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Monday, 6 January 2014

OCBC in exclusive talks over Wing Hang Bank


CW8888: So OCBC is playing catch-up but way behind DBS?



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OCBC Bank said on Monday that it had entered into "an exclusivity agreement" with the substantial shareholders of Wing Hang Bank on Dec 31, 2013 - PHOTO: REUTERS

OCBC Bank said on Monday that it had entered into "an exclusivity agreement" with the substantial shareholders of Wing Hang Bank on Dec 31, 2013, with a view to taking over the Hong Kong bank.

Wing Hang's substantial shareholders are members of the Fung family, its affiliates and related family trusts, and BNY International Financial Corporation. The exclusive arrangement will last until the end of January 2014.
OCBC did not say how much it intends to pay for Wing Hang.

News reports late last week and over the weekend said OCBC had offered less than the two times book value Wing Hang was seeking.

3 comments:

  1. OCBC is a bank which I always admire. Will be loading up this counter onec valuation become attractive.

    Thank you for the update!

    Regards,
    Gerald
    www.sgwealthbuilder.com

    ReplyDelete

  2. From UOBKayHian

    Reminiscent of DBS’s acquisition of Dao Heng Bank. The deal reminds investors of DBS’s acquisition of Dao Heng Bank at P/B of 3.1x in Apr 01.

    At that time, DBS was trading at P/B of 1.7x and the P/B gap was a whopping 1.4x. DBS’s ROE dropped from 12.9% in 2000 to 8.8% in 2001 and 7.2% in 2002. DBS managed to improve its ROE to 10.3% in 2003.

    Fortunately, the P/B gap for OCBC’s planned acquisition of WHB is expected to be smaller at 0.4x.

    ReplyDelete
  3. Hi CW8888,

    OCBC Return on Assets is 1.69, that for Wing Hang is 0.95, slightly more than half, in fact it was 0.84 in 2009 and 2010.

    ROE is 10% ish vs 18% for OCBC.

    DBS has written down its investment in Dao Heng two times so far and I guess will write down a few more times in the next decade or so, and finally exit the investment, making a paper profit on the written down investment. Where have we seen this before ? Oh, yes, SIA investment in Virgin Australia.

    Ah well, I guess, every bank has to make the same mistake at least once so that they learn.

    This will leave UOB who has not made such an acquisition (I guess thanks to it being run by WEC).

    Cheers

    V

    ReplyDelete

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