Incorporated: 1935 as United Chinese Bank
NAIC: 522110 Commercial Banking
United Overseas Bank Ltd. (UOB) is the second largest bank in Singapore and is staking a claim on the larger Asian-Pacific region. The bank offers the full range of commercial and corporate banking services, personal financial services, private banking and other asset management services, as well as corporate finance, venture capital, investment, and insurance services. The company also provides stockbroking services through its share of UOB-Kay Hian Holdings. Having established itself in the mature Singapore market--the company acquired rival Overseas Union Bank in 2002--UOB expects its future growth to come from its overseas operations. The company is already present, through subsidiaries and branch offices, in Malaysia, the Philippines, Indonesia, Thailand, China and Hong Kong, and Taiwan, as well as in South Korea, Japan, Australia, and Vietnam. Further abroad, the company operates branch offices in the United States, Canada, France, and the United Kingdom. In all, the company operates more than 250 offices worldwide. Although banking represents the company's primary business, UOB is also present in real estate, through a 40 percent stake in United Overseas Land; and in trading, through a 30 percent stake in Haw Par Corporation, which produces, among other products, Tiger Balm ointments. UOB continues to be led by Chairman Wee Cho Yaw, son of company founder Wee Kheng Chiang. The Wee family remains the company's largest single shareholder, with a combined stake of some 20 percent.
Founded more than a century earlier, Singapore had become a thriving trade city and, like many countries in the region, home to a large native Chinese population. In the 1930s, a group of Chinese-born businessmen joined together to raise S$1 million in order to establish their own bank. Leading the group was Wee Kheng Chiang, of Chinese descent, whose father had built up a business empire in Malaysia and Singapore in the early part of the century. Wee was named CEO and chairman of the new bank, which was called United Chinese Bank to emphasize its links to the Chinese population in Singapore.
The Wee family eventually took control of the bank. When Singapore achieved its independent city state status in 1965, the bank's name was changed, becoming United Overseas Bank. In that year, the bank also took its first step onto the regional market when it opened its first foreign branch, in Hong Kong.
The bank remained a minor player, both in Singapore and especially in the Asia Pacific region when it went public in 1970, with a listing on what was at the time the Joint Stock Exchange of Singapore and Malaysia. By then, however, the Singapore government had begun a major push to modernize the state and, especially, rebuild it as one of the region's major financial centers. Wee, by then joined by son Wee Cho Yaw, had recognized that this political will was to have a far-reaching impact on the country's banking community, especially once the government inevitably opened the domestic financial market to foreign competitors. In order to survive, Singapore's banks, many of which were small, family-owned affairs, would be forced to grow.
During the 1970s, United Overseas Bank launched its own growth drive through a series of targeted acquisitions. In 1971, the bank bought up majority control of Chung Khiaw Bank, which not only strengthened its domestic network, but also gave it offices in Malaysia and Hong Kong. The Chung Khiaw acquisition also gave United Overseas Bank control of the Haw Par Corporation, which owned the famed Tiger Balm ointment brand.
United Overseas Bank's next acquisition came two years later, with the purchase of Lee Wah Bank, which also operated throughout Singapore and Malaysia. The following year, Wee Kheng Chiang, who had been given the honorary title of Datuk ("Sir"), turned over leadership of the family's holdings to Wee Cho Yaw. In that year, the company reinforced its new image as a major Singapore bank with the inauguration of its first office tower, the 30-story UOB Building.
United Overseas Bank continued to expand its operations through the late 1970s. While continuing to build on its presence in Singapore and Malaysia, the bank also stepped up its presence elsewhere in the region, notably in Hong Kong and in Tokyo, through Tye Hua Bank. The company also flirted with expansion into the United States, entering merger talks with American City Bank, based in Los Angeles. The two sides broke off discussions in 1981, however. Nonetheless, by the beginning of the 1980s, United Overseas Bank had opened branch offices in Los Angeles and New York.
At the start of the 1980s, United Overseas Bank Group claimed to be Singapore's largest, with more than 80 branches and total assets of nearly S$10 billion by 1983. The company also had begun building up a full range of financial services, including brokerage and other investment services. In the mid-1980s, UOB became one of the first to enter the slowly opening Chinese economy, opening a representative office in Beijing in 1986.
Acquisitions remained an important motor to United Overseas Bank's growth over the next decade. In 1984 the bank grew again with the addition of a controlling stake in Far Eastern Bank. That purchase was followed by the purchase of a majority share of Singapore's Industrial & Commercial Bank in 1987. The following year, United Overseas Bank took full control of Chung Khiaw Bank.
United Overseas Bank grew strongly through the 1990s, in part thanks to the roaring economic climate in its Southeast Asian region. During the decade, UOB began to position itself for the future, as the Singapore government began placing increasing pressure on the country's five largest banks--including state-owned DBS and Keppel Tatlee, the number one and four banks, respectively, and privately held Overseas Union Bank and Overseas-Chinese Banking Corporation (OCBC)--to consolidate.
By the mid-1990s, United Overseas Bank prepared to celebrate its 60th anniversary with the inauguration of a new headquarters complex, UOB Plaza, which was opened in 1995. By then, the bank had launched a streamlining effort. In 1994, UOB merged its Lee Wah Bank subsidiary's operations into its main UOB business in both Singapore and Malaysia. Chung Khiaw's turn came in 1997, when that bank's Malaysian branches were placed under the United Overseas Bank signage. Two years later, the rest of Chung Khiaw's operations, including its branches in Singapore and Hong Kong, were converted to United Overseas Bank. This left the bank with just three primary brands, UOB, Far Eastern Bank, and Industry & Commerce Bank.
In 1998, amid the Asian economic crisis of the late 1990s, UOB faced even greater pressure to accede to government pressure for consolidation after the government merged its POSBank people's bank unit into DBS, creating Singapore's largest bank. Yet Wee continued to resist consolidation at home, turning instead to expansion abroad in order to become a stronger regional player.
In 1999, the company made two key foreign acquisitions. The first was of a 60 percent share of Westmont Bank, in the Philippines. That bank was then renamed United Overseas Bank Philippines, and gave UOB a branch network of 97 offices in that country. The second acquisition brought UOB into Thailand, with the purchase of 75 percent of Radanasin Bank--formed in 1998 from the ruins of more than 50 failed Thai banks--in a deal worth $388 million. That unit was then renamed UOB Radanasin Bank. Both the Thai and Filipino operations remained loss-makers into the next century, however.
In 2000, UOB began a new restructuring. The bank merged the operations of a financial services subsidiary, United Overseas Finance, into the overall UOB structure. Next, UOB agreed to merge its brokerage operations, which spanned Hong Kong, Indonesia, Malaysia, Philippines, and Thailand, as well as Singapore, with those of Kay Hian Holdings, a prominent Singapore brokerage, forming the joint venture UOB-Kay Hian Holdings Ltd.
Despite its resistance to local consolidation, UOB found its hand forced in 2001. The bank's main rival, government-backed DBS, launched a takeover attempt of Overseas Union that year, in a bid worth S$9.4 billion. Then OCBC offered nearly S$5 billion to take over the smallest of the top banks, Keppel Tatlee. UOB had no choice but to bid for one or the other of the two takeover targets. As Wee explained to the South China Morning Post: "It gave me the opportunity. I had two options: either I counter-bid OCBC or DBS. So it gave me really one week of sleepless nights to think: 'In which direction I am going?' At the end of the day, I made a decision and recommended to the board that we should counter-bid DBS."
UOB's offer for Overseas Union Bank came in at S$10 billion, beating out DBS. Perhaps more important, however, Wee made a personal visit to George Lien Ying Chow, the aging founder and chairman of family-owned Overseas Union--proposing a "merger" that would allow Lien to save face. The move, which contrasted sharply with DBS's hostile approach, won Lien's backing for the takeover bid. Wee later acknowledged, however, that he would have pursued the takeover even without Lien's approval.
The two sides reached agreement in September 2001, and by the beginning of 2002, integration of Overseas Union into the UOB network began. That process was completed at the beginning of 2003, when all of Overseas Union's branches were converted under the UOB signage. The addition of Overseas Union Bank's operations not only restored United Overseas Bank as Singapore's largest local bank, with more than $62 billion in assets, it also transformed it into a top regional competitor. The newly enlarged operation now controlled nearly 30 percent of the Singapore banking market, while boosting the share of domestic revenues to more than 90 percent of UOB's total.
This placed the bank on delicate ground. UOB could expect little additional room for growth in Singapore, which remained a relatively minor market in the region. Meanwhile, the Singapore government had begun granting banking licenses to an increasing number of foreign rivals--including such global and regional powerhouses as HSBC and Standard Chartered. UOB's only choice for future growth lay in continued regional expansion.
China became the obvious choice for expansion by the end of 2002. In August of that year, the bank opened a new full service branch office in Shanghai, which was followed by the upgrade of its Beijing office to a full service branch in November, bringing UOB's total Chinese presence to five branches. The company also was expanding its range of services in Hong Kong, particularly with a successful launch into the city's credit card market. UOB also eyed expansion into the Taiwan banking market as well.
Over the course of its nearly 70-year history, UOB had grown up with Singapore. At the beginning of the new century, United Overseas Bank now hitched its future as a regional player in the fast-growing Asian Pacific market.
Principal Subsidiaries
Far Eastern Bank; PT Bank UOB Indonesia; United Overseas Bank (Malaysia); United Overseas Bank Philippines; United Overseas Land Group; UOB Radanasin Bank (Thailand).
Principal Competitors
Bank of China; China Construction Bank; Agricultural Bank of China; Hongkong and Shanghai Banking Corporation Ltd.; Shinkin Central Bank; Kookmin Bank; Hang Seng Bank Ltd.; Woori Bank; Joyo Bank Ltd.
Further Reading
"It's Always the Next Deal," South China Morning Post, May 13, 2002.
Lim, Richard, "A Few Good Men," Straits Times, August 12, 2002.
Lloyd-Smith, Jake, "UOB Plans East Asian Expansion," South China Morning Post, March 9, 2002.
"A Merged Local Bank Will Still Be Small," Straits Times, June 8, 1998, p. SS3.
Montlake, Simon, "Singapore Bankers Take the Plunge," Banker, August 2002, p. 45.
"Outwards and Upwards," Euromoney, February 2001, p. 46.
Shih, Lee Han, "Can Wee Cho Yaw Pull Off Next Project?," Business Times, February 8, 2003.
"Singapore's United Overseas Bank Upgrades Beijing Office to Full Branch," Xinhua News Agency, November 6, 2002.
"UOB Sees Need to Expand Overseas," Star, June 21, 2002.
— M.L. Cohen
