Fintech players are shaking up the banking sector in SEA

Fintech players are shaking up the banking sector in SEA

By: 
Samantha Chiew
16/04/18, 02:56 pm

SINGAPORE (Apr 16): CLSA is rating the Asean banking sector “overweight” as it is set to take a different route in the near future with fintech players carving out their paths and partnering the banks in more meaningful ways.

In a Wednesday report, managing director, HK and Singapore Banks of CLSA, Asheefa Sarangi says, “In our view, as a market, Singapore is best positioned from the banks’ perspective.”

This shifting landscape presents both opportunities and risks for banks, but those that are in a supportive environment will have an advantage, and IT-savvy banks with scale should come up as the biggest winners.

The research house’s top picks on the fintech shakeup theme are DBS and OCBC with “buy” recommendations and target prices of $35.50 and $15.75 respectively, as well as Indonesian-listed Mandiri with an “outperform” call and a target price of IDR8,700 (83 cents).

There are more than 600 fintech companies headquartered in Asean and this number has been growing exponentially over the past decade.

According the Sarangi, this is driven primarily by rapid tech adoption, infrastructure improvement, confidence in the stability and reliably of mobile technology, urbanisation, rising literacy, a greater pool of young people, the pull of the unbanked or underserved population and greater accessibility of capital for startups.

In Southeast Asia, fintech seems to be concentrated in payments and settlements, lending, as well as data analytics. These verticals are also where Asean banks look to be partnering.

“Some homegrown companies have the potential to survive as standalone entities, but most will need to partner with large domestic corporates to achieve scale and navigate around any licensing and regulatory barriers,” says Sarangi.

Within the banking industry in Asean, Sarangi believes that Singapore is the most mature, while Indonesia and the Philippines are relatively less developed in comparison.

Hence, more of the Singapore’s existing revenue streams could be at risk, while parts of a traditional banking lifecycle might never take hold in the other two markets.

However, Indonesia and the Philippines particularly appeal because smart penetration is remarkably high; there is a sizeable youthful population likely to engage in new services offered by fintech; and financial inclusion is relatively low.

Regulators and politicians in every market are taking action. Singapore appears to be relatively best placed, while the Philippines seems least well positioned.

As at 2.54pm, shares in DBS and OCBC are trading at $28.52 and $13.08 respectively.

DBS is trading at 12.7 times FY18 earnings with a dividend yield of 4.3%, while OCBC is trading 10.6 times FY18 earnings with a dividend yield of 3.8%.

DBS kept at 'buy' with still more upside expected ahead: RHB

SINGAPORE (Jan 21): RHB Research is maintaining its “buy” call on DBS Group Holdings with an unchanged target price of $29.80. This comes on the back of expectations of still more upside ahead, led by widening net interest margin (NIM). Analyst Leng Seng Choon notes that the 3-month SIBOR has been on a rising trend. It currently stands at 1.89%, after hitting an average of 1.73% in 4Q18 – some 0.1 percentage point higher than the preceding quarter. While he explains that there is some lag effect from the SIBOR rise to filter through to NIM widening, Leng believes DBS’ 4Q18 NIM....
Read More >>

Temasek ramps up pressure over Standard Chartered turnround: FT

SINGAPORE (Jan 21): Standard Chartered’s largest investor Temasek has grown frustrated with the slow pace of chief executive Bill Winters’ turnround, according to a report by The Financial Times of UK, and is stepping up pressure on the UK-listed bank ahead of his pivotal strategy update in February. The Singapore state investment company, which owns about 16% of StanChart, was reported by FT to be asking for more frequent and detailed briefings from top executives and even floated the prospect of taking a board seat in a meeting last year, two people with knowledge of the discussion to....
Read More >>

Ascendas-Singbridge properties to house public EV charging network with help from SP Group

SINGAPORE (Jan 21): Ascendas-Singbridge Group is appointed as Singapore Power (SP) Group’s first major location partner in its plans to build “Singapore’s largest and fasted public EV charging network” with 1,000 charging points island-wide by 2020. Under the partnership, 24 charging points were installed in six buildings owned by Ascendas-Singbridge – Hyflux Innovation Centre at  80 Bendemeer Road, Corporation Place, Techlink, Techplace I, The Capricorn and The Kendall – with operations commencing in phases since Dec 2018.   Main image: SP Group CEO Wong Kim Yin (l....
Read More >>