Flavia Cheong, investment director at Aberdeen Asset Management and part of the team that runs funds such as Aberdeen Asian Income investment trust, explains why she likes Singaporean bank OCBC.
"This is one of the three leading banks in Singapore with a large presence in consumer and small to medium-sized enterprise (SME) lending, as well as insurance via its Great Eastern Holdings subsidiary. The bank also has a meaningful presence in Malaysia, as well as Indonesia via bank OCBC NISP, while its footprint in China is increasing with Ningbo Commercial Bank and in Vietnam with VP Bank."
In 2011, for example, while Singapore accounted for 59 per cent of OCBC's profits Malaysia accounted for 26 per cent and Greater China 7 per cent.
Ms Cheong says: "The main reason we hold OCBC is because of its strong banking and insurance businesses which have considerable regional growth opportunities; good asset quality; and established track record of understanding and rewarding shareholders.
It offers an investment opportunity because this lender continues to evolve from being a local bank to a regional financial services company, most recently with its acquisition of ING's private banking business in Asia, which it has rebranded as Bank of Singapore. And a hefty portion of Bank of Singapore's profits are derived from outside Singapore.
OCBC is diversified across different segments with a dominant presence in corporate and consumer areas, and a growing regional network. In 2011 global corporate banking accounted for 44 per cent of its profits, global treasury 23 per cent, global consumer financial services 14 per cent and insurance 13 per cent.
OCBC also has healthy underlying businesses and low non-performing loan ratios, while it has provided good capital and dividend gains over the long term. Between December 2005 and August 2012, while the MSCI AC Asia Pacific ex Japan Index advanced 35.69 per cent, OCBC's share price grew more than double that, increasing 84.7 per cent."
