Singapore’s OCBC seeks Chinese partner for China securities business

By BLOOMBERG

SINGAPORE • Oversea-Chinese Banking Corp (OCBC) is looking for a Chinese firm to team up with on a securities joint venture (JV) on the mainland, the latest foreign bank seeking to capitalise on the nation’s financial-industry loosening.

Obtaining a Chinese securities license would allow OCBC to do asset management, investment banking and fund management business in the nation, CEO Samuel Tsien (picture) said in an interview in Singapore this week.

South-East Asia’s second-biggest bank by assets is talking to various firms that have shown an interest in such a partnership, he said.

“We will prefer to partner with companies that have a larger franchise already” so OCBC can sell into its existing client base, Tsien said, adding that the bank hasn’t applied for a licence yet.

Under President Xi Jinping, China is gradually taking steps to give foreign financial firms more access to the world’s second-largest economy. That’s prompted banks from Credit Suisse Group AG to JPMorgan Chase & Co to seek a piece of the more than US$40 trillion (RM165.6 trillion) financial industry through controlling stakes in local ventures.

“For us, what we need is to be able to reach out to as many potential customers as we can” through a securities joint venture, Tsien said. Without extensive branch networks or a digital presence in China, “it’s very difficult for foreign banks to be able to reach out to them”.

UBS AG in December became the first foreign bank to gain majority control of a Chinese securities JV under new rules. JPMorgan and Nomura Holdings Inc received their approvals last month.

Any Chinese JV would complement OCBC’s existing business in the country, which includes corporate, consumer and wealth banking.

Tsien said OCBC is on track to achieve a goal of doubling pretax profit in China’s Greater Bay Area to USS$1 billion (RM3.06 billion) by 2023. “It’s possible that we’re able to beat that,” he said.

China is embarking on a sweeping plan to combine nine cities in the Pearl River Delta with Hong Kong and Macau — a region known as the Greater Bay Area — to create a financial and technology hub that could rival California’s Silicon Valley. OCBC plans to boost technology spending and staff in the region, Tsien said in June.

Still, Singapore will remain the most important market for the lender, even though Greater China has emerged as its second-largest location in the past two years, Tsien said.

About 16% of OCBC’s revenue came from Greater China in 2018, compared to 58% from Singapore in the same year, according to its annual report.

Tsien also said: OCBC will look at increasing its 20% ownership of China’s Bank of Ningbo Co once regulators allow foreign banks to hold larger stakes in local lenders.

If a global bank decides to exit the Asian wealth market, OCBC will be interested in looking at that firm’s assets, he added.

Speaking on the business outlook, Tsien said the first half (1H) of the year will be “challenging” as market woes from 2018 continue to weigh on sentiment and business decisions.

Loan growth is likely to slow and the bank will focus on regional trade finance, he said.

In the 2H, “if those uncertainties were to be removed, then I think the investments will continue, and it will be a more conducive market for the banks to perform”.

Tsien signalled that stresses persist in Singapore’s energy industry services sector — which triggered bad debts at local banks from 2016 — despite the recent rebound in oil prices.

Ample US oil supply has discouraged exploration activities and vessels remain underused, hurting the value of collateral held by banks, according to the CEO. “The lingering effect of that will continue for the banking industry,” Tsien said.

OCBC’s non-performing loans ratio rose to 1.49% in December 2018 from 1.38% three months earlier, according to its latest results. Most of the soured assets are in the oil and gas sector. The bank will publish its first-quarter earnings on May 10.