arithmetic of banking survival in Singapore. There are four major banks today. If, as expected, a government blueprint for banking reform due this month allows unfettered foreign access to the banking industry within five years, that number could well drop. "There is room for consolidation," says Deputy Prime Minister Lee Hsien Loong, "but we hope there will be at least two Singapore institutions." In this high-stakes variation on musical chairs, one Singaporean bank likely to find a secure seat is Singapore's largest bank, state-controlled DBS. That leaves one chair for three big competitors. Which two will fail? Obviously, it is not quite this simple. Perhaps none will survive as strictly Singaporean entities; maybe all of them will. Whatever happens, Singapore is on the cusp of a scramble for banking business that is likely to force major changes on traditionally stolid institutions.
A few early, easy changes are already apparent. Singapore's second-largest bank ranked by assets is Oversea-Chinese Banking Corp. (OCBC), a 67-year-old bank trying to shake a hidebound image. Its latest promotional brochure is called "OCBC 3.0," an attempt to convey that the company is updating itself as rapidly and regularly as a new software program. Overseas Union Bank, the fourth-largest of Singapore's Big Four banks, counters with an image brochure called "OUB 2000." The final major, United Overseas Bank, hasn't yet engaged in the public relations war over which of the big players is Singapore's most visionary bank. Time will tell if that decision, taken by the only remaining major family-run bank left on the island, reflects a lack of imagination or a cunning, but hidden, strategy for the future.
"There could be all sorts of different combinations but one thing is certain: We will see mergers among the top Singapore banks sooner rather than later," says Tony Raza, analyst for Daiwa Institute of Research in Singapore. If that is true, the two biggest banks by market capitalization, DBS and OCBC, would probably have the upper hand. OCBC, with a market cap of more than $11 billion, has been rumored to be interested in taking over OUB - market cap $4.2 billion.




OUB, run by former Citibank executive Peter Seah Lim Huat, is not going to passively wait for a takeover. The company has decided its best chance for survival is to target high-end banking customers. OUB first starting heading in that direction in the 1980s with the purchase of the Singapore credit card operations of Chase Manhattan and what was then Bank of America. Until recently, that was merely one piece of a broad-brush approach. Three years ago, Seah told analysts that OUB was really the only regional bank in Singapore - it had the highest overseas contribution to overall profit of any major competitor. Today, after a regionwide recession that began almost two years ago, he is sheepish on the subject. He'd rather talk about the niches OUB has pursued in loan syndication, especially in Australia, and in serving middle- and upper-income customers at home. The strategy may also reflect the fact that OUB has seen the writing on the wall when it comes to pursuing a broad range of customers: Giant rival DBS now has close to 40% of local deposits and OUB does not have widespread branch and ATM network that the average customer wants.
"We've always taken a very cautious approach to making regional acquisitions," says Seah. "That explains why we are the only Singapore bank with no joint ventures in Indonesia and no bank in the Philippines although we have an offshore branch there." Seah concedes that Singapore banks must grow and improve their technology and expertise. But he doubts that OUB will make any major changes this year: "Strategically, it would be prudent not to overstretch our capital base." Family-owned but, unlike United Overseas Bank, run by an outsider, OUB may have become resigned to the reality of the market. Seah notes how difficult it is for family-controlled banks to come up with the capital that is sometimes needed. "All options should be considered," says Seah. "I would not say that we must stay independent."
Careful consolidation is a strategy that contrasts with OCBC. Chief executive officer Alex Au is said to be focused on aggressively pursuing higher growth and increased profitability. Au, born in Hong Kong, earned his banking stripes in the competitive Hong Kong market, where profits are paramount. In banking, that usually means attracting higher-margin retail customers. Au says the company intends to focus on the broad needs of its mainly Chinese customers in Singapore, Malaysia and, eventually, Greater China. "We believe we can build a sustainable competitive advantage servicing consumers and businesses in these locations," says Au. This might mean, he says, acquisitions in Hong Kong and throughout the Greater China region to "supplement organic growth."



It is difficult to figure out the precise strategy of United Overseas Bank. Wee Cho Yaw, the 71-year-old chairman of the bank, has given few clues other than to state blandly that the company wants to enhance shareholder value and focus on return on equity while looking for growth opportunities.
SG Securities bank analyst Michael Sia says Singapore banks should be thinking about how to improve loan margins to achieve the kind of profitability that Hong Kong banks have come to expect. Part of the problem is a structural difference in where the banks lend: Half of Hong Kong loans are mortgages, which are typically high margin and safe. Sia says only 17% of Singapore bank loans are mortgages - most residents buy government-subsidized housing and use their own retirement-fund accounts to help finance the purchase. In addition, Hong Kong corporate loans generally support smaller companies that pay higher rates, whereas Singapore borrowers are often multinationals and government-linked companies that qualify for the lowest rates.
The Singapore government clearly sees consolidation as a key to closing the profit-performance gap. Last year, the fifth- and sixth-largest banks merged to form Keppel-Tat Lee Bank. The new entity still isn't big enough to break into the Big Four, but it is closer. Not for long, however, if the betting is correct that DBS will absorb the merged bank. The real wild cards as the industry shakes out could come in the form of foreign banks that seek entry into the market by buying significant Singaporean partners. Standard Chartered, the London-based bank that recently bought Bank Bali in Indonesia as well as the Thai bank, Nakornthorn, has emerged as a player. HSBC and Citibank already have major presences in Singapore and are also possible merger partners for the remaining Singapore banks. Let the music begin.Do you have something to say about him? We all know that most publications are edited many times before being released and so may not be a useful guage for a person's integrity, character e.t.c. This site seeks to uncover the REAL persona behind the facade, be it good or bad so that, Number 1, we hold them accountable. Number 2, the public can make informed decisions before investing money in their organisations. Having a good Management team is important in investing. Number 3, to know that there is still a side of them we may not yet know