Singapore’s DBS Bank invests in Taiwan,
India…
National Bank of Greece looks abroad
for an insurance partner…
Swedbank’s
rebranding project gathers pace…
Spain’s
Banesto wheels out ‘free’ car
incentive…
Visa, US Bank in mobile money
transfer pilot…..
TRENDS
The ugly emergence of the online bank run
Go deeper with GlobalData
Banks have been hit by a new kind of problem as the financial
turmoil intensifies – the invisible bank run conducted online.
Washington Mutual (WaMu) in particular saw deposits dramatically
and significantly withdrawn as nervy depositors withdrew funds
through online and telephone channels. Nearly 10 percent of its
deposits were withdrawn in just eight days before its collapse,
when parts of the business were sold to JPMorgan Chase. It was also
reported HBOS, the UK bank rescued by Lloyds TSB, suffered similar
problems as its share price started to tumble.
While neither of the banks experienced a widespread or
observable bank run with customers queuing at branches, clients –
mainly those with savings above regulatory insurance levels –
withdrew substantial amounts of money, contributing to the funding
shortfall within the banks and accelerating their demise.
Hong Kong-based Bank of East Asia (BEA), meanwhile, was forced
to issue a statement after a rumour questioning the stability of
the bank, spread by mobile phones, caused customers to queue to
withdraw money. It said it had referred the matter to the police
and Hong Kong Monetary Authority. The bank’s management said BEA
had a capital adequacy ratio of 14.6 percent, well above the
international required level.
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By GlobalDataSTRATEGY
Singapore’s DBS Bank invests in Taiwan, India
Singapore-based DBS Bank has announced plans to renovate its
recently acquired 40-branch network in Taiwan – and will also open
nine new branches in India.
DBS acquired the Taiwanese branches when it bought some of the
assets of Bowta Commercial Bank earlier this year. Taiwan, as well
as being Asia’s fourth-largest banking market in its own right, is
seen as a strategic way of gaining access to the rapidly growing
Chinese market, which still has tough regulation preventing foreign
companies moving in on a larger scale (see RBI 584).
DBS is the first Singaporean bank to move into Taiwan. Other
foreign banks with a presence in the country include HSBC, which
was paid $1.5 billion by the country’s government to take control
of struggling Chinese Bank last December (see RBI 584).
Standard Chartered, Citi and ABN AMRO, now owned by RBS, also
operate in the country.
DBS CEO Richard Stanley said: “DBS Bank’s ambition is to become
a leading bank in Asia. Our expansion in Taiwan reinforces DBS
Bank’s Greater China strategy and commitment to Asia.”
The group also opened its first branch in Calcutta, India,
taking its total in the country to three. DBS has a licence from
the country’s central bank, the Reserve Bank of India, to open
eight more. Stanley said they would be up and running by early
2009.
MERGERS AND ACQUISITIONS
MUFG ups stake in consumer lender Acom
Mitsubishi UFJ Financial Group (MUFG) has paid ¥152.5 billion
($1.4 billion) to up its stake in Acom, Japan’s largest consumer
lender, to 40 percent. MUFG previously held a 16 percent stake in
Acom, which has a market capitalisation of around $4.5 billion.
The move is the latest step in a consolidation process which is
sweeping through the Japanese consumer finance industry, as
wafer-thin margins make smaller businesses unprofitable.
Last month, GE Money sold most of its Japanese operations to
Shinsei Bank for ¥580 billion (see RBI 597). In July, Citi
effectively pulled out of the Japanese consumer finance market,
closing its 32 remaining sales distribution outlets and 540
unmanned, automated loan machines. It said it would suspend
marketing its DIC consumer finance brand and reduce customer
bookings.
The Japanese banking industry, still recovering from its 1990s
financial crisis, has also been hit by strict regulation on
consumer lending. In December 2006, the Japanese Diet (government)
decided to cap consumer loan interest rates, a ruling which is
being phased in up to 2010. It has also forced banks to pay back
excess interest charged to borrowers in the past.
REGULATION
ABA appeals for review of GSE preferred stock decision
The American Bankers Association (ABA) has revealed more banks
than originally assumed hold the preferred stock of Fannie Mae and
Freddie Mac, and has called for government action to protect
them.
The Federal Housing Finance Agency placed Fannie and Freddie
into conservatorship in early September, meaning the payment of
dividends on preferred stock was eliminated. But in an open letter
to Hank Paulson, the United States’s Treasury Secretary, ABA
president Edward Yingling said that the negative impact on banks –
particularly so-called ‘Main Street’ community banks – “is far
greater than regulators first thought”.
He said nearly 27 percent of banks hold preferred stock of the
government sponsored enterprises (GSEs), with 3.4 percent holding
auction rate securities backed by preferred stock of the GSEs.
Yingling said that implied total industry capital exposure of up to
$15 billion, which could create an overall reduction in lending of
$114 billion. He added one unnamed bank faced 90 percent of its
capital being wiped out by the decision.
M-BANKING
Visa, US Bank in mobile money transfer pilot
Visa and US Bank, the fifth-largest retail bank in the US, are
to launch a mobile money transfer pilot which will allow the bank’s
cardholders to use their mobile phones to transfer funds. The trial
will only allow Visa cardholders to transfer money to accounts
linked to another Visa card.
Visa is investing a substantial amount in the mobile channel.
Elizabeth Buse, Visa’s global head of products, said the card
association’s 16,000 member banks and 1.6 billion cards would
enable it offer mobile phone transactions both domestically and, in
the second part of the programme, cross-border.
Buse said: “With more consumers relying on their mobile devices
to simplify their everyday lives, Visa has a significant
opportunity to streamline and secure the way people send and
receive money.”
Cardholders will be able to initiate money transfers using a
mobile web browser via access a secure interface, with transferred
funds credited directly to the recipient’s card account.
The first phase of the trial will include 6,000 participants,
and is scheduled to start by the end of 2008.
STRATEGY
ING India looks for record deposit growth
ING’s Indian operation, ING Vysya Bank, is aiming for 20-25
percent growth in advances and 30-35 percent growth in deposits in
fiscal 2009.
Those figures are in line with the bank’s performance in the
previous financial year, when it registered loan growth of 22
percent, to INR146 billion ($3.14 billion), and deposits increased
33 percent to INR205 billion. It made a profit of INR15.7 billion
in 2007, an increase of 76 percent. It is set to announce its
half-yearly results at the end of the month.
The bank, which has 1.5 million customers and is 44 percent
owned by ING, is currently awaiting permission from the Reserve
Bank of India to open 56 new branches. It currently has 407
branches and 203 ATMs.
Insurance company ING Vysya Life Insurance, a joint venture
between ING and three other companies in India, said it is ready to
make acquisitions to improve the distribution of its insurance
products.
MERGERS AND ACQUISITIONS
Deutsche Bank moves for Postbank stake as German market completely
transforms
A summer of M&A in the German banking market has continued
with the announcement that Deutsche Bank, Germany’s largest bank by
assets, is to buy a 30 percent stake in Deutsche Postbank, and the
re-emergence of merger discussions between the country’s two
largest co-operative banks.
Deutsche Bank has agreed to acquire a 29.75 percent minority
stake in Deutsche Postbank at a cost of €2.79 billion ($4.06
billion), with a view to acquiring an additional 18 percent stake
somewhere between 12 and 36 months in the future, subject to
regulatory approval.
The two banks will collaborate on the distribution of home
finance products and explore cross-selling opportunities.
The deal follows on from Commerzbank’s €9.8 billion acquisition
of Dresdner Bank from Allianz at the start of September (see
RBI 598), a move which will see Commerzbank overtake Deutsche
in terms of German retail banking customers and branches.
Any fully-fledged acquisition of Postbank, however, would see
Deutsche Bank reclaim pole position with a total of 24 million
domestic customers and 1,700 domestic branches, surpassing
Commerzbank’s combined base of 11 million customers and 1,540
branches in Germany.
A further deal in a summer which has also witnessed Credit
Mutuel acquire Citigroup’s German retail business for €4.9 billion,
German co-operatives DZ Bank and WGZ Bank have signed a memorandum
of understanding ahead of a merger aimed to complete in H109.
The merger of the two institutions, which act as wholesale banks
for Germany’s 1,250 co-operatives, will “create new earnings and
growth potential for the local co-operative banks”, said DZ Bank
chief executive Wolfgang Kirsch.
MERGERS AND ACQUISITIONS
Barclays continues its global acquisition spree
Barclays has further increased its retail banking reach with the
announcement that it is to acquire Indonesia’s Bank Akita for an
undisclosed amount, continuing an expansionary plan that has
encompassed countries such as Italy, Russia and Pakistan over the
past six months.
The deal for Akita, which has total assets of IDR959 billion
($102 million) and 10 branches across three cities in Indonesia, is
expected to complete in early 2009, Barclays said.
The UK bank bought Russian institution Expobank for $745 million
in March 2008; aims to double its retail banking network in Italy
from 60 to 120 branches by the end of the year; and has made
progress with its Indian retail banking offering, launched in May
2007.
Barclays has also moved into Pakistan. Having obtained a banking
licence from the State Bank of Pakistan in December 2007, the bank
opened its first three branches in Islamabad, Karachi and Lahore at
the end of August. Seven more are expected to follow by the end of
2008.
STRATEGY
State Bank of India mulls foreign M&As, Pakistan
expansion
State Bank of India (SBI), the country’s largest bank, has said
it is considering an overseas acquisition while continuing to focus
on domestic expansion.
SBI chairman OP Bhatt said that any such consideration would be
a consolidation of existing overseas interests and an attempt to
tap into the potential of the Indian diaspora.
SBI, along with Bank of India, is also seeking approval to open
branches in Pakistan from regulator the State Bank of Pakistan
(SBP), with two Pakistani banks applying for similar licences from
the Reserve Bank of India (RBI).
The United Bank of Pakistan and either National Bank of Pakistan
or Habib Bank will apply for licences from the Reserve Bank of
India. An initial memorandum of understanding signed by SBP and
RBI was agreed back in November 2005.
STRATEGY
National Bank of Greece looks abroad for an insurance
partner
National Bank of Greece (NBG) has announced its intentions to
seek a strategic alliance with an international insurance partner
in order to maximise the potential of its domestic insurance
interests.
European banks are increasingly viewing insurance as a key
revenue driver in an increasingly troubled, low-proft retail
banking environment (see RBI 598), and NBG’s own plans
involve accelerating the development of its Ethniki Insurance arm
as well as its bancassurance businesses.
Ethniki management has already completed a three-year
reorganisation of the company and have “identified significant
growth opportunities domestically and internationally”, NBG
said.
The bank also believes that further operational improvements can
be made to the insurance group despite the completion of the
restructuring plan.
MERGERS AND ACQUISITIONS
HSBC terminates $6.3bn KEB deal at last
HSBC has dropped its long-standing arrangement to acquire a 51
percent stake in Korea Exchange Bank after it was unable to
renegotiate the price of the deal.
The bank, once again the world’s largest by market
capitalisation following a drop in the share price of China’s
Industrial and Commercial Bank of China, agreed in September 2007
to purchase the stake from US private equity firm Lone Star for
$6.3 billion, but could not extract what it believed to be a fair
re-evaluation in light of the stock market slumps of 2008.
A further hurdle to the completion of the deal had been the
absence of any approval from Korea’s Financial Services Commission
(FSC). The FSC asked HSBC to resubmit its application for approval
on 11 August 2008 but had yet to make a decision prior to HSBC’s
pullout.
“HSBC remains fully committed to Korea, however, and it is our
aim to play a full part in the country’s financial services
sector,” said HSBC’s Asia chief executive, Sandy Flockhart.
“Our focus is now on HSBC’s existing and growing operations in
Korea which we will continue to invest in and develop.”
BRANCHES
Nordea joins retail rush with in-store offering
Nordea, Scandinavia’s largest bank by market capitalisation, has
expanded its branch network in Finland with the launch of outlets
in Stockmann’s department stores across the country.
The seven stores will now each feature a Nordea Shop, which will
provide customers with advisory services relating to savings and
investment products as well as customer service for Stockmann
MasterCard holders.
“Customers can drop in to discuss their banking matters while
shopping. Our target of excellent customer experience is
crystallised in the new concept,” said Pekka Nuuttila, head of
banking Finland at Nordea.
Finland was Nordea’s most profitable market in 2007, producing
an operating profit of €1 billion ($1.46 billion) – a third of the
bank’s overall Nordic Banking unit profit total of €3
billion.
BRANDING
Swedbank’s rebranding project gathers pace
Swedbank, Sweden’s second-largest banking group, has started the
rebranding of its Baltic States subsidiary, Hansabank, following
similar initiatives in Sweden in 2006, Russia in 2007 and in
Ukraine earlier this year.
The legal formalities to complete the name change from Hansabank
will be completed during the second half of 2009, by which time the
bank will operate under the Swedbank banner in all markets.
Swedbank acquired Hansabank in 2005.
“The change of name to Swedbank is proof that we are here on a
long term basis”, said Jan Lidén, Swedbank’s president and CEO.
“The core of the Swedbank brand is service leadership, and the main
aim is to provide the best service on the markets where we are
present.”
But the rebranding comes at a time of renewed market rumours of
possible Scandinavian banking consolidation, in particular a report
in Swedish business daily, Daily Dagens Industri, suggesting
Swedbank may be a target for Denmark’s Danske Bank.
Swedbank currently trades at around 4.5 times its estimated 2008
earnings; its shares have lost almost one half of their value this
year.
SPONSORSHIP
Tendulkar to bat for Royal Bank of Scotland
Royal Bank of Scotland has enlisted the assistance of Indian
cricketing icon Sachin Tendulkar to act as a brand ambassador to
help promote the RBS brand across the Asia-Pacific region. The deal
represents RBS’s first sponsorship deal in the region following its
acquisition of ABN AMRO last year.
Celebrity endorsement is a popular marketing tool in India: when
Deutsche Bank began its retail banking operation in India in 2006
it signed up two Indian sports legends – former cricketer Sunil
Gavasker and tennis icon Sania Mirza – to act as product
ambassadors in the country. RBS rival Barclays also got in on the
act, signing up India’s leading golfer Jeev Milkha Singh to
coincide with the launch of its retail operation in the country
(see RBI 573).
Tendulkar joins a stable of RBS sporting ambassadors which
includes tennis player Andy Murray, golf’s Jack Nicklaus, Luke
Donald and Paula Creamer, and motor racing legend Jackie
Stewart.
SOCIAL MEDIA
Co-op blog highlights ethics in action
The UK’s Co-operative Bank, the country’s largest ethical
banking group, is the latest financial services group to embrace
social media to flag up its highly ethical philosophy and increase
customer engagement.
Its launch in mid-September of a blog – http://blog.goodwith/
money.co.uk – has been devised to highlight examples of its ethical
policy in action, as well as inviting feedback about the bank’s
corporate and socially responsible activity.
The first project featured on the site is the bank’s £25 million
microfinance fund, designed to support the development of small
businesses in new and developing countries as well as some of the
world’s poorest economies. The Co-op has already provided support
in 25 countries worldwide including Nicaragua, Azerbaijan,
Cambodia, Ecuador, Kenya and Bosnia.
PROMOTION
Citi launches ‘Thanks A Million’ sweepstake
Citi has rolled out a sweepstakes promotion entitled
‘Thanks-A-Million’ which will give away a total of 5 million
loyalty points to highlight its successful Thank
You loyalty scheme.
New current account customers will be automatically entered into
the prize draw, while existing customers will be entered when they
make a purchase with a Citi debit card. In addition, new current
account holders will receive 10,000 bonus points when they make a
qualifying purchase with a Citi debit card.
The promotion, which runs until 30 November, offers two first
prizes each of one million points, four second prize winners will
receive 500,000 points while 10 prize winners will each receive
100,000 points.
More than 10 million customers have signed up to Citi’s no-fee
Thank You scheme since it was established in 2005.
PRODUCT INNOVATION
CBA remains determined to be different
Commonwealth Bank of Australia (CBA), Australia’s second-largest
bank by assets, has ramped up its mortgage line-up with the
introduction of a simplified loan procedure, offering a 60-minute
home loan approval as part of its customer acquisition initiative,
Determined To Be Different (see RBI 587).
Customers will now get completed home loan documentation within
one hour; the bank will also offer a one year pre-approval facility
giving customers an obligation-free home loan available for 12
months.
According to the bank’s group executive of retail banking, Ross
McEwan, CBA’s new simplified process of applying for a home loan
“is another example of how Commonwealth Bank is determined to be
different”. In October, the bank will launch a further mortgage
initiative, the CBA First Home Savers Account.
CORPORATE SOCIAL RESPONSIBILITY
Bank of America launches Eco-Deduct
Bank of America has released Eco-Deduct, an environmental
rewards programme, designed to reward commercial wire transfer
payments by making donations to conservation charity The Nature
Conservancy.
Under the terms of the Eco-Deduct project, BofA will donate
$0.25 to the charity for every transfer from a new client and the
same sum for each transfer that represents added volume from
existing clients.
BofA clients which participate in the scheme will have the
choice of one of four programmes supporting conservation and
climate change work in Australia, Brazil, Costa Rica and parts of
Africa.
“Eco-Deduct is an innovative rewards programme that supports The
Nature Conservancy’s mission of conserving wildlife habitats and
addressing climate change,” said Catherine Bessant, president of
BofA global product solutions.
The scheme is the latest in a series of green projects following
BofA’s announcement in early 2007 of its 10-year, $20 billion
environmental plan to address climate change by championing
sustainable business practices through innovative lending,
investment strategies and new retail products.
PROMOTION
Spain’s Banesto wheels out ‘free’ car incentive
Santander’s Spanish subsidiary Banesto, which has long prided
itself on wacky promotions, is offering its savers free Citroën
cars and Piaggio motor scooters in return for opening long-term
interest-free term deposit accounts.
The bank’s Sobre Ruedas promotion (which translates as ‘smooth
running’), does, however, have a catch: to qualify for the small
family segment Citroën C4 diesel (worth around €20,000), customers
must deposit at least €160,000 over three years. As the bank will
not pay interest on savers’ capital during the lock-in period of
the offer, customers will forego around €24,000 in interest over
three years, assuming an interest rate of 5 percent.
The promotion, which runs until the end of the year, also offers
Piaggio motor scooters for savers with a deposit balance of at
least €18,000.
