OCBC

OCBC: (The Edge) In a key feature by The Edge magazine, OCBC’s CEO Samuel Tsien was quoted as calling the Wing Hang acquisition ‘’transformational’’, with the magazine highlighting that OCBC could even reclaim its position as Asean’s largest bank, a position it once held until 1996. As a guide, the acquisition of Wing hang would see OCBC grow its asset size by another 9% to a pro forma of $373.3b, just 7% short of DBS, and overseas earnings contribution on a pre-tax profit basis would jump to 47% versus UOB’s 41% and DBS’s 35%. An appreciation of the new combined entity by investors could result in a premium market rerating, while the group’s market value would also likely be boosted by the raising of additional equity capital to finance the acquisition. In regards to the group’s strategy, OCBC does not aim to compete head on with the Chinese domestic banks, while instead the bank aims to focus on trade and investment flows between China, Asean and the Asian region, where foreign banks generally have a competitive advantage due to its regional presence. OCBC does not aim to compete with the Chinese domestic banks, but instead they aim to capture the fund flows of trade and investment between greater China and Asean, where foreign banks are generally better in this area due to its regional presence. Will also grant it access to additional currency despoits like RMB, HKD and USD deposits which could be used to fund an expansion in assets and expand its suite if activities. The grp also intend to cross sell more of its products and services, and its subsidiary great eastern will also be able to penetrate the insurance market. As a comfort, OCBC has had a good track record in M&A's, as evident in their acquisitions in Great Easetern, its acqusition of Bank NISP in Indonesia and its acquisition of ING private bank, all of which has yield pretty positive results. Using a 10 yr period, OCBC shares has O/p its peers, yielding a 90% return vs UOB's 625 and DBS 25%.