Do you remember the Overseas Union Bank (OUB)? No, we’re not referring to UOB, the bank you’re familiar with, but OUB.
Heard of it before but can’t find an outlet here in Singapore? Well, that’s because it no longer exists.
OUB History in Singapore
OUB was the first new bank to be opened in post-war Singapore on 5 February 1949. Back in their heyday in the 1980s, they were one of the ‘Big Four’ local banks in the Singapore banking industry and were the ‘first’ in many things.
In 1943, the founder Lien Ying Chow escaped the Japanese Occupation in Singapore to Chongqing, China and gathered ethnic Chinese leaders from Singapore, Malaya, Burma and India to form the Overseas China Union Bank (OCUB). The OCUB has several branches in China and mainly does business with ethnic Chinese who fled from the conflict in Southeast Asia.
Due to the unstable political climate and high inflation in China after WWII, Lien returned to Singapore and OCUB ceased operations in China. Lien made plans in 1947 to start a new bank in Singapore and OUB was born, starting its operations in 1949.
Despite only starting out with a small capital of $2 million (for a bank, that’s considered low) and only 27 employees which includes Lien and Chi Owyang, the vice-chairman and chairman of the OUB board, the bank started out daringly in Raffles place, previously the preserves of European and American Banks and business houses.
When it first started out, OUB found its calling in trade financing, and up to the mid 1950s, OUB finance 80% of the rice imports into Singapore. In addition to that, almost all Thai banks maintain a Singapore dollar account with OUB.
At the end of its 3rd year of operations, OUB was able to declare 5% dividend to its shareholders and eight years later, OUB went on to set up branches in other countries like Penang, Malacca, Kuala Lumpur and Hong Kong. It was the first Singapore Bank to open in New York and has set up in London and Japan as well.
In 1964, the Overseas Union Enterprise (OUE) was established because Lien sought to enter the hotel industry. When Lien took over as chairman in 1968 when Owyang retired, OUB has an impressive S$300 million in deposits and 32 branches.
In the 1970s, the banking industry grew competitive when it was opened to foreign banks. Lien recognized that the bank could not continue operating in the old ways – traditional Chinese business where staffs are usually friends or family members of the board and were accustomed to a casual management style.
He brought in former Housing Development Board chairman Lee Hee Seng as chief general manager in 1974 that put a stop to jobs for the board’s family members and friends and improved productivity and efficiency. OUB also introduced computer technology into operations and a union was formed as a response to these changes.
A collective agreement was signed but the threat of industrial action did not die down until 1975. Back in 1948, Lien wanted to purchase land at 1 Raffles Place to build a flagship building for OUB. It took 40 years for the land to be acquired in its entirety and the 60-storey OUB Centre opened in 1988.
The completion of his dream also marks his decision to retire as chairman and take a backseat in OUB. By then, his direct holdings and cross-holdings in OUE made him and his family the single largest shareholder, owning 20% of OUB.
Under Peter Seah, CEO and president of OUB, the 1990s was the golden age for OUB. OUB was the fastest growing bank among the ‘Big Four’ local banks and its operations in Hong Kong and Malaysia were particularly profitable – accounting for 30% of OUB’s income in 1994 and 40% in 1999.
OUB was also the fourth largest bank in Southeast Asia due to a series of rights issues which enlarged shareholders funds and record its largest ever profit at S$310 million in 1996. This amount increased to a new record of S$545 million by 2000.
OUB’s growth at that time can be attributed to “an expansion of investment banking, consumer banking, fund management (with a portfolio of around S$2.5 billion in the mid-1990s), corporate management, corporate finance, capital markets and syndication activities and overall, loans and treasury were the most profitable of OUB’s operations.”
By 1973, OUB’s paid-up capital grew to S$50 million with assets of around S$1 billion and for a decade afterwards, their profits grew by 25% and assets and shareholder funds grew by 20% annually.
Despite its rapid growth in the 1990s, OUB remained the smallest of the ‘Big Four’ local banks and was the prime target for acquisition when pressure was placed on the local banks to consolidate, especially when they had a failed merger with French bank BNP Paribas in mid-2001.
In June 2001, DBS made a hostile takeover of S$9.4 billion. Now, don’t be shocked and misled by the term “hostile takeover”: it just means that DBS tried to buy over the company by going direct to the shareholders or by replacing the management. In response, UOB made a competing bid of S$10 billion.
And here’s why OUB did not become DBS.
The bid from UOB succeeded not just because of the higher amount, but also due to the fact that their bid seemed friendlier and garnered huge support.
In September 2001, UOB announced they have gained 90% acceptances for its bid and will acquire OUB in its entirety and delist it. This acquisition made UOB into the largest local bank with around S$115 billion in total assets.
At the time of takeover, OUB’s shareholder funds totaled S$5.2 billion after tax of S$561.1 million. By the end of 2003, OUB was fully merged with UOB and all its branches converted. And that is the reason why we don’t see OUB branches around anymore: OUB is now part of UOB.
In other words, the merge of POSB and DBS isn’t the only bank merger here in Singapore.
Something to note, the only remaining legacy of this bank will be the OUB Centre (OUBC) which has since became One Raffles Place.