OCBC Has Appointed a New CEO: What are the Implications for Investors?

It’s not often that you hear of large banks changing their CEOs.

OCBC Ltd (SGX: O39), one of Singapore’s three big banks, surprised investors last week when it announced that its current CEO, Samuel Tsien, will be retiring in mid-April.

Succeeding him will be Ms Helen Wong, 59, who has many years of banking experience in China and North Asia.

Ms Wong had a long history with OCBC, joining the bank way back in 1984 as its first China desk manager.

She has worked in various roles in investment banking, corporate banking, relationship management and debt capital markets since then.

Her last role was at HSBC Holdings (LON: HSBA) where she was appointed chief executive of Greater China.

Ms Wong rejoined OCBC in February last year and helped to review and redefine OCBC’s group strategy and operating model. She also spearheaded a task force that worked on the bank’s sustainability efforts.

There is little doubt that Ms Wong will play a big role in OCBC’s future.

The China connection

It’s noteworthy that Ms Wong’s experience included many years of working in Hong Kong banks and dealing with Chinese corporates.

Back in 2014, OCBC had conducted the acquisition of Wing Hang Bank in Hong Kong, the largest takeover in the bank’s history.

Then in 2016, the Bank of Singapore, OCBC’s private banking arm, acquired the wealth and investment management business of Barclays PLC (LON: BARC) in Singapore and Hong Kong.

And in 2017, OCBC bought the retail and wealth business of the Singapore and Hong Kong arms from Australia’s National Australia Bank (ASX: NAB).

From the above acquisitions, it seems clear that OCBC intends to expand its presence in the Middle Kingdom and capture a larger slice of the lucrative pie there.

For context, the bank’s recent third-quarter earnings show that Greater China made up 22% of group’s total operating profit for the quarter, the largest contributor apart from Singapore at 50%.

In addition, the Greater China segment (consisting of Hong Kong, Macau, China and Taiwan) made up nearly 25% of OCBC’s loan book as of 30 September 2020.

These numbers clearly show that the bank intends to further grow its China business.

With Ms Wong’s extensive experience in dealing with Hong Kong and China, the bank looks set to continue to grow both its earnings and loan book in this region.

Succession planning

OCBC has also demonstrated savvy succession planning with the change at the helm.

Samuel Tsien had served nine years in the top position and the bank believes that the time is right for someone to succeed him.

Ms Wong’s appointment also means that this is the first time a lady will be heading a local bank.

This move should be most welcome by investors as it enhances management representation and diversity.

With her experience in crafting operating strategy and in leading OCBC’s sustainability efforts, Ms Wong is also preparing the bank for the future where ESG (i.e. environmental, social and governance) concerns will feature more prominently.

Implications for other banks

The banking industry is facing rapid change and potential disruption.

Late last year, Singapore’s central bank, the Monetary Authority of Singapore, had awarded four digital banking licences to successful applicants.

Two were for digital full banks that allow a wide range of banking activities to be conducted, while the other two were wholesale licences that are more restrictive.

The emergence of digital banks could be a threat for the incumbent banks, which may be one reason why OCBC had started a global search for a new CEO.

Then, there is also the question of succession planning at the other two local banks, DBS Group Holdings Ltd (SGX: D05) and United Overseas Bank Ltd (SGX: U11), or UOB.

DBS’ CEO Piyush Gupta is 60 this year and joined the bank in November 2009, while UOB’s CEO Wee Ee Cheong is now 68 and has been in the top seat since April 2007.

Both banks could potentially also be looking out for a successor to carry the business to greater heights.

Get Smart: A change in strategy?

Overall, the succession looks like a canny move by the bank.

With its current CEO reaching retirement age, finding someone to succeed him shows that the bank has robust succession planning measures in place.

Ms Wong, with her valuable and extensive China experience and who has worked in multiple roles in various banks, is well-placed to take OCBC forward into this next decade.

Investors should continue to monitor the bank’s progress to see what strategic plans the new CEO has once she comes on board.

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Disclaimer: Royston Yang owns shares in DBS Group Holdings Ltd.

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