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Copyright 2014: MILSTE Group Limited
Asia Retail Banking Practice
Retail Banking in Singapore: Competitive Landscape,
Opportunities & Trends Last Updated: May 2014
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Table of Contents
1. Forward and Introduction 3 2. MILSTEs Methodology 4 3. The
Role of Branches: The Competitive Environment, Opportunities,
Trends 5-7 4. The ATM Market in Singapore: The Battle for Access to
Clients 8 5. Mobile Banking: Leaders in the Market and Clients
Preferences 9-10 6. Credit Cards: The next Generational Customer,
the Use of Credit Cards and
Strategies of Singaporean Banks 11-13 7. Retail Lending Market
Share in Singapore and Strategies of Major Players 14-15 8. Debit
Cards in Singapore: The Competition for More Wallet Share 16 9.
Mortgages: Competitive Landscape & Market Share 17 10. Overall
Competition of Banks in Singapores Retail Market: SWOT Analysis
18-
29 a. DBS b. OCBC c. UOB d. Citibank
11. How to Leverage MILSTE for Banks and Technology Vendors
30-31
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Forward and Introduction MILSTEs Retail Banking in Singapore:
Competitive Landscape, Opportunities & Trends report is the
result of an extensive project completed by MILSTEs teams in
Beijing and Hong Kong over a three-month period in 2014. This
report attempts to calculate the number of credit cards in the
market, the number of debit cards, the number of ATMs, retail bank
lending, and more importantly, it looks deeply into the strategies
of the banks in all the aspects mentioned. Not only do we provide
the data, but our analysts also provide a sharp analysis that
creates a story around the numbers. MILSTEs reports give life to
the data. In this report you will find opportunities in the most
current data we have gathered, understand competitive threats with
our detailed market analyses, and plan your corporate strategy with
our expert qualitative evaluations and growth projections. This
report will give the reader strategic intelligence about the most
competitive players in Singapores retail banking industry. It will
also allow the reader to fully understand key industry trends,
opportunities, and problems within Singapores retail banking
sector. We are proud to use a minimalist style in our reports in
which we present only data and analyses that are directly related
to the topic at hand. We keep pointless pictures and graphics out
of all of our reports to ensure that you are not distracted from
the analyses and data that we present in our intelligence. Thank
you for working with MILSTE. If you have any other needs or
comments, please do not hesitate to contact my staff or me. With
great respect,
Baron Laudermilk Managing Director MILSTE
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MILSTEs Methodology MILSTE utilizes a simple yet proven
methodology to ensure the accuracy of our reports. We use primary
sources to acquire the intelligence we need, including interviews,
surveys and conversations. Regarding MILSTEs Retail Banking in
Singapore: Competitive Landscape, Opportunities & Trends
report, the information comes from two surveys, (One towards
financial institutions and another towards consumers) and
conversations with regulators in the Monetary Authority of
Singapore (MAS). The research was conducted in 2014. The two
surveys are broken down as the following: Survey 1: Interview
Singapores financial institutions
Interviewed decision makers and managers in eight different
banks in Singapore, including the following:
o OCBC o UOB o Citibank o Standard Chartered o HSBC
Five managers in trust companies in Singapore completed the same
survey.
Survey 2: Surveyed 100 clients and 10 HNWIs in Singapore The
survey asked about their investment preferences onshore and
offshore, the products they are seeking, and how they view
different banks, and their attitudes and purchases of specific
financial instruments.
Our team of researchers also gathered information from discrete
conversations with regulators about Singapores retail banking
industry, and we have also added in desktop research with our
analyses to ensure that this report is a comprehensive overview of
Singapores retail banking sector. MILSTEs intelligence and analyses
are conducted independently of outside influence with the findings
based on a quantitative context through the interpretive views of
trained analysts. These analysts are held to the highest standards
and are bound to our Promise of Integrity. Our success is evidenced
by our results.
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The Role of Branches: The Competitive Environment,
Opportunities, and Trends
A branch is the main part of a banks retail banking business. It
is still one of the main contact points for customers with banks in
Singapore. With the continuous development of domestic retail
banking and the increasing customer demands on branches,
Singaporean banks are transforming their branches from traditional
branches to innovative, low cost and highly social branches. Many
banks in Singapore, including the foreign banks, are giving new
reasons for clients to come into the branches to do banking by
providing a high tech atmosphere that welcomes clients, excellent
customer service, and using technology to mitigate the length of
lines and to better understand their customer needs. We are seeing
Singaporean banks comprehensively upgrading their branches to use a
fully "customer-centered" approach, in order to enhance the
performance of their retail business, improve customer
satisfaction, lower operation costs and increase efficiency.
The Singaporean retail branch transformation is a deep-seated
revolution of the branch network based on the bank's overall
development strategy, from the view of customer segmentation and
target customer positioning. In the process of transformation,
Singaporean banks are going to need to continue to design the
entire branch transformation blueprint, identify the breakthrough
point, develop a collaborative roadmap, and implement the
transformation step by step through pilots and promotions. The
roadmap for many of these banks, including DBS, UOB and OCBC have
been in the works for years, and each of them, along with their
main foreign competitors, Standard Chartered and Citibank, will
continue to find ways to bring relevance to their branches as
digitalization slowly makes branches less and less relevant to the
mobile banking customer.
FIGURE 1: Singaporean Banks Branches Becoming The Right Size
Source: MILSTE
Tailored Footprint Have Various Branch Formats Boost Sales Via
Technology
Gain an Understanding of Their Clients With Analytics Add the
Human Touch to Banking
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OCBC has continued to enhance the design and layout of its
branches to improve customer experience and to compete with its
main competitors, DBS and UOB, who are also finding ways to improve
their customers experience. The bank introduced an SMS queue alert
service to reduce queue time for customers by around 30% by using
mobile technology that is connected directly to all of its
branches. The bank expanded its regional network of Premier Centers
from 45 to 58, and it refurbished key locations by upgrading
facilities so that customer events and seminars can be held
in-house. OCBC has been going back to the basics in improving its
retail banking operations. At the banks branches, they raised the
bar in customer experience through initiatives such as service
audits, and ensuring that they hire people with the right
attributes by screening them with online testing that tests
personalities and finds employees that are more sympathetic and
caring, and that are social and enjoy speaking with new people and
helping them. DBS, the leader in branch transformation in
Singapore, has been optimizing big data and using analytic tools to
improve its customer experience, and creating innovative and
relaxing branches that quickly serve their customers while at the
same time upselling them to increase revenue. In previous years,
the bank has successfully cut queue times at their branches,
enhanced the look and feel of their branches to attract younger
people, and have brought in Ipads and other social gadgets to
interact with clients while they wait for service. In 2013, the
banks distribution channels were expanded by a partnership with
7-Eleven, a convenience store chain, to enable their customers to
withdraw cash from its 500 outlets across Singapore. This built on
the partnership with SingPost that was launched in 2012, which
enabled their customers to carry out basic banking transactions at
56 post offices in Singapore. Furthermore, the bank improved the
customer on-boarding experience with a simplified documentation
process. The account opening documents were awarded the Crystal
Mark for being written in plain English. DBS launched an online
appointment system so that waiting times can be reduced when
customers visit a branch to complete their account opening.
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Citibank and Standard Chartered have both been investing in
their branches to ensure that they continue to keep up with the
likes of DBS. Citibank has opened something called a Smart branch.
It uses digital technology including display panels forming media
walls, interactive touch-screens, face-to-face phone banking and
video-conferencing facilities for interactions with banking
specialists. In addition, the branch provides for other innovations
including a cheque-deposit machine with imaging technology, iPads
carried by in-branch staff and a workbench with Apple terminals for
account openings and other services. The design of the branch,
which sets the tone for all of Citibanks new branches going
forward, is premised upon putting the customer in control by
streamlining the customers interaction with the bank and maximizing
their banking experience. The branch is equipped with enabling
tools that put information at the fingertips of customers and
harnesses cutting-edge technology to provide a paperless and
straight-through process for account openings. Designed around the
customers needs, the branch promotes customer engagement at all
levels. Banks in Singapore will continue to make their branches
more optimal, social and customer centric to meet the rising demand
of customers and to ensure that their branches are in sync with
their internet, mobile and social platforms. FIGURE 2: Total Retail
Branches in Singapore 2011-2012
Source: MILSTE
0 50 100 150 200 250 300 350 400 450 500
2011 2012
Total b
ranche
s
Others UOB OCBC DBS
436 428
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The ATM Market in Singapore: The Battle for Access to Clients
The ATM market in Singapore has been, is and will continue to be
highly competitive as banks continue to develop their ATMs to make
them more user friendly and easier for consumers to access. The
biggest players in Singapores ATM market, DBS, OCBC and UOB. DBS
bank has dominated the ATM market for more than 4 years according
to our data, as it continues to maintain its lead within the
market. But DBS faces major challenges in the market by OCBC bank,
which has been aggressively expanding its ATM network across
Singapore in order to take the number one spot. Banks have
mentioned that the ATM market is the second most important area for
competition in Singapore, right behind mobile and online banking.
Many younger consumers avoid branches as they have lines, so they
use online banking or access nearby ATMs. The competition in ATMs
in Singapore will continue to be strong in the next few years as
foreign banks, including Citibank, HSBC and Standard Chartered
continue to also expand their market share in Singapore.
FIGURE 3: Total Number of ATMs in Singapore from 2011-2012
Source: MILSTE
0 500
1,000 1,500 2,000 2,500 3,000
2011 2012
Total A
TMs
Others UOB OCBC DBS
2,657 2,759
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Mobile Banking: Leaders in the Market and Clients
Preferences
As the majority of Singaporeans have smart phones, such as an
android or Iphone, banks have been spending a lot of resources and
time to develop their mobile platforms, which have become one of
the most advanced in Asia similar to that of South Korea and Hong
Kong.
With consumer transactions rapidly shifting online, banks
continue to enhance their Internet and mobile platforms to make
them seamless extensions of their physical branch footprint. The
revamp incorporates an improved engine to pull together customer
and product information, a refreshed and consistent look and feel
for all our online and mobile channels, and the introduction of
innovative applications. Once the full revamp is completed,
Internet and mobile platforms will be simpler and more intuitive to
use, offer a higher degree of customization to individual needs,
and enable customers to interact in real time with relationship
managers or branch staff. Customers will be able to make everyday
transactions such as payments, receive assistance for making
investment decisions, call up information on lifestyle activities
such as dining and shopping, and check on their bank accounts all
at their convenience, 24/7. FIGURE 4: Singapore Banks Path to a
Digital Bank
Source: MILSTE Increasing demand from customers for mobile
banking is prompting DBS Bank to invest heavily in this area in the
coming years. Singapore's largest consumer bank revealed that
nearly a quarter of its customers use its mobile apps, five years
after it began rolling out such applications. Out of more than four
million customers, over 839,000 are registered users of its mobile
apps, while over two million prefer to go online and access the
bank's website. Of these, a significant portion are heavy
users.
A Digital Bank Make Information Easy to Access
Increase Penetration Add Lifestyle Applications to Banking
Platform
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About 350,000 customers log in daily to the website via both
mobile and online platforms. The bank announced last month that it
would be investing $200 million in digital banking over the next
three years.
Transactions increased 33% since its launch in 2011. According
to data released by the bank, United Overseas Bank customers are
conducting more than one million mobile-based transactions every
month. Monthly transactions using UOB Mobile reached a high of 1.1
million in December 2012, an increase of 33 per cent since its
launch in December 2011. UOB Mobile customers are using the app
most often to check their account, transfer funds and to make bill
payments. The Mobile Cash feature, an industry first, provides
customers with the ability to make cash withdrawals and transfer
funds to others with just an instant text message and a one-time
password at more than 600 UOB ATMs in Singapore.
FIGURE 5: Total Number of Mobile Subscribers in Singapore from
2010-2014e
Source: MILSTE
75% 85% 95% 105% 115% 125% 135% 145% 155% 165%
0 1 2 3 4 5 6 7 8 9 10
2010 2011 2012 2013e 2014f
Mobile subscribers
as % of population T
otal m
obile
pho
ne
subscribers (M
illion)
Total mobile phones subscribers Mobile subscribers as % of
population
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Credit Cards: The next Generational Customer, the Use of Credit
Cards and Strategies of Singaporean Banks
With over 5 million credit cards in circulation, credit card
issuers in Singapore need to understand the different customer
segments. Total unsecured loans in Singapore, comprising credit
card rollover balances and personal loans, grew by 9%. Credit card
spending increased by 14% while income from payment terminals at
merchant outlets grew over 90% since 2013 according to our data.
This demonstrates the major competition for more credit card market
share in Singapores fragmented credit card market. Banks in
Singapore are some of the most advanced in the world when it comes
to credit card strategies, marketing them, and adding benefits and
gift schemes to them to maintain clients and attract new ones. The
leaders in Singapores credit card market are UOB, OCBC, and DBS
bank, each owning almost a 25% of the countrys market share. FIGURE
6: Credit Cards in Force in Singapore from 2010-2014e
Source: MILSTE
In 2013, OCBC bank implemented a consolidated card application
processing system across Singapore and Malaysia that reduced the
unit processing time for credit card applications by around 75%.
Also in November 2013, credit cards were re-launched with new
features. In particular, the unprecedented 0.5% to 1.2% rebate on
all retail purchases with no maximum rebate limit and the automatic
triggering of installment payment plans for large ticket purchases,
have been well received by customers. Due to the banks initiatives
in credit cards, from 2012 to 2013 the bank has increased its
credit card non-interest income by 28%, one of the highest.
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%
0.0 2.0 4.0 6.0 8.0 10.0
12.0
2010 2011 2012 2013e 2014f
Credit cards in force, annual %
change
Num
ber of credit cards in
force (m
illions)
Millions % change
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Although Citibank is not in the top three credit card issuers in
Singapore, it is one of the most innovative, and it has increased
its market share significantly in the last few years with its
innovative credit cards. Citibank was the first bank in Singapore
to launch a card that integrates social networking. The Citibank
Clear Platinum Card leverages on the voice of the consumer in
social media, allowing its card members to customize their card
experience, be part of a virtual community that rewards them for
their social activities, and enjoy accelerated 5X rewards points
for shopping online.
FIGURE 7: Credit Card Market Share by Bank in 2013 in
Singapore
Source: MILSTE
Banks in Singapore private banking arms are also using special
customer centric credit cards to cater to their clients. Instead of
plastic, these special cards are crafted out of titanium, steel or
metal membrane, with the ultra wealthy in mind. Besides having
dedicated relationship managers who can help tailor memorable and
unique lifestyle experiences, these super card holders are also
pampered with complimentary first or business class airline
tickets, and complimentary golfing privileges, to name a few.
Besides a whole host of luxury privileges spanning from travel,
fine dining to exclusive events, one can even pay for an expensive
car with the Centurion card. Citibank's Ultima Card, which is a
credit card launched in 2003 and then revamped in 2010, is only
offered to clients with minimum investible assets of more than S$5
million or income of more than S$1 million A large portion of these
card-members are Singaporeans, although there has also been a
growing number of expatriates from Indonesia, China and Taiwan. In
the last two years, there has been double-digit growth in net
client growth.
19%
21% UOB
30%
DBS OCBC UOB Others
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FIGURE 8: Singapores Next Generation Credit Cards
Source: MILSTE
Using analytics to understand the exact kind of card that their
clients need Powerful Marketing Strategies of Credit Cards
Creating a back-end infrastructure that makes it easy to use
credit or debit cards in conjunction with other systems Loyalty
Programs
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Retail Lending Market Share in Singapore and Strategies of
Major
Players
People are borrowing more
Total gross lending showed healthy growth throughout 2013 in
Singapore. In 2013 Singaporean consumers continued to borrow to
finance their daily spending and used credit cards to enjoy
discounts and promotions offered by the card issuers. Borrowing for
overdrafts without the need of collateral remained popular, as
small borrowers are free to use the loan for their own purposes,
while small and short-term borrowers approached banks for easy
access to consumer loans.
Government property cooling measures
With property prices increasing sharply during the review
period, the Singaporean government put several measures in place
over the review period. With the newer cooling measures in 2013,
the lowering of loan-to value ratio for mortgages/housing loans and
auto loans were effective in controlling the demand for property
and vehicles. The restrictions on new, unsecured loans announced by
the government will also deter some credit card spenders who rely
on revolving credit line.
Banks and consumers becoming more careful
While the government announced cooling measures to prevent any
bubble from forming in the economy, both banks and borrowers were
also becoming more cautious about further increases in the interest
rate. As property prices increased strongly during the review
period, many investment experts suggested that it would be
difficult to earn a profit by investing in property at such high
prices. Banks also became more careful in offering loans to
consumers and ensuring they were not over-borrowing.
Local banks losing edge in retail lending
The three main local banks, DBS Group Holdings Ltd, United
Overseas Bank Ltd and OCBC Group, were the leading lenders in
Singapore in 2013. As foreign banks offer more competitive
borrowing rates, many borrowers are turning to them for better
offers. The foreign banks were also aggressive in attracting high
net worth customers and offered special rates for these premier
customers. Apart from the mainstream financial service providers,
pawn shops also became more popular during the review period,
especially for lower income earners with quick approval of loans
based on their own collateral such as jewelry or watches.
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Consumer lending expected to slow down in the forecast
period
Consumer lending is expected to grow more slowly in the forecast
period due to the many cooling measures in place in 2013. Many
investors are also careful about the tapering effect of US Federal
policies, which might force up interest rates. As consumers enjoyed
low interest rates in the review period, many will not be able to
afford the increase in interest rates if this were to happen.
Consumers will learn to spend within their means and have better
financial planning. Nevertheless, it is good that the government
restricted the total debt-servicing ratio in 2013 in preparation
for such an event in the forecast period. If consumers find it too
difficult to apply for unsecured loans from financial institutions,
they are more likely to approach the pawnshops and use their own
collateral for rapid turnover.
FIGURE 9: Total Retail Lending in Singapore from 2010-2014e
Source: MILSTE
0 50
100 150 200 250 300
2010 2011 2012 2013e 2014e
Total retail loa
ns
(bn Local Currency)
Others Unsecured Consumer lending Credit cards Mortgage
152 `
180 207
242
283
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Debit Cards in Singapore: The Competition for More Wallet Share
Most recently, UOB helped small business customers in Singapore
manage rising costs with the UOB Business Debit card, offering
cost-saving discounts on utilities and transportation expenses.
Partnerships factor significantly in UOBs business and they
continue to build alliances with the biggest names in business. In
Singapore, UOB reached an agreement to launch a co-brand card with
the Dairy Farm Group, which operates more than 270 retail outlets
nationally. In Indonesia, UOB ran a yearlong campaign with Garuda
Airlines and The Food Hall, a gourmet supermarket franchise, for
the benefit of UOB Card members. FIGURE 10: Debit Cards in Force
from 2010-2014e in Singapore
Source: MILSTE
0%
5%
10%
10.4 10.6 10.8 11.0 11.2 11.4 11.6 11.8 12.0
2010 2011 2012 2013e 2014e
Debit cards in force, annual %
change Deb
it cards in
force (m
)
millions % change
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Mortgages: Competitive Landscape & Market Share
The mortgage playing field in Singapore is dominated by the
countrys big banks, and they have been gaining market share and
expanding their mortgage business in Singapore rapidly as
immigrants to the country are reaching an income level to acquire a
home. Despite the governments campaign to curb housing prices and
the idea floating around of a property bubble, banks are still
pushing their mortgage business in Singapore. DBS and UOB lead the
market with each more than S$46 billion in outstanding mortgages,
and OCBC falls right behind them with around S$38 billion. Other
major banks and foreign banks, such as Citibank and Standard
Chartered, have increased their market share in recent years in
mortgages, but they have mainly been focusing on other fee-based
incomes, such as credit cards, debit cards, wealth management and
private banking, which has thus left them behind the big banks that
have been centering much more attention on the countrys mortgage
market. FIGURE 11: Mortgages from Key Banks in Singapore 2011-2012
in Singapore
Source: OCBCs outstanding mortgages from 2011 ($32billion) to
2012 ($41 billion) have seen major growth in its mortgages and are
attempting to catch up with DBS and UOB in the next few years. But
the banks strategy in mortgages is different than OCBC and DBS. UOB
is taking a more cautious and calculated step when it acquires its
mortgage clients. The bank has instead been creating a strong
credit risk platform to ensure that its non-performing loans stay
down and that it keeps profitability high. But domestic banks have
become weary of loans in Singapore due to the repricing. By the end
of 2013, Mortgages were 23-24% of gross loans.
41 32
41
17
46 38
46
23
0 5 10 15 20 25 30 35 40 45 50
DBS OCBC UOB Others
Outstan
ding
mortgages
(bn, Local Currency)
2011 2012
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Overall Competition of Banks in Singapores Retail Market: SWOT
Analysis
Banks in Singapore have become highly competitive and are using
technology to gain an edge in the market, especially in redesigning
their branches, making their mobile banking platform more customer
centric, and building new technologies internally to become more
effective in serving their customers. A variety of surveys
including our own have shown that customers most common interaction
is through ATMs, followed by online banking. Besides getting cash,
customers can also pay bills, parking fines and carry out other
third-party transactions through ATMs. When it comes to loyalty,
online transactions and online sales or service are most likely to
result in recommendations. Visits from a banker and ATM usage also
have a strong positive inuence. Although Singaporean banks have
been significantly investing in their mobile banking systems, there
is still room for improvement to fully satisfy their clients.
Although Singapore's mobile banking usage is somewhat high compared
with other countries, at 38%, and much higher for customers of
certain banks in Singapore, customers are not highly impressed by
the experience according to various surveys. This gives many
opportunities for banks to continue to develop these systems and
take market share from their competitors. Foreign banks in
Singapore are also increasingly finding new ways to tap into the
market and gain a share of their high net worth individuals and by
leveraging their international operations and resources to gain an
edge in the mobile banking market. Standard Chartered is looking to
strengthen its competitive position in Singapores crowded domestic
banking space, where it may open upto 10 additional branches
following the consolidation of its consumer and small and medium
enterprise (SME) banking businesses into a locally-incorporated
subsidiary. Standard Chartered currently has 19 branches, seven
priority-banking centers and 31 ATMs across 25 places of business
in Singapore. But that number may potentially double once the
European Union-Singapore free-trade agreement comes into force. The
bank will use its mobile banking platform, which is quite famous in
Asia, to gain an edge in the market compared to its domestic
competitors. Wealth management has also become a major flashpoint
for banks to compete in for Singaporean banks. Intense competition,
a tendency for wealthy Asians to use multiple private bankers and
high staff costs are likely to force consolidation in the wealth
management business in Singapore and could push operators out of
business, top private bankers have warned. Signs of competitive
strains in one of Asias biggest wealth management hubs stand in
contrast to an image of rising wealth as the number of
multimillionaires grows faster in the region than anywhere
else.
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DBS DBS business model has been to compete on a universal bank
model. Though they have had substantial success in deposits, they
have, unfortunately, been focusing on matters outside their key
strengths. Growth has been driven primarily by interest income and
it has been squeezed considerably in a low interest rate
environment. Loan and fee income growth was subdued in the last few
years and considerably lower in terms of growth compared to its
domestic peer, UOB. DBS retail financial services performance,
compromised by internal changes over the last years, has been
stabilizing since 2011 but did not quite take off in 2012. Profit
gains hovered at around $26.5 million in 2011 and 2012, with a
lower core deposit collection than UOB. Despite its strong POSB
franchise in the DBS family and its largest network in the
heartland of Singapore it fell short to leverage its network more
effectively. That showed up in their incremental income gain for
2012, which continues to be lower, compared to UOB and OCBC. Part
of their subdued performance was due to management issues. The
banks sustainability and strategic direction has been hit by a
series of management changes and high profile exits in the last
five years. In fact they had the least stable retail and overall
bank executive management. However, by electing Piyush Gupta as its
CEO in 2009, they have finally obtained the caliber, skillsets and
personality they should have been looking for in the first place.
With that in place, DBS can turn their attention to where they are
hurting right nowtheir operations. The ATM network shutdown in 2010
reflected their inability to engage with their business provider
and end customers, and the ATM scam in beginning of 2012, which was
most likely due to the shutter being switched off as so to speed up
the long queues, cost the bank more than $0.78 million. Yet, the
bank gave communication and customer engagement a higher priority
thereafter. It also put more attention on queue management and
quicker on boarding in the credit cards business with its near
instant approval of credit cards, a theme revolutionized by
Citibank a few years ago in Singapore. DBS is also plagued by their
mandate to provide banking services to all segments, including
lower income segments such as foreign contractual immigrants. DBS
is pursuing a containment strategy by rolling out differentiated
service levels and distribution solutions according to segment
profitability. A lot of capital has gone into reviving DBS and it
is today the more valuable franchise in the DBS POSB union. DBS did
little until 2009 to rejuvenate POSB with which 60% of Singaporeans
bank. The POSB franchise today is clearly in better shape than it
was three years ago, but continues to be hampered by low
cross-selling and fee income generation per branch. It introduced
POSB micro branches in 2012 with approx. 200sqm, which is part of
the strategy to reduce the cost to serve. DBS/POSB is in the
process of changing their customer portfolio business model, which
will be tightly linked to the branch where 80% of unsecured
business is
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being originated. The two brands also moved from a business
manager model to a market manager model for their branch executives
that will make them fully responsible for all P/L issues, which is
expected to bring them an upswing in terms of conversion rates and
productivity. DBS key areas of retail competitive strength are
deposits due to their largest network of ATMs and branches, as well
as in mortgages for public housing. DBS also has the largest assets
under management in private banking with over $81 billion (2011) in
earning assets. Cards currently contribute 10% to overall fee
income but only 7% to total retail income, while wealth management
contributes 9% to total retail income. In April 2012, DBS Group
announced its acquisition of Bank Danamon. Yet, since Indonesia has
put a 40 percent cap on single ownership in its local banks and
higher capital cost for holding minority stakes under Basel III
rules, DBS eventually was forced to walk away from taking over Bank
Danamon. Strengths
Able to control interest rates better than its peers. Sustained
and robust retail fee income growth driven by treasury-related
income from the affluent segment and bancassurances business.
POSB franchise and strong deposit base with POSB. Largest retail
banking network. Mortgage business (public housing). Generates most
insurance and unsecured lending business through its branch
network. Leading market share in car loans, payments and
savings.
Weaknesses
Predominantly reliant on interest income (fee income from cards
35% of fee income).
Building the business to full capacity will take another three
years, but underlying momentum strong.
Operational and transactional risk handling. Engagement with
customers. Business is currently restricted mostly to Hong Kong and
Singaporeboth of
which offer little growth. Opportunities
The only Singaporean bank with a real Asian presence that offers
opportunities to capitalize on growth in the region.
Improved contribution of fee income from cards and payments
business and treasury-related fee wealth management to cushion
income from low interest rate environment.
Building a protection portfolio in wealth management.
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Threats Need for balancing the profitability of the mortgage
book with global
slowdown, as it is one of the largest books at DBS. Bank may be
prone to trade profitability with external risks.
Continued drag on bottom line performance due to mortgage
customer rate deterioration.
Continued low interest environment drag on performance. Global
outlook and the impact on investment products and securities.
Online and transaction risk (operational risk will increase).
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OCBC
Although OCBCs retail banking business is the smallest among the
three local banks in terms of asset size, it has been growing in
the last few years especially as it continues to tap into emerging
markets in Greater China and Southeast Asia. The bank has a solid
retail banking strategy, an experienced retail banking team,
however, it faces major challenges in expanding its growth in its
own market. Headquartered in Singapore, OCBC is the 30th largest
bank in the Asia Pacific by total assets, with good cost
efficiencies and leadership network distribution, service and
product innovation. OCBC saw a change of guard at the C-level and
retail banking level in 2012. It appointed Samuel Tsien, who was
the banks head of global corporate banking, as CEO to succeed David
Conner in April 2012. At the same time, OCBC promoted Ching Wei
Hong, currently the head of global consumer financial services, to
the newly created position of chief operating officer. Tsiens
appointment marks the transition from foreign to local management,
a key theme in Singapores financial services industry. OCBC had
three disastrous years after 2008caused mainly by internal
reshuffling at the retail executive level and a change of
strategybut showed stronger numbers for the first time in 2012
across assets, income, profit and deposits driven presumably by
Bank of Singapore, OCBCs private banking arm which the bank
includes in its retail banking reporting. The low or negative
growth base can explain the improved full year performance of OCBC
in 2012 from previous years, which is partially correct, and that
one year of positive results after three years in the doldrums does
not necessarily point to a stabilizing business. If anything it
could be said to reflect volatility rather than sustainability
going forward. But, to our surprise, even if you take private
banking out of the retail segmentwhich UOB includes in their
reportingOCBC still showed better growth figures across income and
pre-tax profit, and exceeded profit gains by $8 million. The
biggest upswing was seen in the growth in savings and checking
accounts in 2012, led by OCBC by a comprehensive margin and thereby
redeeming some of its initiatives introduced in 2012. Relatively,
to its other business lines, retail banking has not yet become a
key growth driver again, lagging its corporate, treasury and
insurance business. But OCBC appears to be stabilizing and we
believe it bottomed out in 2011 and 2012. When Singapore
liberalized its banking sector in 1999, OCBC relied on a formula of
acquisitions and organic growth to shore up local operations and
expand overseas. After acquiring two banks in Singapore, OCBC
articulated growth plans in its New Horizons strategy in 2003,
seeking international growth via a build-and-transfer approach and
utilizing the balanced business scorecard approach to build a high
performance bank. New Horizons II, a five-year plan from 2006 to
2010, followed this. Under this plan, OCBCs key retail team
introduced various channel initiatives aimed at providing a unique
customer experience. OCBC added an advanced mobile phone platform
in 2005, the first in Southeast Asia, and supermarket banking in
2007, and was the first bank to actively integrate its distribution
network regionally with its
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operations in Malaysia and Indonesia. In totality, these
initiatives aimed to rejuvenate and integrate the network, aligning
it with changing customer behavior and potential future users.
OCBCs primary objective pre-crisis was to introduce an interactive
and consistent banking experience to its customers through a range
of personalized online services. These enabled the bank to deliver
total convenience banking. Post-crisis, OCBCs retail balance sheet
performance has been on the decline, partially due to the change in
retail management, which saw a hiring spree of overseas foreign
executives. Unlike its domestic peers, the bank has not seen a
recovery in its retail financial services yet. Bancassurances
business had a weak 2011, and the cards business suffered from high
expenses. However, wealth management re-bounded and will continue
to be the main fee and commission income earner going forward. We
expect the new strategy and the changes implemented since 2011 in
its back and front office to take effect gradually and a full
recovery will not come before 2014. OCBC embarked in 2011 on
Horizon III, a five-year plan that encapsulates a vision, which has
strong similarities with New Horizon II in a bid to become a more
customer-centric organization. OCBC intends to differentiate itself
by delivering banking in an innovative, engaging and relevant
manner, launching multiple transformative business models,
including retail, premier banking, cards business, account opening
and channel redirecting, in particular for its online and mobile
banking platforms which OCBC wants to turn into a sales platform.
It is in the front office that OCBC is putting its focus by
embedding analytical decision-making, straight-through processing
and richer visual interaction with customers. It also capitalized
on foreign assets in the aftermath of the crisis. OCBC took over
INGs private banking business at the end of 2009, tripling the
bank's private client assets under management to $23 billion and
making it one of Asia's leading private banks. It was renamed Bank
of Singapore and operates as a separate entity. Its earning assets
stood at $39.6 billion as at end 2011. With its subsidiary, Great
Eastern, it continues to be market leader in the overall
bancassurances market, where it has held a market share of above
34% since 2001. In addition, the bank identified opportunities in
top segments and introduced two new plans in 2012 to cater to the
financial and estate planning needs of the affluent. Being not a
dominant player in the mortgage loan market, it could improve
slightly its market position in 2012. It implemented a more
segmented view on the portfolio and started to reduce further cost
by leveraging on the bancassurances direct sales force to cross
sell mortgage loans. Unlike its domestic peers, OCBC targets the
generation X segment of which there are about 700,000 in Singapore,
aiming at capturing about 50% of the market and to break even by
2015. OCBC has a sizeable overseas retail business. 80% of retail
banking income is from Singapore while OCBC Malaysia contributes
around 13%, followed by OCBC NISP (Indonesia). However, it is OCBC
NISP which is currently a key retail profit driver in its overseas
business.
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Strengths Most advanced domestic bank when it comes to engaging
customers on social
media without buying fans as is being done by its peers. Strong
market position on wealth management fee income. Competencies in
creating meaningful interactions by steering customers into
themed, zoned experiences designed for specific purposes.
Innovation at product and service level. Bancassurance. The use of
analytics SME banking (small to mid-sized segment).
Weaknesses
Credit card business. New management team will take time to form
and contribute effectively to
bottom line. Discontinuation of online and mobile distribution
strategy held by previous
management team up to 2009. Supermarket banking and NTUC card
usage suffer from low adoption rates. Branch banking.
Opportunities
Improved contribution of fee income from cards and payments
business and treasury-related fee wealth management to cushion
income from low interest rate environment.
Targeting the young segment in Singapore (FRANK initiative) with
a full-fledged product and service proposition.
Threats
Given the small size of the domestic market and the relatively
stable market shares, OCBC, the weakest among the three domestic
banks, is still a potential take-over target.
The scalability of OCBCs efforts is constrained by the nature of
the overseas markets where the bank is staking its long-term
future. A regional strategy to re-platform is underway but whether
OCBC can apply such adaptive knowledge to build a stronger retail
franchise outside Malaysia in the vastly different environments of
China, Indonesia and Vietnam remains to be seen.
Ambitious plans to capture a large size of the youth market.
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UOB UOB has been building on a well-diversified portfolio, with
notable strength in the privileged reserve segment, the corporate
business in SME/Business banking and payments. Yet, UOB is
currently not able to leverage its retail asset growth which was
the strongest compared to DBS and OCBC in 2012, to boost its top
and bottom line growth. In fact, since 2008, income and profit
growth have slowed significantly for UOB. What is worrying is that
income gains in terms of the Singapore dollar have also been
slowing. We believe the pressure on top line growth results from a
low innovative retail services culture and a very conservative
approach in adopting new trends. Retail profit contribution to
total profit declined by 4% yoy in 2012. Over the course of 4 years
between 2008 and 2012, UOB extended its retail asset contribution
to total asset from 55% to 60% and its retail deposit contribution
from 65% to 72%. UOB might not have shown strong growth over the
years but it showed growth neverthelessat a time when both OCBC and
DBS failed to do so in particular post global financial crisis. A
family owned bank in the 3rd generation, it escaped the
discontinuities at DBS and to a minor extent with OCBC, both who
suffered from management changes in the past, and has recently
introduced a younger generation of managers in its consumer banking
business. Mass retail, privileged reserve (wealth management) and
private banking are the key segments for UOB, yet its key growth
segments are the privilege ($100-350K) and privilege reserve
($350K-2million). The strategy aims at capturing also a solid and
stable core depositor base. With about 80 relationship managers in
this segment its success relates to being focused. Its success is
based on well-trained staff plus the focus on a few products that
drives better performance than taking a broad based sales approach.
With intense cost pressure it centralized its resources across the
region and scaled back on big investment which UOB views as
ineffective in the current environment. Despite its rapid growth in
this segment and sales success it trails in regards to cross sell
ratios in those segments compared to its peers in Hong Kong and
international players in Singapore. Although it has Prudential as a
partner, it is not yet a strong player in bancassurances. UOB
expanded its regional network with 13 more dedicated wealth
management centers increasing the regional wealth management
footprint to 49 centers in 2012. By end of 2012 it managed $66
billion AUM spread across its customer base of 155,000. It aims to
grow its regional wealth management contribution by 50% in 2015 as
of 27% by end of 2012. Amid intense market competition, UOB has
maintained its leadership position in the private residential home
loans segment by making enhancements to the customer experience by
introducing instant mobile loan approval on site. In 2012, the bank
also implemented a paperless electronic account opening service,
introduced cardless cash withdrawal, and made steady progress
towards a fully integrated regional platform. Key regional markets
such as Malaysia and Thailand are a significant profit driver, with
regional profit growth outpacing that of Singapore.
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Thus, harnessing the potential of its regional network will be
crucial for future growth and success. UOB reiterated that it is on
track to complete its regional core-banking platform by end of 2013
connecting its last two countries, Malaysia and Thailand. It is not
a major risk taker in developing new products and services. A case
at hand is that it only introduced a full-fledged mobile banking
service end of 2011 lagging its peers by about 2 years. While being
risk averse and slow moving, UOB has started to move up a gear in
introducing changes at the front and back office to maintain a
dominant position in the market. 23% of its retail business
currently comes from its overseas operations. UOB aims to generate
40% of revenue from overseas in the future (currently 23%).
Strengths
Corporate segment of SME business Credit card management (high
revolving ratio, strong profitability in premium
card segment, good call center service management, credit card
fee income contributes 17.5% to overall fee income of the
group)
Wealth Management (Privilege Reserve) Senior level management
stability with young stars given key
responsibilities Prudent cost management Strong fee income
generation (36% contribution to total retail income) Strong
contributions from its Malaysian and Thai retail operations
Efficient collection of core deposits through its branch
network
Weaknesses
High turnover of junior staff in business banking and at the
front line (teller) Siloed business lines (e.g. credit cards) Low
levels of automation (only recently addressed) Low analytical
capabilities Low flexibility in responding to market changes
Bancassurances Credit card approval (6hrs for existing customers)
Outdated IT and core banking platform
Opportunities
Leveraging on continuity at C-level and high degree of trust in
the bank for wealth management and SME banking
Regional retail banking expansion Threats
CIMB Bank in the SME banking business DBS is in strong recovery
mode in its overall retail business Citibank in Credit Cards OCBC
in bancassurances Missing the hip factor for the younger segments
and upcoming professionals
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Citibank
Citibank Singapore is the flagship country operation for Citi
Asia Pacific where most of the retail and payments innovations are
being incubated before being rolled out in Asia. Since 2005, the
bank has been licensed by the Monetary Authority of Singapore (MAS)
as a qualified full licensed bank to engage the full scope of
banking business in Singapore. Citibank Singapore with a S$12
billion consumer banking portfolio has de facto became a powerful
local player in the Singaporean market growing its franchise and
branch network. It continues to grow its franchise by expanding
aggressively its physical distribution network. From just four
branches and 1 off-site ATM in 2005, the bank is now accessible to
customers at more than 1,000 touch-points including 25 branches,
216 Citibank ATMs and 120 ATM locations under the shared ATM5
network. It has made inroads not only in the city center but
branched out successfully into the urban neighborhoods and micro
transit branches at all major underground train stations. Its a
dominant player in the wealth management space with its iconic
Citigold brand and a strong player in credit cards. Next to its
private banking services Citigold Private Client for high net worth
individuals (HNWIs), which it launched in 2010, it introduced, in
line with other banks, an emerging affluent segment in 2011. Up to
2005, Citibank retail financial services propositions in Asia
Pacific were hardwired towards the affluent and HNWI, and its
banking franchises in the region, outside the credit card business,
were regarded as niche and exclusive. Then Citibank executives saw
growth opportunities beyond the Citigold proposition, making a
far-reaching decision to expand their franchise further. In
essence, it articulated an expansion strategy from high street to
Low Street, from high profile locations in residential areas,
business districts, shopping belts, arts and entertainment, aiming
to take away business in retail financial services and core
deposits from local players. In 2007, it opened mass transit micro
branches in the traffic heavy commuter districts of Singapore and
Hong Kong in conjunction with the introduction of an integrated
credit and mass transit card. The partnership with Singapore Mass
Rapid Transit Corporation (SMRT) subsequently served as a primer
for other countries in Asia Pacific such as Hong Kong. Citibank set
up the transit branch concept, a micro branch with a footprint of
40-60 square meters in high traffic areas such as train stations or
subways, thus taking the branch to where it was most convenient to
customers, marking a shift in the branch paradigm from you come to
us to we come to you and out of the way branches to on your way
(transit and connectivity). It was also innovative since it was the
first bank leveraging transit innovation with a strategic
partnership (SMRT Card for Singapore and Octopus Card in Hong Kong)
for markets where Citi had a weak physical footprint. Downsizing
the branch, it also reengineered its processes and services.
Another innovation was on-the-spot issuance of credit cards, which
could be processed and handed out to eligible customers within 30
minutes, which were bundled with a mass transit ticket application.
The branches are open seven days a week, 12 hours a day and are
staffed with two to three people, who are multi-skilled and able to
deal with everything from opening stock accounts to loan
underwriting.
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In 2010 Citibank Singapore unveiled the next leg in branch
banking under its smart branch-banking banking concept. Designed as
a transit branch featuring extensive use of digital technology
including display panels forming media walls, interactive
touch-screens, face-to-face phone banking and video-conferencing
facilities for interactions with banking specialists. In addition,
the branch provides for other innovations including a
cheque-deposit machine with imaging technology, iPads carried by
in-branch staff and a workbench with Apple terminals for account
openings and other services. Citibank Japan followed later with its
own but same format high-tech and multimedia, offering the
availability of the latest interactive technology in a single store
and integrated paperless workflow processes, information transfers
and discovery in an open workbench environment. Though issues
remained on the richness and depth of service applications, the
customer experience-driven branch concept with a superior human
interface and very high degree of automation aimed to meet customer
expectations of instant delivery and always on connectivity. The
revolution was largely possible due to the incorporation of
technology as seen from the state-of-the-art touch points. Citibank
intends to introduce this branch concept into mature markets in the
Asia Pacific over the next years. In 2011, Citibank Singapore
introduced 24 hours online e-chat services and solutions for wealth
transfer and legacy planning, as well as access to funds typically
reserved for institutions and high net worth individuals. It also
introduced greater self-control on card security, by allowing
customers to activate and de-activate cards for local and overseas
usage. It also has improved its rewards redemption programme in
regards to ease of usage in the last years in Singapore. In
addition, it launched SMS Pay late 2012 to allow clients to pay
their bills via SMS. Yet Citibank Singapore has been coming under
pressure to grow top line growth post global financial crisis.
Singapore will require foreign banks with a big share of the
country's retail deposits; Citibank is one of them, to incorporate
their retail operations here to protect depositors. The government
may allow also a "very small number" of QFBs that are
"significantly rooted" in Singapore to increase the number of
business locations they can operate here to 50 - including as many
as 35 branches - up from a maximum of 25 places of business now.
This will be part of an overall package negotiated with the banks'
home countries, which have signed free trade agreements (FTAs) with
Singapore.
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Strengths Wealth management Consumer finance and credit cards
Phone banking customer service Internet banking
Weaknesses
Turnover rates of front line staff is high, might indicate
internal dissatisfactions of workforce
Often too many consumer banking initiatives are taken on which
are hard to complete
Mortgages Hierarchical Flagging top line growth
Opportunities
Deepening its franchise by growing further its physical network
Consumer finance Affluent and emerging affluent business
Threats
Global outlook and the impact on investment products and
securities
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