50-year home-loan a 'gimmick': Khaw

SINGAPORE - For those thinking of taking up long-term loans in order to buy their dream home, National Development Minister Khaw Boon Wan has this message for you: Don't do it.

Instead, Singaporeans should exercise prudence, especially amid the uncertain global financial climate, he said.

He advised against taking up 50-year housing loans, which at least one bank here began offering recently.
Mr Khaw said: "There is now some gimmick, a bank offering 50-year loans. Please don't fall for that. It doesn't make sense."

He was speaking to reporters in Woodlands Drive yesterday, during the launch of the National Community Emergency Response Team (Cert)-on-Patrol Week for Sembawang GRC.

Last month, The Straits Times reported that United Overseas Bank had introduced a 50-year home loan. The report said that borrowers above a certain age are not eligible.

Other banks, such as OCBC, offer a maximum loan period for private and HDB homes of 40 years, or up to the age of 75, whichever is earlier.

Mr Khaw said it is important that people live within their means and buy only what they can afford.

He said that he first rented a room in a flat when he moved from Malaysia to Singapore. He then bought a small 30-year-old house in a private estate and upgraded subsequently.

Mr Khaw said: "If you want to immediately come out of school and think you want a five-room flat, and...a 50-year loan will help you achieve that, I don't think that is very wise."

Take-up rates for the loan have been low, a "good sign that Singaporeans know we should always be prudent", he said.

Yesterday's event marked the launch of the pilot project, and saw 238 Cert members trained in emergency preparation going door-to-door to give out leaflets and spread the fire-safety message.

Sembawang GRC has one of the highest rates of bin chute fires here, with 74 such fires recorded from January to March.

It is expected that the project - which began last Wednesday and ends on Thursday - will reach out to some 75,000 households in Sembawang GRC and the Cert-on-Patrol Week will be rolled out islandwide within a year.

At the event, Mr Khaw also tried his hand at riding a bicycle - one of 47 sponsored by French consumer-product company Bic to aid Cert in its work.

Bic will provide another 53 of the Aleomakino Italy bicycles - which cost about $200 each - to West Coast GRC.

Yesterday, he reiterated that foldable bikes are a good choice for the National Parks Board's (NParks) field officers.

Last month, an NParks officer responsible for the $57,200 purchase of 26 Brompton folding bicycles was suspended from duty, after an internal-audit team discovered "discrepancies".

Mr Khaw said he recently joined an NParks officer on a tree inspection and found that the job would be more challenging with a normal bicycle.

He said: "I'm convinced that, in the case of NParks, (for) the type of work that they do...foldable bikes are not wrong.

"But how they acquire them is a different story."

OCBC posts 12% rise in Q2 net profit

SINGAPORE: Oversea-Chinese Banking Corporation has posted a 12 per cent rise in second-quarter net profit.

Singapore's second-largest lender was helped by strong loan growth and a surge in trading income.

OCBC earned S$648 million (US$521 million) in the three months ended June.

Investors pick Singapore's top companies

Singapore's top companies were revealed today, as Alpha Southeast Asia revealed the results of its second annual poll to find Southeast Asia's top companies.

The awards by Alpha Southeast Asia, a magazine focused on Southeast Asia's banking and capital markets, are based on tallied votes among 460 investors, pension funds, hedge funds, equity and fixed income brokers and analysts with investment interests in the Southeast Asia region.

Companies in each country were ranked on their financial management, adherence to corporate governance, investor relations' strategy, transparency and disclosure including the alignment of their CSR strategy to business goals.

In Singapore, the eight companies most preferred by institutional investors include regionally diversified telecoms company SingTel and local telecoms player Starhub, global real estate player Capitaland, regional banks' DBS Bank, OCBC, and UOB, aeronautical engineering specialist SIA Engineering, and conglomerate Keppel Corp.

SingTel's Jeann Low was nominated for both Best CFO in Singapore and Southeast Asia.

Across the region, the award for the Best Annual Report in Southeast Asia went to Keppel Corp while the award for the Strongest Commitment to Sustainable Energy in Southeast Asia went to Thai Oil.

Foreign banks eyeing share of depositor market

SINGAPORE: Foreign banks with a full commercial licence in Singapore are out in force to draw customers.

They are rolling out higher-than-normal interest rates for fixed deposits.

And that's stepping up the competition, prompting Singapore banks to swing into action.

Competition is getting intense as more foreign banks are offering attractive interest rates for Singapore dollar time deposits.

In January, ANZ came out with a step-up deposit offering an increasing interest rate with an option to withdraw funds every quarter.

More foreign banks have joined the fray with interest rates of over 1 per cent per annum.

They are now offering as much as 1.5 per cent for a one-year deposit.

Wu Jinmei, head of Retail Banking Department, Bank of China (Singapore branch), said: "These promotions are in line with our long-term development strategy and serve to thank our new and existing customers for their continued support."

British bank, Standard Chartered fired the latest salvo with a 1.88 per cent rate on current account savings.

Dennis Khoo, head of Consumer Banking, Singapore Standard Chartered Bank, said: "You don't get rewards from your credit cards but you get a high interest rate of 1.88 per cent. We do believe that most customers who have fixed deposits under S$50,000 will migrate to this product."

Since its launch a week ago, Stanchart has an average daily sign-up rate of 500 accounts.

Ritesh Maheshwari, MD, Asia-Pacific Financial Services Ratings, Standard & Poor's, said: "To grow, they need funds. So, it is part and parcel of their long standing strategy. They want to grow without growing the network in a cheaper way or it is a tactical move to balance the ALM (Asset-Liability Management) in a shorter term."

However, the local banks are not resting on their laurels and have come up with promotional rates of as much as 0.9 per cent for a 13-month deposit, although, still falling short of their international counterparts.

Alfred Chan, director, Financial Institution, Fitch Ratings, said: "This goes to show that the local banks still have a strong franchise among the depositors so they don't really need to go on a price war to compete for deposits."

Local banks like OCBC take comfort in their branch network which offers convenience as a selling point, apart from interest rates.

Analysts said the aggressive funding exercise may be the result of BASEL III requirements, which demand major international banks increase their capital as a safeguard against financial crises.

Depositors in Singapore are guaranteed up to S$50,000 per depositor in case of any bank defaults.

Bank bonuses aren't what they used to be

Bonuses and pay increases for staff at foreign banks here are lower this year - which is not surprising given that most have reported a fall in their 2011 profits.

The picture for those working in local banks could be mixed.

DBS, which last Friday reported record earnings of $3.04 billion, the highest ever for a local bank, will not be paying record bonuses, said chief executive Piyush Gupta. 'The best year was 2006, as it was for other banks,' he noted.

DBS' return on equity (ROE) in 2006 was 12.8 per cent. ROE for 2011 was 11 per cent.

Still, pay for staff rose sharply last year over 2010, up 20 per cent to $1.7 billion as headcount gained 11 per cent to 17,652. This works out to each employee earning an average of $96,986 from $89,733 in 2010.

As DBS staffers started learning of their bonus payouts yesterday, one said that her total payout was the best she had ever got. But she conceded that this may not be the case for others whose basic pay may be relatively higher.

It is uncertain if OCBC Bank and United Overseas Bank - which will be reporting their full-year results later this month - will maintain bonuses at 2010 levels. For the first nine months of 2011, operating profits at the two local banks were slightly down.

The lead could come from US banks like Citi, JP Morgan and Goldman Sachs, and European banks such as Credit Suisse and Deutsche Bank which have already announced their 2011 results.

Still, despite reduced bonuses for their Asian staff, including those here, it is believed that on average, the reduction is less severe than the 30-70 per cent cuts reported for staff in New York, London or Geneva. Zero bonuses are also not uncommon.

Confirming the downtrend, Andre Cheong, chief executive, Global Search Partners, said: 'Typically, foreign banks pay their bonuses around February while local banks pay theirs in March. For the coming bonus payments, both foreign and local banks are expecting a decrease in the amounts this year.'

'In one foreign bank, employees have been informally told that they can expect 25 to 30 per cent less in bonuses this year,' he added.

Concurring, James Rushworth, managing director of Profile Asia, said: 'Bonuses are definitely down for many, some are getting none, even though their appraisals have been strong.'

Some bankers at foreign banks, however, told The Business Times that the expectations of their employees have been 'managed' and that unhappiness with the smaller payouts are not obvious. Some are also said to be relieved to still have their jobs.

'The sense of entitlement is being adjusted,' said one executive of a US bank.

A source at another bank said that bonuses at his bank have been slashed by 10-30 per cent on average. 'The point to note is that bonuses have to reflect the current economic environment, while it is as much a recognition and reward of the work done in the past year. Hence, overall bonuses have come down,' he added.

The exception seems to be Malaysian banks which have practically no exposure to the Western economies. It seems bonuses of four to six months could be the minimum this year at Maybank and CIMB - this is still unlikely to match previous record bonuses.

Global Search Partner's Mr Cheong said 'one candidate (in the middle office) we spoke to recently is expecting about six months' bonus.'

'The front-office people and good performers can probably expect more, but I'm not sure if it will be as much as 12 to 36 months as in the past.'

Foreign banks still pay more than local banks. 'The gap will have narrowed for sure but there is still a gap,' said Mr Rushworth.

Hiring has slowed except in private banking but even there the premium has dropped.

'Candidates hopefully should be more realistic and know that clients don't always follow them,' said Richard Wee, chief executive of private bank Lombard Odier, Singapore. 'What's being offered is less than before, around a 20-30 per cent premium.'
 

Banks in Singapore scramble for share of deposit pie

Banks here, especially foreign ones, are getting into the seasonal spirit by offering higher interest rates on deposits as they usher in Chinese New Year.

But some market watchers say the banks' motives for handing out 'red packets', to gain a share of the deposit pie after bonus season, may be far from festive.

They say some banks may be scrambling to stockpile cash just in case the global banking system seizes up again as it did in 2008 and 2009.

Banking analyst and head of research at CIMB, Mr Kenneth Ng, said: 'There is an aggressive hunt for deposits. Banks are offering rates considerably higher than the Singapore Interbank Offered Rate (Sibor), especially the foreign banks.'

What some banks are offering

• HSBC

Enjoy 0.8 per cent and 1 per cent per annum on eight- and 12-month Singdollar and US dollar term deposits.
Fresh funds of at least $25,000 and up to $5 million in either currency, deposited from now until Feb 29, will qualify for the promotion.

• UOB

Customers who place an additional sum of $10,000 from now till Feb 29, can enjoy an interest rate of 0.628 per cent a year. The $10,000 can be deposited incrementally throughout the promotional period.

• ANZ

Interest rates that increase at the end of every three-month cycle, starting at 0.7 per cent for the first three months, and up to 1.5 per cent for the fourth quarter, if at least $150,000 is held for a 12-month tenor.
Different rates apply for amounts less than $150,000.

• OCBC

The first 1,000 customers who deposit at least $68,000 will receive a two-piece abalone gift set. The first 380 who deposit $368,000 or more, will receive a six-piece abalone set.

Revision of Bank Deposits Interest Rates

Sometmes I just browse through bank websites to log in to my internet banking account, happen to drop by to see the deposit interest rates of various banks and I'm quite shocked to realise how low the bank is giving us for our deposits nowadays.

As below are the major banks' deposits interest rates table and I'm sure you know that how much your money is being lost especially to inflation in the coming years ahead.

POSB (POSB Savings)

Standard Chartered (e$aver)

OCBC

UOB

For me, I will definitely keep only sufficient for liquidity and invest the rest into other investment vehicles generate higher returns.

Investing with your CPF

YOUNG adults already in the workforce will no doubt be familiar with their CPF (Central Provident Fund) accounts, into which a portion of their monthly salary is automatically squirrelled away, along with a percentage contribution from their employers.

Having surveyed the gamut of asset classes and investment vehicles over the last few months, the Young Investors' Forum takes a look this week at how young working adults can think about investing their CPF savings for the future.

While the prospect of retirement may still be far from the minds of energetic go-getters just scaling the lower rungs of their career ladders, it is only prudent to start preparing for that future today.

Know your CPF

The government bills the CPF as a 'comprehensive social security plan'. Meant to provide working Singaporeans financial security in their old age, the scheme covers retirement, healthcare, home ownership, family protection and asset enhancement.

These aims are met by mandatory monthly sums of money working Singaporeans and their employers channel into each individual's three CPF accounts:

• The Ordinary Account (OA), which is where the bulk of your monthly contribution goes if you're under 35, and stores monies which can be used to buy property and insurance policies, make financial investments or pay for your own or your children's education.


• The Special Account (SA) is to accumulate funds for old age and contingencies, which can be used to invest in retirement-related financial products.


• The Medisave Account's (MA) savings are meant for hospitalisation expenses and approved medical insurance plans.

While entrepreneurs and the self-employed need not contribute to the Ordinary and Special Accounts, they must contribute to the Medisave Account if their yearly net trade income exceeds $6,000.

Without you choosing to invest, CPF savings in all these accounts will earn interest. Funds in the OA earn an interest rate based on the 12-month fixed deposit and month-end savings rates at major local banks, but the CPF Act guarantees a minimum risk-free interest of 2.5 per cent.

For the Special, Medisave (SMA) and Retirement Accounts, which earn an interest rate equal to the 12-month average yield of 10-year Singapore Government Securities (10YSGS) plus one per cent, the government announced last September that it would keep an interest rate floor of 4 per cent till this December.

Also, the first $60,000 you have across your CPF accounts - with up to $20,000 coming from your OA - earns an extra one per cent interest.

Hence, one possible way to grow your CPF savings is to transfer monies from your OA into your SA, to take advantage of the higher interest rate that uninvested savings in the SA earn. But such a move is irreversible, as fund transfers in the opposite direction are not allowed.

CPF Investment Scheme

As long as you are at least 18 years old, are not bankrupt and have more than $20,000 in your OA or more than $40,000 in your SA, you can tap the CPF Investment Scheme (CPFIS) to grow that 'retirement nest egg'.

The CPF Board runs two separate investment schemes for the OA and the SA, allowing for your CPF savings to be put to work via a wide range of instruments, in the hope of reaping a return above the prevailing interest rate.

The ultimate aim, of course, is still to accumulate wealth for retirement, so any profits made from these investments are still subject to the standard CPF withdrawal rules.

If losses are incurred on your CPF investments, you need not top up the accounts from which the investments were made, but your retirement savings would have shrunk.

Financial planners posit that, as a rule of thumb, a person needs about 70 per cent of his last annual income to keep up his current lifestyle in retirement. CPF savings are meant to cover basic retirement needs and may not meet a person's other lifestyle needs - one key motivation for private savings and investments.

Also worth considering before you decide to start investing your CPF savings are any financial obligations that would require payment from a CPF account. For instance, whether you need to use your OA to make monthly housing payments will help you decide how much of your savings you are willing to channel into investments.

Getting started
 
The CPFIS's range of investment options include fixed deposits, bonds, annuities, endowment insurance policies, investment-linked insurance products, unit trusts and exchange traded funds (ETFs).

What is available to you under the CPFIS-OA and the CPFIS-SA differ, since the two accounts are meant to help accumulate savings for different purposes.

So, while OA funds can be invested in fund management accounts, shares, property funds, corporate bonds and gold or gold products, SA savings cannot.

Other restrictions you should be aware of before investing your CPF savings include the fact that you may only invest in unit trusts, exchange traded funds and fund management accounts approved by the CPF Board.

And CPF savings can only be used to purchase common shares, Reits and corporate bonds issued by companies incorporated in Singapore and traded on the Singapore Exchange (SGX).

Also, you can put a maximum of only 35 per cent of your investible savings into shares, Reits and corporate bonds, while the cap on gold (including gold ETFs and other gold products) is 10 per cent.


More details on restrictions and possible charges you may incur from the CPFIS and the other financial intermediaries are available at www.cpf.gov.sg, where you can also calculate how much of your investible CPF savings you have at the moment.

If you intend to use funds from your OA, you will need to apply for a CPF Investment Account with any one of the CPFIS agent banks: DBS, OCBC and UOB. Do note that you can have only one CPF Investment Account at any one time.

Such an account is not needed if you intend to invest from your SA, in which case you can approach investment product providers directly.

Naturally, all the usual caution urged with regard to investing in general will apply to investments made using your CPF savings too.

Any investor must consider his investment time horizon, asset allocation, the risks and returns of each product, and diversification across his portfolio, before committing to an investment - even ones made under the CPFIS.

'No one can guarantee that investments under the CPF Investment Scheme will always be profitable,' the CPF Board states on its website.

'CPF members have to decide for themselves how to invest their savings, and what risks to accept, and exercise prudence and care in investing their CPF savings to ensure their financial well-being after retirement.'

'If they are not confident of investing on their own, they should leave their money in their CPF account which earns interest and is risk-free,' it adds.