Seeing the ambition of its local clients, OCBC has leveraged its strong IT resource and risk team in order to build out its business, moving in tandem with customers’ growth in the region and meeting the increased sophistication of their hedging requirements.
Wee Wei Min, global head of treasury advisory and institutional sales at OCBC, says: “We are quite excited about the regional space; it will be challenging to just do business in Singapore due to the demographics here. We have adopted a policy to service our clients and follow them as they go regional. The challenge is for them to understand the regional landscape, and we can partner with them to put in place an efficient treasury model to cover their regional footprint.”
OCBC has been proactive in protecting customers from the buffeting of central bank policies and global economics. Interest rates are moving upwards for the US dollar and Singapore dollar – the two primary currencies in which the firm’s customers borrow for business activities, giving the bank something to get working on.
With the expectation of a total of three or four rate hikes in the US this year, Wee predicts there will also be heightened activity in putting on hedges using interest rate swaps or currency swaps.
In addition, the dollar has been strengthening across the Asian currencies. As the firm’s clients typically have a lot of exposure to the US dollar against the Singaporean dollar in foreign exchange terms, they are exploring hedging more proactively.
“If they need to buy some US dollars they come to the market a lot faster than before,” says Wee. “Sometimes they will just buy spot to hedge their exposure, but a lot are very open to hedging forwards now, as well as putting on some forex option structures in order to get a better rate than the current spot or forward markets.”
With an estimated 213 banks in Singapore, the market is very competitive. OCBC, which is the second-largest local bank by assets, is competing with not only big global banks but with other local banks too, which, in common with OCBC, have a very entrenched small- to medium-sized enterprise (SME) customer base. Engaging fully requires a combination of commitment and technical skill.
“International banks may not offer enough balance sheet to SME customers and we get a lot of hedging business from the shared customer base that we have as a result,” Wee says.
Behind the scenes, the bank has been engaging to deploy its digital strategy, taking a five-year view on technology investment to maximise its capabilities and find efficiencies in operations that will allow the bank to scale up, along with client operations.
“We are committing resources and energy into looking at how we can engage clients more digitally,” says Wee. “We are investing in the operational and technology space. We need to use technology to make products and platforms much more efficient in order to deliver solutions much more efficiently to our clients.”
The Treasury team is collaborating internally with the bank’s group customer analytics team, which was originally set up in the consumer segment of the bank to handle the high levels of data that are processed for consumer banking customers, such as credit-card spend.
You have to be very brave to invest and be prepared to compromise the bottom line for returns two, three or five years from now
Wee Wei Min, OCBC
“By analysing the data and preparing a dashboard, they were able to alert our relationship managers as to how they might be able to cross-sell products,” Wee says. “For example, if our client has purchased a bond coming to maturity, an alert will pop up a month ahead of that time, enabling us to propose some investment solutions for the client to reinvest the funds into.”
Technology has also distributed capabilities. Historically, when clients wanted to invest or hedge in equities, the team would have used its pricing engine and assessed the different possible strategies before coming up with new prices for those clients.
The bank now has a platform that will allow it to price internally, and at the same time run a market-check of what its competitors are offering – a process that is accessible online through its internal equities platform, providing such services to branches and subsidiaries.
“By pulling our analytics together, we can see opportunities, [and] call the customer-relationship managers and talk to them about forex or interest rate hedging,” Wee says. “So for every dollar that we put on our balance sheet for the client, we want to max out our relationship with them to cross-sell cash, investment banking or treasury forex, and interest rate hedging and investments.”
By engaging in that technology evolution, led by a customer-focused philosophy, OCBC has delivered results, generating positive returns in client engagement and earning a well-deserved win from the judges.
“You have to be very brave to invest and be prepared to compromise the bottom line for returns two, three or five years from now,” says Wee.