OCBC chief steps up to the challenge

OCBC Bank is set to ramp up expansion into the high-growth markets of Indonesia and China even as it posted a record set of results for last year.

In an interview with The Straits Times, OCBC chief executive Samuel Tsien said: "Because the local economic activity is not likely to grow as high as we have seen in the past, we need to find a channel such that we can have new areas of growth. That is why we say we would like to see the overseas market more developed."

Just last week, OCBC Bank announced a full-year profit of $3.99 billion for 2012, up from $2.31 billion a year ago.

Excluding one-time divestment gains, core net profits were still up 24 per cent to a record $2.83 billion.

Mr Tsien, 58, took over the helm last April from Mr David Conner, who stepped down after a successful 10-year run.

There are signs an expansion could be afoot, especially since the bank did not issue a special dividend after its divestment gain from the sale of its stake in Fraser & Neave, and Asia Pacific Breweries.

The dividend payout ratio fell to 40 per cent, the lowest in seven years, as the bank will be retaining its earnings for expansion.

All three analysts, who declined to be named, seemed to have the sense that Mr Tsien might make a move sooner rather than later, but added a disclaimer that it might be too early to make a call.

Mr Tsien noted that doing business in Indonesia and China is not easy, because there could be policy changes, and there could be some volatility. "We need to manage the risk very well, which is to understand the drivers for economic activity and how to do business with those sectors that we think have more stability than others," he explained.

Since 2007, OCBC has poured 3.5 billion yuan (S$694 million) of capital into China, excluding its purchase of a 15 per cent stake in the Bank of Ningbo.

It also has a 20 per cent stake in Avic Trust, which complements OCBC's businesses in China.

On top of its 16 branches, the bank will open its latest in Shaoxing, and is looking to increase its branch network at a pace of two to four new branches a year, depending on administrative approval and the identification of suitable locations.

Mr Tsien is also on the lookout for suitable acquisition targets, given that the rules allow foreign banks to make two investments of up to 20 per cent, on top of their existing presence.

"We are interested. If there is a strategic fit, we probably will want to make investments out of the Zhejiang area. That could create strategic positioning for us," he added.

OCBC NISP, with its franchise of 350 branches, is still rather concentrated on the mass commercial segment, which comprises business slightly smaller than small and medium-sized enterprises.

Mr Tsien wants to expand on both ends of the spectrum, to small businesses and corporates.

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