SINGAPORE BANKS SAY DIVERSIFICATION KEY TO GROWTH
Singapore's major banks are
diversifying and gradually shifting their asset holdings from
loans to debt instruments, banking sources said.
    The banks following the trend are the <Overseas Union Bank
Ltd>, <United Overseas Bank Ltd>, <Oversea-Chinese Banking
Corporation> and the <Development Bank of Singapore Ltd>.
    The shift towards securitisation has been helped by
volatile financial markets which have developed hedging
facilities such as floating rate notes and bonds for risk
management, said Overseas Union General Manager Loh Hoon Sun.
    Loh told Reuters in an interview that Singapore banks see
limited growth in credit risk. More and more of them are
switching from term lending to major growth areas such as
stockbroking and fee based income, he said.
    Major local banks ventured into stockbroking after being
granted seats on the stock exchange. Bankers said they are now
moving into the new government securities market and the Stock
Exchange of Singapore Dealing and Quotation System.
    One foreign banker said the Development Bank and the
Overseas Union Bank Ltd have become major players in the equity
market in Singapore.
    Loh said the banks' participation in the stock market has
increased business transactions and provided long term growth
for the market. The banks are not competition for individual
stockbroking firms because of the increased business they
generate, he added.
    Loh said the Stock Exchange of Singapore might expand
equity issues by as much as one billion dlrs this year because
of the increasing ability of foreign and local market
participants to absorb new issues.
    Loh said <OUB Investment management Ltd>, a subsidiary of
the Overseas Union Bank Ltd, has teamed up with a U.K. Firm to
launch the Union Global Fund. The fund is for local investors
seeking capital growth through a diversified international
portfolio. It will invest in international shares with the
emphasis on U.S. And Japanese markets, he said.
    <DBS Securities Singapore Pte Ltd>, a subsidiary of the
Development Bank of Singapore, has applied to the Hong Kong
Stock Exchange to set up a Hong Kong stockbroking firm.
    Loh predicted fixed deposit and prime interest rates in
Singapore will stay low this year. As a result, banks will be
forced to provide fund management services for major clients
seeking better returns, he said.
    Economic analysts and bankers are optimistic the major
banks will show profits in 1987, helped by higher income from
treasury and investment banking activities.
    They expect the 1987 after-tax profits of Oversea-Chinese
and United Overseas to show stable growth of four to eight pct
against respective gains of four and seven pct in 1986.
    Overseas Union's profits are expected to jump to over 40
mln dlrs from seven mln dlrs in 1986, economists said.
    The Development Bank's after-tax profits rose 39.2 pct in
1986 mainly due to a dividend of 20.4 mln dlrs paid by
<National Discount Company Ltd> before it became a subsidiary
of the bank, they said.
 REUTER
