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Interest rates set to stay low
By Mano Sabnani, Business and Financial Consultant
First published in TODAY
8 - 9 Mar 2003
Bank
shares have been among the hardest hit in the current market
downturn, and there is some justification for that. Results
for 2002 of all three, DBS, UOB and OCBC, have not been inspiring.
The picture that is emerging is that
all the banks are facing a saturated local market with thinning
margins in most
areas of activity. The foreign banks are getting more active
in the traditional domains
of the local banks, while retaining a grip on their traditional
niches.
The
local banks are eyeing the region, including China. But returns
from these areas will take time to develop into growth drivers
for the Big Three.
Meanwhile,
dependence on the local market remains and DBS has moved to
try and improve returns by cutting deposit rates more deeply
than lending rates. Its
POSB deposit-taking machine is still bringing in cash at such
a rapid rate
that profitable deployment of the funds is a problem. Low,
low interbank rates are
of no help for this traditional provider of funds in the interbank
market.
On the lending side, DBS has been on the defensive in lucrative
housing loans,
for instance. It has brought in Eddie Khoo from Citibank to
help lead the
charge with Edmund Koh. But results will take time to show.
In the meantime, DBS will
have to contend with other changes on the banking scene.
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