Overseas Union Bank (OUB)
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Overseas Union Bank (OUB), now defunct, was founded in 1947 in Singapore by Lien Ying Chow. It began operations in February 1949 and by the 1980s had grown into one of Singapore’s “Big Four” local banks. In 2001, OUB was acquired by United Overseas Bank (UOB) in a S$10 billion takeover deal.
In 1943, Lien Ying Chow was based in Chongqing, China, having escaped the Japanese Occupation of Singapore. There he gathered ethnic Chinese business leaders from Singapore, Malaya, Burma and India to form the Overseas Chinese Union Bank (OCUB). This predecessor of OUB had several branches in China and in its operations dealt largely with ethnic Chinese who had fled the conflict in Southeast Asia. After the end of World War II, the bank faced issues such as China’s unstable political situation and rampant inflation. Lien returned to Singapore and OCUB ceased operations in China.
However, the banking industry remained attractive to Lien, and in 1947 he made plans to form a new bank. Overseas Union Bank (OUB) began operations on 5 February 1949, making it the first new bank to open in post-war Singapore. The chairman of the new bank was Tan Sia Kuang, a banker and owner of a rubber company, while Lien held the post of vice-chairman. Other members of the OUB board included “Tiger Balm King” Aw Boon Haw, rubber magnate Tan Lark Sye, and cinema entrepreneur Loke Wan Tho. Chi Owyang, who had been general manager of OCUB, filled the same position at OUB.
Despite starting with a modest paid-up capital of $2 million and a lean staff of 27 including Lien and Owyang, OUB showed its confidence by setting up in Raffles Place, previously the preserve of established European and American banks and business houses. The new bank occupied the ground floor and basement of Meyer Chambers at a rent of $4,000 a month.
In its early years, OUB found its niche in trade financing, especially for businesses importing rice from the region. OUB formed ties with Thai banks and rice exporters, and almost all Thai banks maintained a Singapore dollar account with OUB. Up to the mid-1950s, OUB financed around 80% of the rice imports into Singapore.
While there had been some doubts over the viability of OUB at its inception, by the end of its third year the bank was able to declare a dividend of 5% to its shareholders. Such success was previously unheard of in the Singapore banking industry. Eight years after opening, OUB embarked on an expansion phase, opening new branches in Singapore as well as Malacca, Penang, Kuala Lumpur and Hong Kong. The international focus continued with new OUB branches in Tokyo and London in the 1960s. In 1972, OUB became the first Singapore bank to open in New York.
In 1964, Lien sought to enter the hotel industry, with a dream of what later became the Mandarin Singapore Hotel. OUB general manager Chi Owyang felt that the bank should not bear the potential risks of the project, and a separate company, Overseas Union Enterprise (OUE), was established. OUB and OUE held cross shareholdings. By 1968, OUB had deposits of over S$300 million and 32 branches. Lien had taken over as chairman by this time, while Owyang had retired.
Changes to Singapore’s banking sector in the early 1970s had opened it to foreign banks and rendered the industry more competitive. OUB had achieved success while being run along the lines of a traditional Chinese business. Many of the bank’s staff were family members and friends of shareholders, and staff were accustomed to a casual style of management.
Lien recognised that OUB had to switch from doing business the old-fashioned way, and brought in former Housing Development Board chairman Lee Hee Seng as chief general manager in 1974. Lee instituted professional personnel policies, including putting an end to jobs for board members’ friends and family. He also improved productivity and efficiency, streamlined work processes and established clear lines of reporting and control.
OUB also introduced computer technology into operations. The changes unsettled some and a union was formed for the first time in the bank’s history. OUB signed a collective agreement but the threat of industrial action did not abate until 1975.
By 1973, OUB’s paid-up capital had grown to S$50 million, with assets of around S$1 billion. Over the following decade, profits grew by an average of 25% annually, while assets and shareholder funds grew by over 20%. The bank was listed on the Singapore Exchange in 1975, forming one of the largest public companies in Singapore at the time. Subsidiary companies dealing in areas such as finance, stockbroking and property were established, together with OUE forming the OUB Group.
Beginning in 1948, Lien had been buying land at 1 Raffles Place for a flagship building for OUB. The land for the S$500 million building took 40 years to acquire in its entirety. The 60-storey OUB Centre opened in 1988. Following the realisation of this dream, Lien subsequently took a back seat in OUB. In 1995, he retired as chairman and director of OUB, and was named honorary life counsellor. Through his direct shareholding and cross-holdings in OUE, Lien and his family remained the bank’s largest single shareholder with around 20% of OUB.
Under the leadership of CEO and president Peter Seah during the 1990s, OUB become the fastest growing of the “Big Four” local banks (the Development Bank of Singapore, United Overseas Bank, Overseas-Chinese Banking Corporation and OUB) in terms of profit growth. OUB operations in Hong Kong and Malaysia were particularly profitable, with overall overseas operations contributing 30% of OUB’s income in 1994 and 40% in 1999.
A series of rights issues enlarged OUB’s shareholder funds to over S$5 billion in the late 1990s, making it the fourth largest bank in Southeast Asia on those terms. In 1996, OUB recorded its largest ever profit of S$310 million. By 2000, this had grown to a new record of S$545 million. OUB’s growth had come about after an expansion of investment banking, consumer banking, fund management (with a portfolio of around S$2.5 billion in the mid-1990s), corporate management, corporate finance, capital markets and syndication activities. Overall, loans and treasury were the most profitable of OUB’s operations.
Acquisition by UOB
Despite its rapid growth in the 1990s, OUB remained the smallest of the “Big Four” banks. When local banks came under pressure to consolidate in the early 2000s, OUB became a prime target for acquisition. A failed merger with French bank BNP Paribas in mid-2001 increased speculation that OUB would become a target for one of the other three banks or merge with a smaller bank.
In June 2001, the Development Bank of Singapore (DBS) made a hostile takeover bid of S$9.4 billion for OUB. This drew a competing bid of S$10 billion from United Overseas Bank (UOB). Crucially, UOB’s bid was seen as a friendly one, gaining the support of the OUB board and management, as well as the backing of founder and substantial shareholder Lien.
In September 2001, UOB announced that it had won over 90% in shareholder acceptances for its bid, enabling it to acquire OUB in its entirety and delist it. The acquisition made UOB the largest local bank in Singapore, with around S$115 billion in total assets.
At the time of the takeover, OUB’s shareholder funds totalled S$5.2 billion, with after-tax profits of S$561.1 million. By the end of 2003, OUB was fully merged with UOB, with its branches converted to UOB ones and the OUB brand no longer in use.
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The information in this article is valid as at 2011 and correct as far as we are able to ascertain from our sources. It is not intended to be an exhaustive or complete history of the subject. Please contact the Library for further reading materials on the subject.