Wing Hang Bank

OCBC chief Samuel Tsien confident on Wing Hang deal schedule

Samuel Tsien expects 'very reasonable' deal for HK lender will be completed in third quarter, despite concerns in market over valuation

PUBLISHED : Monday, 30 June, 2014, 1:40am
UPDATED : Monday, 30 June, 2014, 8:01am

Oversea-Chinese Banking Corp, Southeast Asia's second-largest bank by assets, is confident that its proposed acquisition of Wing Hang Bank - one of the few remaining family-controlled lenders in Hong Kong - will be completed by the third quarter of this year despite some growing concerns about the deal's valuation.

Samuel Tsien, the chief executive of OCBC, one of Singapore's three biggest lenders, described the deal price for Wing Hang as "very reasonable".

Tsien also said the acquisition of Wing Hang would be a key part of OCBC's long-term strategy to strengthen its business in the so-called SMIC markets.

SMIC refers to Singapore, Malaysia, Indonesia and China.

Wing Hang’s current business and networks … are quite attractive

For OCBC, SMIC meant the four most important markets that the bank was keen to expand in amid growing competition from both local and international banks, said Tsien, a former senior executive of Bank of America and China Construction Bank in Hong Kong.

In April, OCBC announced an offer of HK$38.4 billion to fully acquire Wing Hang, the eighth-largest lender in Hong Kong, making the deal the largest acquisition of a Hong Kong bank by a Singaporean bank after the purchase by DBS of Dao Heng Bank for about HK$45 billion in 2001.

DBS, OCBC's main rival, is the sixth-largest bank in Hong Kong after years of expansion in the city.

Analysts have said with the OCBC-Wing Hang deal, OCBC can challenge DBS's position in Hong Kong in terms of branch coverage and customer base across the city.

The landmark OCBC-Wing Hang deal can be translated into 1.77 times the price-book value of Wing Hang's consolidated net book value at the end of last year.

In comparison, mainland investment firm Yue Xiu early this year offered a price-book value of 2.08 times for Chong Hing Bank, also a small family-controlled lender in Hong Kong.

Some minority shareholders of Wing Hang have recently raised their concerns whether the OCBC-Wing Hang deal was undervalued.

Asked if OCBC might be forced to increase its offer, Tsien denied those market concerns. "Everything is now on schedule and the deal price is already very reasonable," he said.

After the Wing Hang deal, "China definitely has the potential to become one of the top three markets in terms of profit contributions to the OCBC group," said Shanghai-born Tsien, who has lived in and worked for OCBC in Singapore for seven years.

Singapore contributes about 60 per cent to OCBC's group operating earnings and Malaysia is the second-largest contributor with more than 20 per cent. Indonesia is third, with about 5 per cent, according to company data.

"Wing Hang's current business and networks in mainland China, Hong Kong and Macau are quite attractive to OCBC, especially its wealth management and treasury business, but Wing Hang doesn't have overseas presence, and that's something OCBC can help with," said Tsien, who emigrated to Hong Kong with his family as a child and became one of the city's most influential bankers.

A general offer was made for Wing Hang after OCBC received irrevocable undertakings for a stake of 50.66 per cent from the Fung family who founded the bank in the 1930s.

OCBC has said that once it completed the acquisition of Wing Hang, it will delist the bank from the Hong Kong stock exchange.

On Friday, OCBC said it had received approvals for the acquisition from financial regulators in Singapore, Hong Kong and Macau. Wing Hang also has a long history and strong presence in Macau.

Tsien said Beijing's ambition to push the yuan as a global currency was also part of the reason why OCBC was keen to acquire Wing Hang.

"Hong Kong's yuan market is much bigger than Singapore, so we want to make Wing Hang a very attractive platform for yuan-related businesses for OCBC clients," Tsien said.

Follow the reporter on Twitter: @george_chen