Singapore’s “Big Three” from 1997 to 2013

國

立 政 治 大 學

‧

N a tio na

l C h engchi U ni ve rs it y

market (Global Finance Magazine, 2013). On top of that, their Tier-1 Capital ratio¹⁹ is one of the highest in the world at nearly 15%, compared to a bit more than 9% in Taiwan. This is higher than the minimum rate of 6% advised by Basel III²⁰ (Moody’s Investors Service, 2013, p. 9).

2.4.2 Singapore’s “Big Three” from 1997 to 2013

2.4.2.1 DBS

DBS, formerly known as the Development Bank of Singapore, is Singapore’s largest retail bank, and is the domestic leader in mortgages, and investment vehicles (RF Intelligence, 2013, p. 2). As of December 2012 it had a market share of 18% of all loans issued in Singapore, and 25% of all deposits; making it the number one in both sectors (Moody’s Investors Service, 2013, p. 3).

Created in 1968, it has been able to seize a considerable market share as it has been used from the independence of Singapore as the main bank to finance infrastructure development projects in the early industrialization phase.

DBS took over Post Office Savings Bank in 1998. And in 2007, in order to tap into growing demand in Malaysia, Indonesia and the Middle East, it created the Islamic Bank of Asia alongside other investors from the Middle East (Islamic Bank of Asia, 2007).

While showing its strength as a universal bank in Singapore, it has since 2010 more clearly aimed at being a competitive regional bank focusing on Greater China²¹, Southeast Asia, and India. Capitalizing on Singapore’s cosmopolitan population, and strong language skills,²² it aims at attracting regional firms and HNWIs from Asia-Pacific through DBS Private Bank.

19 The Tier-1 Capital ratio is a measure of banks core equity capital versus their risky assets. The higher this ratio is, the more likely a bank will withstand a crisis.

20 The Basel Committee on Banking Supervision developed Basel III during the aftermath of the 2008 financial crisis. It refers to a set of rules applying to financial institutions aimed at fixing the problems that had led to the bankruptcy of Lehman Brothers bank. It will be fully implemented worldwide by 2018.

21 In this context Greater China refers to the combination of China (People’s Republic of China), Taiwan (Republic of China), Hong Kong (Special Administrative Region), Macao (Special Administrative Region).

22 English, Mandarin Chinese, Malay and Tamil are the four official languages of the country.

‧ 國

立 政 治 大 學

‧

N a tio na

l C h engchi U ni ve rs it y

Ironically it is currently using Hong Kong as its base to invest in the Greater China area, and not Singapore. This shows that Singapore’s financial cluster, is well positioned as a financial center for Southeast Asia, but lacks propositions for those investing in Greater China (DBS Bank, n.d.). In that logic in 2001 DBS bought over Dao Heng Bank for 10 billion SGD, and in 2003 it became part of what is now known as DBS Bank (Hong Kong) (DBS Bank (Hong Kong) Limited, 2003; Seawright, 2001).

2.4.2.2 OCBC

OCBC Bank unlike DBS was created before the independence of Singapore, it was born from the merger in 1932 of three banks targeting the Hokkien (福建) community of Singapore: Chinese Commercial Bank, Ho Hong Bank and, Oversea-Chinese Bank (Hisasue, 2014, p. 17).

In line with its heritage OCBC Bank opened one of the first foreign banks in Xiamen (China) in 1925. It is no wonder then that OCBC has recently been more than keen to position itself as the leading bank to capitalize on the RMB internationalization.

In order to increase its investment portfolio available for its customers it acquired Straits Lion Asset Management in 2005. Yet, its main move to brand itself as a leading private bank for HNWIs, was the acquisition of ING Asia Private Bank in 2010 (sold by ING because of financial difficulties following the 2008 financial crisis). It shortly after changed its name to Bank of Singapore, relying on Singapore’s strong image as a city-state with an efficient, hard-working and trustworthy population. Similarly in April 2014 it announced the takeover of Wing Hang Bank in Hong Kong, following an acquisition pattern similar to the one of Dao Heng Bank by DBS (Wing Hang Bank, 2014).

While it is focusing on becoming an influential regional bank, it nonetheless aims at expanding in markets it has long been accustomed to, i.e. Malaysia and China.

Thus it counts on its long-term strength, which has always been centered on its customers and local communities. The bank is still famous all over Singapore for having been the first bank that introduced in 1948, the “night safe system” that has

‧ 國

立 政 治 大 學

‧

N a tio na

l C h engchi U ni ve rs it y

since then allowed local merchants to put their money safely at the bank at the end of the day. Thus keeping their minds off from worrying (OCBC Bank, 2001).

As of December 2012 it had a market share of 14% of all loans issued in Singapore, and 16% of all deposits; it was the last in both sectors compared to DBS and UOB. But overall it is the second one of the “Big Three” in term of total assets that includes operations overseas, further showing its strength as a discrete but efficient regional actor (Moody’s Investors Service, 2013, p. 3).

2.4.2.3 UOB

United Overseas Bank Limited (UOB) was founded in 1935, similarly to OCBC that mostly catered to the Hokkien overseas community UOB focused on servicing the same ethnic group. Though the bank changed its name to UOB in 1965, the full name ‘United Overseas Bank’ is still widely used even by the bank itself.

As a consequence of having a strong foothold among the overseas Chinese community it has a strong presence in four foreign markets with a significant Chinese population: Malaysia, Indonesia, Thailand and China. (United Overseas Bank, 2014).

As of December 2012 it had a market share of 18% of all loans issued in Singapore (the same as DBS), and 20% of all deposits; placing it in second position in Singapore’s domestic market. But overall it is the smallest of the “Big Three” in term of total assets, reflecting a strong focus on its local market, and meager performance abroad. (Moody’s Investors Service, 2013, p. 3).

2.4.2.4 Summary

As can be seen on Table 6, Singaporean banks have seen their total assets value more than triple over a bit more than a decade. However when the total assets of DBS, OCBC and UOB are put together, it barely reaches 1,025 billion USD, looking dismal in comparison to HSBC. Hong Kong’s leading banking institution in June 30, 2013 had total assets of 2,645 billion USD (HSBC Group, 2013). Thus the “Big Three” are nearly three times smaller than Honk Kong’s heavyweight.

In terms of expansion overseas as well, Singapore’s domestic banks fare poorly in comparison to HSBC. While OCBC, UOB and DBS, are merely regional players. HSBC has more than 6,300 offices in 75 countries and caters to around 54

‧ 國

立 政 治 大 學

‧

N a tio na

l C h engchi U ni ve rs it y

million customers (HSBC Group, 2013), in comparison to DBS (Singapore’s largest bank) that in 2012 had just 5 million customers worldwide mostly in Hong Kong and Singapore (HSBC, n.d.).

Overall what could be advised for the city-state’s government and the MAS would be to considerably reshuffle their banking sector. Hong Kong has for instance only one main large bank, i.e. HSBC; the Netherlands like Singapore has only three main Banks, ABN Amro, ING, and Rabobank, but with GDP more than two times bigger than Singapore’s (United Nations Statistics Division, n.d.). Consequently the government could be well advised to push for a merger between UOB and OCBC as they had similar origin (i.e. Singapore’s Hokkien community), and therefore corporate cultures would not tremendously be different.

This solution would lead Singapore to have two main banks, OCBC/UOB would be more oriented towards the Asia-Pacific region, while DBS which has the official backing of the government could aim at becoming a global leader through a more aggressive acquisition policy of foreign banks. Therefore, these two large banks would stand a better chance of maintaining their flourishing activities in the international environment.

‧

Evolution of Total Assets Held by DBS, OCBC, and UOB from 1997 to 2013 (SGD, in million)

Note. No data available for OCBC in 1997, and neither for UOB from 1997 to 2000 Source: DBS Bank, 2014; DBS Group, 1999, p. 57; DBS Group, 2002, p. 179; DBS Group, 2004, p.51; OCBC, 2014; OCBC Group, 2003, p. 2; Oversea-Chinese Banking Corporation Limited, 2005, p. 2; United Overseas Bank Limited, 2003, p. 3;

United Overseas Bank Limited, 2004, p. 3; United Overseas Bank Limited, 2009, p.

1; United Overseas Bank Limited, 2014.

$113,888

$1 $50,001 $100,001 $150,001 $200,001 $250,001 $300,001 $350,001 $400,001 1997

‧

2.5 Evaluation of the evolution of Singapore’s banking and financial market