![](https://i.imgur.com/CLvY2jA.png")
15-06-2023, 09:17 AM
* Reluctant to overpay after pricy 2001 HK bank buy
* Eyes Indonesia, where banks command hefty premiums
* Fund manager cautions DBS against buying at any price
SINGAPORE, Nov 6 (Reuters) - Eight years after burning its fingers on a pricy acquisition in Hong Kong, Singapore's DBS Group Holdings Ltd DBSM.SI, Southeast Asia's biggest bank, faces a dilemma -- stick to growing its existing business or beef up its Asia presence with a significant buy.
Memories of the Dao Heng purchase -- DBS paid $5.8 billion in 2001 and then had a big writedown in late 2005 -- still haunt DBS as critics say the acquisition failed to deliver value for money.
DBS has since been super cautious, shunning expensive bank deals in growth economies like China and steering clear of the recent bidding race for ING's Asian private bank that was snapped up by smaller rival Oversea-Chinese Banking Corp Ltd OCBC.SI.
With ex-Citibanker and Southeast Asian expert Piyush Gupta taking over the reins at DBS, investors are looking for a new strategy that enables the bank to expand more aggressively in the region, where it has trailed rivals.
“It has to be an opportunistic strategy based on what exposure they can get at the right price,” said Mike Kerley, a London-based fund manager at Henderson Global Investors, which owns DBS shares.
“As a shareholder I would be cautioning them of growth at any price, I don’t want them to overpay to increase exposure elsewhere in the region.”
Investor concern is highlighted by a poor performance at its Hong Kong unit, its biggest market outside Singapore. Net profit there fell by a third in 2008 and its contribution to group profit dropped to 19 percent from 29-30 percent.
DBS is still carrying Dao Heng at 3 times price-to-book "which is totally unjustifiable given the inferior profitability of the franchise," said Credit Suisse analyst Sanjay Jain. Most Hong Kong banks trade at 1.1 to 1.9 times book except for Hang Seng Bank 0011.HK, which trades at 4 times, Credit Suisse estimates.
For latest DBS quarterly earnings, click [ID:nSIN12742]
DBS’s strategy under Chairman Koh Boon Hwee, who has run the bank since January, is to build market share in loans, debts and equity markets, while increasing its presence in China, India and Indonesia through more branches.
This has succeeded in that DBS has won market share from foreign rivals, who were scaling back in Asia as the global crisis forced the likes of Citigroup C.N and Bank of America BAC.N to take huge credit losses.
But as global banks return to take advantage of opportunities in a region that has outperformed the developed world and has shown resilience during the crisis, analysts question whether organic growth will be a viable option.
HURDLES
Government regulation has prevented DBS from expanding in Malaysia and India, while in Indonesia it is beset by a hefty premium that bank assets command and hurdles faced by its biggest shareholder, state investor Temasek [TEM.UL].
Temasek, which owns 28 percent of DBS, has faced Indonesian regulatory pressure on its subsidiaries to divest or merge. Last year, Temasek sold a majority stake in Bank Internasional Indonesia BNII.JK to Malaysia's biggest bank Maybank MBBM.KL.
DBS says Indonesian regulatory policy does not affect the bank because it has a “single bank” presence in Southeast Asia’s biggest economy, but admitted that organic growth is slow.
DBS aims to double its branches in Indonesia in three years and will look out for an acquisition. [ID:SIN215053]
Analysts said building an existing business in Indonesia won’t be easy because of severe competition, and acquisition may be constrained by regulatory bottlenecks.
“Meaningful organic growth is unrealistic when the top five banks control 55 percent of deposits and are also not realistic M&A targets,” said Matthew Wilson, an analyst at Morgan Stanley.
He said the Indonesian central bank's "single presence" policy is a difficult inorganic hurdle with Temasek a substantial shareholder in both Danamon BDMN.JK and DBS. (Editing by Ian Geoghegan)
Our Standards: The Thomson Reuters Trust Principles.
dbs was ok until 2009
DBS announced today their intention to raise $4 billion of capital through a rights issue. Every two shares that a shareholder owns will entitle him to subscribe for a DBS share at a price of $5.42. This is almost a discount of 45% to the last traded price of $9.85 on 19th December 2008.
The shares trade ex-rights date will be 29th December 2008 from 9am.
With the rights issue, DBS tier 1 ratio will rise from 9.7% to 11.8%.
Temasek Holdings will be taking up its full entitlement of 27.6% of the rights issue with an agreement to subcribe up to 33.3% through a sub-underwriting agreement.
More information can be found in the press release and media presentation below:
DBS rights issue announcement
DBS rights issue press release
* Eyes Indonesia, where banks command hefty premiums
* Fund manager cautions DBS against buying at any price
SINGAPORE, Nov 6 (Reuters) - Eight years after burning its fingers on a pricy acquisition in Hong Kong, Singapore's DBS Group Holdings Ltd DBSM.SI, Southeast Asia's biggest bank, faces a dilemma -- stick to growing its existing business or beef up its Asia presence with a significant buy.
Memories of the Dao Heng purchase -- DBS paid $5.8 billion in 2001 and then had a big writedown in late 2005 -- still haunt DBS as critics say the acquisition failed to deliver value for money.
DBS has since been super cautious, shunning expensive bank deals in growth economies like China and steering clear of the recent bidding race for ING's Asian private bank that was snapped up by smaller rival Oversea-Chinese Banking Corp Ltd OCBC.SI.
With ex-Citibanker and Southeast Asian expert Piyush Gupta taking over the reins at DBS, investors are looking for a new strategy that enables the bank to expand more aggressively in the region, where it has trailed rivals.
“It has to be an opportunistic strategy based on what exposure they can get at the right price,” said Mike Kerley, a London-based fund manager at Henderson Global Investors, which owns DBS shares.
“As a shareholder I would be cautioning them of growth at any price, I don’t want them to overpay to increase exposure elsewhere in the region.”
Investor concern is highlighted by a poor performance at its Hong Kong unit, its biggest market outside Singapore. Net profit there fell by a third in 2008 and its contribution to group profit dropped to 19 percent from 29-30 percent.
DBS is still carrying Dao Heng at 3 times price-to-book "which is totally unjustifiable given the inferior profitability of the franchise," said Credit Suisse analyst Sanjay Jain. Most Hong Kong banks trade at 1.1 to 1.9 times book except for Hang Seng Bank 0011.HK, which trades at 4 times, Credit Suisse estimates.
For latest DBS quarterly earnings, click [ID:nSIN12742]
DBS’s strategy under Chairman Koh Boon Hwee, who has run the bank since January, is to build market share in loans, debts and equity markets, while increasing its presence in China, India and Indonesia through more branches.
This has succeeded in that DBS has won market share from foreign rivals, who were scaling back in Asia as the global crisis forced the likes of Citigroup C.N and Bank of America BAC.N to take huge credit losses.
But as global banks return to take advantage of opportunities in a region that has outperformed the developed world and has shown resilience during the crisis, analysts question whether organic growth will be a viable option.
HURDLES
Government regulation has prevented DBS from expanding in Malaysia and India, while in Indonesia it is beset by a hefty premium that bank assets command and hurdles faced by its biggest shareholder, state investor Temasek [TEM.UL].
Temasek, which owns 28 percent of DBS, has faced Indonesian regulatory pressure on its subsidiaries to divest or merge. Last year, Temasek sold a majority stake in Bank Internasional Indonesia BNII.JK to Malaysia's biggest bank Maybank MBBM.KL.
DBS says Indonesian regulatory policy does not affect the bank because it has a “single bank” presence in Southeast Asia’s biggest economy, but admitted that organic growth is slow.
DBS aims to double its branches in Indonesia in three years and will look out for an acquisition. [ID:SIN215053]
Analysts said building an existing business in Indonesia won’t be easy because of severe competition, and acquisition may be constrained by regulatory bottlenecks.
“Meaningful organic growth is unrealistic when the top five banks control 55 percent of deposits and are also not realistic M&A targets,” said Matthew Wilson, an analyst at Morgan Stanley.
He said the Indonesian central bank's "single presence" policy is a difficult inorganic hurdle with Temasek a substantial shareholder in both Danamon BDMN.JK and DBS. (Editing by Ian Geoghegan)
Our Standards: The Thomson Reuters Trust Principles.
dbs was ok until 2009
DBS announced today their intention to raise $4 billion of capital through a rights issue. Every two shares that a shareholder owns will entitle him to subscribe for a DBS share at a price of $5.42. This is almost a discount of 45% to the last traded price of $9.85 on 19th December 2008.
The shares trade ex-rights date will be 29th December 2008 from 9am.
With the rights issue, DBS tier 1 ratio will rise from 9.7% to 11.8%.
Temasek Holdings will be taking up its full entitlement of 27.6% of the rights issue with an agreement to subcribe up to 33.3% through a sub-underwriting agreement.
More information can be found in the press release and media presentation below:
DBS rights issue announcement
DBS rights issue press release
