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UOB 'now an Asian bank'

Publication Date : 04-08-2014


Mention United Overseas Bank (UOB) and the image of its skyscraper overlooking the Singapore River might come to mind; but the financial giant is intent on painting a far broader picture than that.

Chief executive Wee Ee Cheong sees the towering UOB Plaza as the hub with spokes shooting out across Asia as part of a regionwide bank network.

That ambition has been at the heart of UOB's strategy for the past 13 years or so and its hard work is paying off.

UOB, which was founded by his grandfather Wee Kheng Chiang in 1935, has developed a strong Asian bent with close to 40 per cent of its net profits coming from outside of Singapore.

There are over 500 offices in its regional network with more than 450 located outside Singapore, including in Malaysia, Thailand, Indonesia and Greater China.

"We are no longer Singapore-centric, we are an Asian bank," Wee said, in an exclusive interview with The Straits Times.

This year, UOB has acquitted itself well, picking up several awards like The Asian Banker's Best Retail Bank in Asia Pacific award as well as the Best Retail Bank in Singapore award.

Last week, there was a record quarterly profit tally of S$808 million (US$648.5 million) while its share price's some 14 per cent gain this year far outweighs the Straits Times Index's 5.6 per cent as investors signal their approval of the bank's conservative stance and cautious approach to expanding in the China market.

But with the property market likely heading for a rough ride and banking regulations getting tougher, it makes sense that Singapore's third-largest bank has made the right decision to set its sights on being an Asian bank.

Over the past decades, UOB has picked up stakes in various lenders.

In 1999, for example, it bought Radanasin Bank, a small Thai commercial bank that was struggling after the end of the Asian financial crisis; but its expansion was really set in motion by a huge deal it pulled off in 2001.

In what was, and remains, its largest acquisition, UOB bought Overseas Union Bank, then Singapore's fourth-largest bank, for S$10 billion (US$8.03 billion) and integrated it successfully.

Wee said: "After the acquisition it became clear that our market concentration in Singapore would become very large. I asked if it made sense.

"How would the group grow from there? And so we said it would be timely for us to expand regionally to have an effective presence in Southeast Asia."

Going regional has been the defining theme for the bank since.

Wee said that "growing our intra-regional businesses would make our earnings more sustainable and deepen existing relationships. If I have a regional banking relationship with my customer and he banks with me in Indonesia and Thailand because of my footprint, it will be easier for us to grow the banking relationship

There is demand from customers, after all.

"Many of these regional companies and (small and medium-sized enterprises) have intra-regional trade needs and this is where UOB has the competitive advantage," Wee added.

The bank sees Southeast Asia as a bright spot over the next 10 to 20 years, despite the different cultures and different languages.

"My job is to build these foundations," Wee said.

But regionalisation does not come easy given that UOB always has to compete with the domestic incumbents in any one country.

Take Thailand. UOB has 157 branches there but large Thai banks far outnumber it in terms of reach and convenience which could number some 2,000 branches for example.

Here is where UOB turns its weakness into a selling point.

For example, most large Thai banks have a limited presence outside their home country but UOB can offer customers there access to banking services across the region.

With the huge purchase of Fraser & Neave by Thai Beverage, UOB was appointed as its adviser over say Thai banks, probably because UOB could offer a network in both Thailand and Singapore.

But having a wide range of branches is not enough. A crucial factor is to offer a common platform across all branches to make it a seamless banking process.

A customer stepping into a UOB branch in Thailand will feel no different from transacting in a branch in Singapore.

There is a common look and feel to the operations even to the point that an ATM card looks the same across all UOB markets.

A Thai UOB customer will find no difference using an ATM in Singapore and not even incur any extra charge for cash withdrawals or ATM services.

That uniform feel is no fluke but the result of a five-year, S$500-million (US$401.3-million) project that aimed to have a common IT platform across all the countries.

And there are pickings aplenty to be had, going by the still-small UOB presence in these foreign markets.

It has more than 5 per cent of the retail banking market in Malaysia and about 2 per cent in both Indonesia and Thailand.

Wee said: "So what I hope for is that our Thai, Indonesian and Malaysian customers see UOB as their regional bank when they expand across Southeast Asia.

"Our common platform enables our relationship managers to make the intra-regional experience seamless."

Of course, such integration also helps cut costs - the end-to- end credit card processing cost has been trimmed by half - and allows products to be quickly rolled out to different markets, a must in today's fast-paced environment.

And with Asia set to be a huge market in the next decade and beyond, UOB is getting ready to be in the thick of the action by building a distribution network of branches along with the technology to support it.

Being ready to support customers as they expand regionally will be key to building long-term banking relationships.

And that is what underpins all these moves. It is a long-term approach where decisions to invest in projects will be taken even though the results might not be immediately obvious.

Stressing words such as "long-term" and "sustainable", Wee said: "The decisions that I make today have to stand the test of time. They have to last through business cycles and beyond the next generation."

On succession planning

When you are the head of a firm where your family holds the largest stake, it is inevitable that succession planning holds a special significance.

United Overseas Bank boss Wee Ee Cheong knows this well, with the Wee family being the single largest shareholder of UOB at about 18.5 per cent.

Wee has been with the bank since 1979 and now serves as chief executive officer, but he knows that at the age of 61, he needs to look to the next generation.

"Being responsible is important. It's not something where you can wake up tomorrow and say that you want to find a successor," he says.

And technical skill is very much a given, adds Wee, who notes that a CEO must have the ability to think long-term.

"We need someone who understands the spirit of a handshake, to stand with a client through thick and thin."

In other words, the CEO should think like an owner.

"His mindset should be on building for the long term and making it sustainable," says Wee.

That raises another inevitable question: Is one of Wee's children in the running?

Two of his sons are already operating their own businesses, including Wee Teng Wen, 34, who set up the Lo & Behold restaurant group with his friends.

Wee Ee Cheong smiled, saying: "I know your next questions. How about your own children? Are they interested? Whether they join UOB, I don't know. If they do, it must be a calling.

"Generally, they must enjoy what they are doing, just like what I have been doing for the last 30 years."

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