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OCBC seeks to energise unprofitable China consumer banking unit
[SHANGHAI] Oversea-Chinese Banking Corp, Southeast Asia's second-largest lender, plans to remodel its unprofitable consumer-banking unit in China and focus on corporate banking in an effort to boost profits from the mainland.
The bank will add new customer segments and products to the consumer-banking operation, Kng Hwee Tin, chief executive officer of OCBC Bank (China) Ltd, said in a Tuesday interview. That requires training for staff members in the next six to nine months, she said, declining to give more details.
Foreign banks struggle to make money from their retail businesses in China, where they face lengthy approval processes for new branches that are pitted against the tens of thousands of outlets owned by the nation's largest banks. HSBC Holdings Plc has the largest foreign presence with more than 170 branches, compared with Agricultural Bank of China Ltd's 23,612. OCBC has 17.
"It's a very difficult business for us, we don't have the competitive advantage," said Ms Kng, 48. "It's small and not making money. We are thinking of remodeling it, as in what can we do better given our current footprint and our current investments."
Overseas banks hold less than 2 per cent of banking assets in China, the lowest share among emerging markets, according to a 2012 report from the International Monetary Fund.
Net income at OCBC's China unit surged 231 per cent to 238 million yuan ($38 million) last year thanks to higher income from corporate loans, fees from trade finance and settlement, and investment returns, according to the unit's annual report. The consumer-banking segment posted an operating loss of 175.8 million yuan.
"That's a market where we don't have a natural base of customers," said Ms Kng. "We are not at the end of the road to say we are closing the consumer business, we are not there yet. We are trying."
The lender will almost double its branch network and the about 800 employees it has in China after it absorbs the mainland operations of Wing Hang Bank Ltd, which OCBC acquired last year, according to Ms Kng. The bank has no plans to cut workers to save costs following the purchase, she said.
The US$5 billion Wing Hang acquisition, the biggest takeover of a Hong Kong lender since 2011, gave OCBC access to a city that is the biggest center for offshore yuan trading. Wing Hang's strength in serving small businesses in China will strengthen OCBC's portfolio of corporate customers, which comprises mainly Chinese companies, including state-owned enterprises, and clients seeking to invest in China, Ms Kng said.
The Singaporean bank plans to focus on its corporate- banking business in China as it tries to take advantage of growing trade ties between the mainland and Southeast Asia, Ms Kng said. The lender wants to increase its services to Chinese companies expanding outside of the mainland, she said.
"OCBC Group is very large in Southeast Asia, and we are frankly quite experienced," Ms Kng said. "The linkage between China and Southeast Asia, if you look at the trade flows, the investment flows, is something not to be understated."
Greater China, which includes the mainland, Hong Kong and Taiwan, contributed 19 percent of OCBC's pre-tax profit in the first quarter, compared with 12 percent a year ago, according to an April 30 statement.
Ms Kng was appointed head of OCBC in China in March 2013 after 20 years at the company in various positions including head of audit.