Singapore’s top banks to expand in Southeast Asia
Singapore’s top three financial institutions – DBS Group Holdings, United Overseas Bank (UOB) and Oversea-Chinese Banking Corp. (OCBC) – are aggressively expanding beyond the country’s borders, leveraging strategic acquisitions and hires to cement their positions as key players in the Southeast Asian region.
UOB’s CEO, at the bank’s annual meeting, highlighted ambitious plans to expand into ASEAN and compete with local rivals over the next five years. This follows the successful acquisition of Citigroup’s consumer banking businesses in Thailand, Malaysia, Indonesia and Vietnam in 2022, which added Citi’s 2.4 million retail customers to UOB’s existing 2.9 million customers in these countries. The integration has already been completed in Indonesia, Malaysia and Thailand, with Vietnam scheduled for next year.
UOB aims to become the leading cross-border merchant bank in ASEAN and is actively pursuing partnerships such as those with Chinese automaker BYD and Thailand’s Rever Automotive. Through this collaboration, UOB has been able to finance more than 25 local Rever dealerships.
OCBC is also on an expansion path, acquiring PT Commonwealth Bank Indonesia in November last year to strengthen its presence in Indonesia. OCBC’s group CEO highlighted the bank’s strategy to support Chinese clients’ investments in Indonesia to take advantage of the growing capital flows between ASEAN and Greater China.
DBS, the largest of the three banks by assets, has also followed suit, acquiring Citigroup’s retail banking business in Taiwan in 2022 and successfully completing the integration in August last year. DBS recently brought in a former Credit Suisse executive to run its Thailand and Philippines operations, demonstrating its commitment to regional growth.
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Singapore currently accounts for the bulk of these banks’ revenues – 66.5% for DBS, 61.9% for OCBC and 56.7% for UOB, according to QUICK FactSet data. However, UOB and OCBC also derive significant revenues from Thailand and Malaysia.
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This rapid growth outside Singapore is partly due to the saturation of the local market, where most residents have relationships with multiple banks. This is confirmed by a senior analyst at Phillip Securities Research, who noted that strategic acquisitions allow banks to better integrate with local markets and deliver sustainable growth.
In a volatile external economic environment, these banks are looking overseas. They are expected to face challenges in the form of lower interest rates after record revenues based on rate increases. Interest rates in Singapore, dependent on global monetary policy and geopolitical risks in the Southeast Asian region, highlight the importance of geographic and revenue diversification.
The net interest margins of DBS and UOB fluctuate in an interest rate environment, which has driven their strategic focus on expanding credit card and wealth management services.
Despite strong competition in local markets such as Thailand and Indonesia, recent moves to expand into other countries are seen as successful. According to an analysis by Phillip Securities Research, expansion beyond the domestic market promises to improve the customer base and financial performance.
