However, not everyone is convinced. At DBS Group Holdings’1QFY2024 results briefing on May 2, DBS CEO Piyush Gupta said there are challenges to being a conglomerate, such as taking on a lot of assets.
“On the whole, [the] focus on banking business for us has proven to be beneficial. Manufacturing insurance takes a very different skill set,” said Gupta. DBS and fellow bank United Overseas Bank(UOB) divested their respective life insurance arms years ago.
There is “no obvious synergy” between banking and insurance, according to Gupta. “Doing your own manufacturing and distributing it, [we] still have to run two separate companies. We’ve found that just being [a] distributor as opposed to [a] manufacturer has proven to be very good for us.”
The two are completely different businesses, said Gupta. “I can go into the jam-making business and say it’s a great business as well. We go into businesses based on core competencies and to bring value to shareholders. Focusing on banking and [insurance] distribution is a better use of capital and management capabilities.”
See also: Minority shareholders would like GEH management to be rewarded with a GEH share option scheme
Up or down from 88.4%?
As expected, OCBC’s plans for the separately-listed GEH was again a point of contention at its AGM. Similar questions had been raised at OCBC’s AGM last year and at GEH’s own AGM on April 25. Some disgruntled shareholders had raised their voices at GEH’s board, calling the insurer’s share price a “disaster”.
At OCBC’s AGM, however, shareholders pressed Lee for clarity about OCBC’s plans — whether to distribute some of its shares in GEH in-specie to OCBC shareholders, or to add to its holdings and eventually take GEH private.
See also: OCBC board keen on talks with GEH to align dividend policies: 2023 AGM
Helen Wong, group CEO of OCBC, agreed with a shareholder that there is value in distributing dividends whether in cash or in-specie, but questioned the decisions behind such a move.
“Whatever we distribute, we have to attach a decision… If we choose to distribute GEH shares, is that of value to our shareholders? Of course. But likewise, if we distribute in cash, if we distribute in our own shares, it’s also of value to the shareholders.”
OCBC will make the best decision given its capital position, said Wong. “Do we believe we have excess capital? What are we holding that will give us the best value going forward, so that any distribution of dividend is of value, and is of sustainable value? I think that is another thing that we have to look at.”
Following Wong’s comments, Lee likened OCBC to a “thriving” restaurant. “Does it make sense to downsize our kitchen when we see good potential in the business?”
One shareholder retorted: “I agree with you that it does not make sense to downsize, but I think it makes sense to upsize and take the whole Great Eastern private.”
Lee answered: “We have already answered the question last year; it is on public record. Anything that is good strategically for the group, we will consider.”
Last year, Lee had said OCBC is “always open to possibilities”. “If there are Great Eastern shares available for sale, talk to us; we may be interested. This is just one strategic possibility the bank has with regards to Great Eastern.”
See also: Great Eastern Holdings free float falls further with OCBC acquiring 2.3 million shares
OCBC made good on its word in June 2023, when it bought 2.3 million GEH shares for nearly $40 million, taking its stake up from 87.9% to its current 88.4%.
Another shareholder echoed the call for OCBC to take GEH private. “Since OCBC said last year [that] anybody who is willing to sell GEH shares can approach OCBC; hypothetically, if somebody has 1.6% and is willing to sell to OCBC, is OCBC open to this idea?”
Lee called his bluff. “If there are shares for sale, assuming you have [them], please approach our CFO. Please stand up to get recognised again.”
‘Big brother of GEH’
For some time now, GEH top management have been remunerated with OCBC shares. If OCBC is not keen to distribute GEH shares to its shareholders, would the board consider distributing GEH shares to GEH’s directors?
The same shareholder — who claims to also hold GEH shares — asked if GEH’s “big brother”, OCBC, would consider offering GEH shares to its executives instead. According to him, GEH’s chairman Soon Tit Koon had dismissed his question at the GEH AGM, saying it should be answered by OCBC’s board instead.
Lee replied: “As I have said, this is the decision solely of the Great Eastern board; there's nothing to stop the Great Eastern board if they want to go out to the market to purchase Great Eastern shares… OCBC is agnostic as to how they reward their executives or their directors with whatever shares they want to award.”
According to GEH, the low liquidity of the stock makes share purchases difficult, a comment the shareholder relayed to Lee. “As I've said earlier, since 2006, the free float of Great Eastern is lesser than 20%. OCBC is not in the business of providing liquidity for another company. We have our own strategic agendas… We have no direct interest in stimulating Great Eastern liquidity or share price.”
Great Eastern is a strategic pillar, said Lee, repeating his comments from last year’s AGM. Then, Lee had pledged to align the interests of the shareholders of OCBC with that of GEH.
Since then, GEH has refreshed some board seats, appointing five new directors, Lee noted. GEH’s dividend has also been raised to 46%, up from an average of 34% over the past 10 years.
OCBC is “not hoarders of capital”, said Lee, despite the bank’s common equity tier-1 (CET-1) ratio standing at 15.9% for FY2023, above DBS’s 14.6% and UOB’s 13.4%. As of 1QFY2024, DBS’s CET-1 has edged higher to 14.7%.
“To put it in a militaristic term, our gun is fully loaded; we have all the bullets,” said Lee. “We will use them where it makes sense to us strategically and for the right price.”
OCBC will report its 1QFY2024 results on May 10 before trading opens.
