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Occupy Central: How Are Our Banks Holding Up?
Econowatch, Tradeable | 02 October 2014
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By: Tradeable
Articles (256)

[UPDATE on Friday, 3 October, at 11am: Adding details on Leung Chun-ying's press conference and subsequent reactions.]

Hong Kong’s embattled chief executive, Leung Chun-ying has refused to step down amidst protesters’ demands. This development could ratchet up tensions as police have been seen carrying ammunitions and equipment to protest sites. However, the government seems to be compromising with its offer to hold talks with protest leaders. The protests head into their eighth day with some local banks having closed branches for four days by now.

The protest movement, Occupy Central has currently already gone on for over a week. While most retail businesses bore the brunt of the disruption that the protest movement has caused, banks have also felt a pinch, albeit a slightly smaller one. All three major Singapore banks have a presence in Hong Kong. We look at how they are faring and whether a protracted Occupy Central will hurt them.

Thousands have joined Occupy Central over the week

Here’s What We Know:

  • DBS announced that it had closed four Hong Kong branches (out of 50) in Hong Kong. This includes its branches in Admiralty, Causeway Bay, and Mong Kok.
  • OCBC’s recently acquired subsidiary, Wing Hang Bank temporarily halted operations at two branches in Admiralty as well as Mong Kok.
  • UOB currently has not taken any action to suspend operations and are assessing the situation.
  • Based on its FY13 annual report, DBS derived about 18.2 percent of its net interest income from Hong Kong ($1 billion from Hong Kong versus $5.6 billion in total). Neither of the other two banks provided any segmental information about Hong Kong specifically in their annual reports.

DBS currently looks to be the most affected by the protest movement.

So, What Now?

  • Needless to say, the suspension of banking operations at certain branches will affect business. However, to put things into perspective, the two banks (DBS and OCBC) that have suspended some operations have only done so for about four working days. In the larger scheme of things, this is fairly insignificant.
  • That said, things can still get mighty ugly for all three banks if this protest movement becomes a protracted one. Worst still, if the protests turn violent, business sentiment in Hong Kong will nose dive. Surely then, we will see a significant impact on all three banks’ financial performance.
  • Already, some are pointing out that the Hong Kong protest movement is adding a new geopolitical threat to markets that are already grappling with several military conflicts around the world (Ukraine, ISIL, and the Syrian civil war).
  • In light of this, we generally feel the development is mildly negative to all three banks with DBS and OCBC possibly being more affected than UOB. However, should the protest movement turn violent or continue for a protracted period of time, we would be more pessimistic about whether the three banks will come out of the episode unscathed.
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DBS Group Hldgs  24.900 +0.19 +0.77%   
Business: [FY18 Total Income] Institutional banking (43.7%), consumer banking/wealth management (42.9%), treasury markets and others (13.4%).

Insight: Apr-19, 1Q19 net profit rose 9% to a record $1.7b.... Read More
Oversea-Chinese Banking Corp  10.740 +0.09 +0.85%   
Business: [FY18 Turnover] Global corporate/investment banking (35%), global consumer/private banking (34.8%), OCBC Wing Hang (11.5%), insurance (11%), global treasury & mkts (7.7%).

Insight: May-19, 1Q19 total income rose 14.7% driven by str... Read More
United Overseas Bank  25.920 +0.43 +1.69%   
Business: [FY18 Turnover] Group retail (43.3%), group wholesale (43.2%), global markets & investment management (5.1%), others (8.4%).

Insight: May-19, 1Q19 total income rose 7.8% to $2.4b due t... Read More

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