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Singapore banks ramp up to offer local service to multinationals

Written by Anton Murray Consulting on . Posted in News

Jeremy Grant

Singapore’s three biggest banks are ramping up hiring to capture a surge in demand from western multinationals wanting to use local banks – rather than global rivals – as they expand in the fast-growing markets of Southeast Asia.

The move highlights how multinationals – whether in retail, consumer, manufacturing or engineering – are changing their banking relationships and dealing more with local players as they seek to take advantage of the creation of a single market in the Association of Southeast Asian Nations (Asean).

It also reflects multinationals’ desire to reduce reliance on traditional ties with global banks amid counterparty risk worries in the wake of the 2008 financial crisis.

“Western multinationals are looking for an alternative kind of banking provider,” said Piyush Gupta, chief executive of DBS, Singapore’s biggest bank by assets.

United Overseas Bank, the third largest, said it was hiring bankers for a unit set up this year to service multinationals. “The team will start coming in between now and the end of the year and next year we will look more strategically at how this business grows and will resource it accordingly,” said Collin Tan, head of multinational corporate banking at UOB.

DBS established a unit to handle multinational companies in 2012. That unit was now staffed by “dozens” of bankers handling cross-border Asian trade flows, working capital provision and treasury risk management services, the bank said.

DBS clients include BP, US materials conglomerate 3M, Schlumberger, the oil services group and Rolls-Royce, the UK-based aircraft engineering group.

OCBC, Singapore’s second-largest bank, said multinationals were “more receptive to banking with us compared to three to five years ago as we look to extend our coverage to them”.

Asean has brought down a swath of tariffs that have long hindered cross-border business. While many executives and economists doubt that Asean will achieve its target of creating a planned Asean Economic Community by the end of 2015 – in part because non-tariff barriers remain in place – multinationals are nonetheless expanding in the region.

Trends such as urbanisation and a rising middle class are driving investment by many, drawn by what they believe is the potential of a region with a combined population of 620m and a gross domestic product greater than that of India.

A recent survey by the American Chamber of Commerce in Singapore showed that 73 per cent of US multinationals expect Asean’s contribution to their group profits will rise in 2015.

Companies increasingly preferred to use local banks, often with more extensive branch presences in key markets, as well as better access to small and medium-sized enterprises that were potential suppliers, Mr Tan said.

“When you are an MNC looking to develop your business in an emerging market you need to do business with local companies that offer local supply chains and trade flows,” he said. “It’s not just a case of ‘the cheapest price wins’, it’s who understands the creditworthiness of the seller and the quality of what you are buying.”

Financial Times