OCBC eyes growth in Greater Bay Area in China

OCBC chief executive Samuel Tsien (right) with Mr Na Wu Beng, chief of subsidiary OCBC Wing Hang Bank, at a briefing last week.
OCBC chief executive Samuel Tsien (right) with Mr Na Wu Beng, chief of subsidiary OCBC Wing Hang Bank, at a briefing last week.PHOTO: OCBC BANK

It aims to hit $1b profit from area by 2023, double last year's figure, says CEO

OCBC chief executive Samuel Tsien believes ongoing trade tensions between the United States and China will have limited impact on its operations, which are primed for significant growth in the Hong Kong region.

He told a briefing that the bank aims to hit $1 billion in profit from what is termed the Greater Bay Area by 2023, double the $500 million racked up last year.

China's Greater Bay Area comprises nine cities in Guangdong province that make up the Pearl River Delta, as well as Hong Kong and Macau. The Chinese authorities hope it can eventually rival other bay areas such as those in San Francisco, New York and Tokyo.

Besides the ambitious profit target for the region, Mr Tsien said OCBC is looking to clock a 15 per cent per year growth in customer loans to $80 billion, up from $35 billion last year. It also expects to raise headcount by 40 per cent, from around 3,000 to 4,200.

OCBC will invest $200 million in its Greater Bay Area franchise to meet those targets.

It will earmark two-thirds of the funds for technology and the building of an IT hub in the Pearl River Delta region. The remaining one-third will go towards adding more staff.

  • Driver of China's future growth

  • • Last year, Chinese Premier Li Keqiang announced the Greater Bay Area as a driver of China's future growth, by acting as the gateway for domestic Chinese companies to grow their business abroad.

    • It is made up of the Pearl River Delta - nine cities in Guangdong province plus Hong Kong and Macau.

    • China aims to create the world's largest bay area in terms of gross domestic product (GDP) by 2030, beating bay areas in San Francisco, New York and Tokyo Bay.

    • Last year, the Greater Bay Area contributed 12 per cent to China's GDP, even though it covers less than 1 per cent of the country's land area and accounts for less than 5 per cent of the population.

    • The Pearl River Delta cities recorded a 2017 GDP of US$1.1 trillion (S$1.5 trillion) while that of Hong Kong hit US$341 billion.

    • The Greater Bay Area has been mentioned as a possible innovation centre for China's Belt and Road Initiative.

    • Beijing is expected to give details of the Greater Bay Area masterplan in the coming weeks.

    Claire Huang

The targets fit with the bank's strategy in the Greater Bay Area to capture trade, capital and wealth flows in and out of the area, Mr Tsien said.

"Given the current development of the Chinese economy, it is our belief that there will be a gradual relaxation of capital flow beyond China into other countries," he added.

Mr Tsien noted that the Greater Bay Area could be used as a pilot ground for this purpose and if so, the bank, with its presence in the region, would be able to contribute to this end.

OCBC has a presence in five of the nine cities in the Greater Bay Area, in addition to Hong Kong and Macau. It also has more than 470 branches spanning South-east Asia, including its core markets of Singapore, Malaysia and Indonesia.

China also hopes that the Greater Bay Area will act as the gateway for mainland Chinese companies looking to expand overseas.

OCBC is also looking at other areas for expansion, including its asset management business within China. It already has a 28 per cent share in a fund management firm set up by the Bank of Ningbo, of which OCBC owns a 20 per cent stake.

It is also looking to beef up its domestic wealth management operations in China amid the sizeable market of high-net-worth individuals.

"The private banking and wealth management area in China is currently not very well developed yet because of the lack of products," Mr Tsien pointed out, later adding that the idea is to create a well-researched, well-diversified and well-packaged wealth management product portfolio.

By geography, Greater China including the Greater Bay Area accounts for about 20 per cent of the group's earnings. The area also represents about half of Greater China's earnings, but OCBC expects that to rise to 70 per cent or so.

Mr Tsien also told the briefing that he expects the escalating US-China trade tensions to have limited impact on group operations.

He noted: "In Greater China, our loans (distribution in the first quarter) is $63 billion. Within the $63 billion, $5 billion is booked inside China... the remaining is in Hong Kong or in Singapore or in other parts. About $30 billion is in Hong Kong, about $20 billion plus is in Singapore."

In addition, China is the only economy in the world that can manage risks more skilfully and avoid a "hard landing" situation, he said.

A version of this article appeared in the print edition of The Straits Times on June 19, 2018, with the headline 'OCBC eyes growth in Greater Bay Area in China'. Print Edition | Subscribe