Singapore's lenders look to be on the hunt for acquisitions to accelerate their regional expansions, with all three said to be eyeing stakes in other banks.
Sources said yesterday that OCBC Bank is studying an offer for Hong Kong-based Wing Hang Bank. News reports have said United Overseas Bank is also considering a bid for the same bank.
Both declined to comment.
This follows reports last week that DBS Group Holdings is among the banks that have advanced in the bidding process for Societe Generale's private banking assets in Asia.
"The local banks have, over the years, been building a presence in regional markets, so these moves all boil down to an aspiration to be regional," said Fitch Ratings' director of financial institutions, Mr Alfred Chan. "If they stay in Singapore, prospects for growth are limited."
Bloomberg reported that OCBC has been studying an offer for Wing Hang for over two weeks, while Agricultural Bank of China, ANZ Banking Group and UOB were also reported by Reuters to be potential suitors.
Wing Hang, with a market value of US$4.6 billion (S$5.7 billion), is one of four remaining family-owned banks in Hong Kong.
These banks are facing stiff competition from big international players.
Wing Hang is 45 per cent controlled by Hong Kong's Fung family and BNY International Financing Corp. Its suitors are likely aiming for a gateway to China as the world's second-largest economy loosens its currency controls, said CIMB analyst Kenneth Ng.
"OCBC has spent a good part of the last decade building up its Asean platform and for the next 10 years, the big story is likely to be yuan liberalisation," he noted.
"And I believe when they look around the region, they're seeing Malaysian banks intruding into the Asean space. So for OCBC, extending to Hong Kong and building onwards beyond its Asean platform makes Wing Hang a strategic play."
The local banks have not made many acquisitions in recent years.
OCBC bought a stake in China's Bank of Ningbo in 2009 and, a year later, completed the purchase of ING's Asian private banking business for US$1.44 billion.
UOB, meanwhile, bought ING's Thailand asset management unit for €10 million (S$17 million) last year.
In July, one of the biggest prospective deals of all, DBS' US$6.5 billion bid for Indonesia's Bank Danamon, was thwarted by regulatory obstacles.
All three local banks, being well-capitalised, should have no problems funding acquisitions, Mr Ng said. But he added that Wing Hang may come at a premium, given that it is a mid-sized bank in an attractive market.
Mr Chan agreed, saying: "The issue is not funding but pricing."
He believes that OCBC and UOB will be looking closely at the Hong Kong market and Wing Hang itself before making any moves.
"They want to build a presence but they won't rush to do it - if there's an opportunity, they would look at it, or else they would grow organically," he said.
"They'll have to study whether there's value in Hong Kong, a market that's so saturated. And does Wing Hang have good connectivity with Chinese corporates that could lead to more meaningful referrals?"
