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After nearly a decade of steady growth, Singapore's biggest banks are headed for a shake-up that is partly due to a slowing domestic economy, but mostly a result of the success they have had in developing their own market.
The problem is not hard to see. The island has a mere 2.7 million people, but they are served by four large commercial banks (not to mention the smaller banks and proliferating finance companies). These are, in order of assets, DBS Bank, Oversea-Chinese Banking Corp. (OCBC), United Overseas Bank (UOB) and Overseas Union Bank (OUB).
The Big Four, as they are known, have given Singaporeans what must be the most convenient banking network in the world there is a full-service branch or an automatic teller at nearly every street corner. Pedestrians can hardly be out of sight of one or the other wherever they go.
Of course, this could not have happened if business weren't good. And in the late 1980s it was, as Singaporeans translated economic prosperity into higher deposits and eventually higher borrowing. But now there are reminders (albeit gentle ones) that the pie can only grow so big: second-quarter figures show a year-on-year growth of 9% for financial and business services --the first single-digit result in three years.
For some banks, the growth is already negative. The DBS group posted a 1.7% drop in interim pre-tax profit to S$189 million, the first drop since 1985. (After-tax profit did manage to grow, however, rising 7.4% to top S$140 million.) The smallest of the Big Four, OUB, did even worse, with profit falling 17.8% to S$38 million.
UOB, which has the biggest branch network at 81, squeezed out a 4.5% rise in the same period, reaching S$145 million. Only OCBC managed to buck the trend altogether and record another double-digit growth rate. Its net earnings grew a respectable 12.1% to S$119 million.
The reasons for the poor performance vary: DBS blamed its decline...