By SIOW LI SEN
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MAYBANK'S results for its financial year 2008 on Wednesday were hardly remarkable - profit was down 8 per cent to RM2.93 billion (S$1.23 billion). But it is likely that bankers here must be reading the details with great interest as the Singapore unit has chalked up yet another record year of earnings.
Maybank Singapore made profit before tax and zakat of RM530.9 million, up a hefty 44 per cent from RM368.6 million previously. It attributed the sparkling performance to strong loans growth which outperformed the market - 36 per cent year-on-year compared to the industry's growth of 26 per cent. The main areas of loans growth were lending to the building and construction sector, trade-related loans and home loans.
With this coming on the heels of record profits posted by the Singapore operations of HSBC and Standard Chartered Plc, it is a no-brainer that the DBS chief executive, after just over 100 days on the job, would want to refocus on Singapore. Some cynics even say that for a new CEO, it is the fastest way to build his reputation.
Richard Stanley said earlier this month at DBS's second-quarter results announcement that the bank would refocus its attention on Singapore as part of a broader push to improve the group's performance by making better use of its natural advantages in its home market.
Singapore contributed 62 per cent of the group's pre-tax profit for the first six months of the year, slipping from 66.5 per cent a year ago.
DBS has a 'privileged position' in Singapore, said Mr Stanley, who took over as head of the group in May. 'It's a competitive market, a mature market, but I think we can do even better here, leveraging on our strengths in our deposit base, our client base, our branch network, and our brand recognition.'
The recent $35 million makeover of POSB, which DBS acquired in 1998, is an example of the group's efforts to renew its focus on its home market, he added.
With growing uncertainties and increased political risks and tension in the region, pulling back to concentrate on Singapore has always been the refuge for the three local banks. DBS has the biggest weapon - its huge deposit base - which the group has not defended. The DBS deposit book has shrunk 1.2 per cent quarter-on-quarter. For a long time, the bank did not bother because it was seen as expensive, given that DBS could not deploy funds fast enough. The other two local rivals, too, have lost share in deposits to the foreign banks, which have managed to earn income by offering higher-yielding deposit products.
But the global credit crunch has changed the perspective on expensive deposits.
Noted Morgan Stanley analyst Matthew Wilson: 'While bank managements are keen to maintain net interest margins and have aggressively repriced deposits, they are doing so to the detriment of their deposit franchise. The deposit is a bank's most valuable asset and never more so in this world of rapidly shrinking liquidity.'
DBS is working overtime on its POSBank relaunch, which it will unveil soon, according to spokeswoman Karen Ngui. No doubt there will be a slew of products accompanied by bells and whistles with changes to its distribution network. The bank is so far keeping mum on what exactly it will do to win customers.
The trick is getting it right without alienating its 4 million customers, especially in times of high inflation and with a possible recession looming. Mr Stanley, an ex-Citibanker, should be wary of the Citi model of pushing products. Selling the wrong product to retirees or pushing small loans to those with uncertain incomes could turn out to be worse than no action at all.
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