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.

Gold trading in Singapore set to get boost

SINGAPORE: Gold trading is set to find new glitter in Singapore.

The government's move to exempt the 7 per cent goods and services tax (GST) on gold trading is expected to boost competitiveness globally.

However, market players said more can be done to turn Singapore into a gold trading hub.

For investors, the exemption of GST on investment grade gold will level the playing field for the precious metal.

From October, gold will stand at par with other financial instruments like stocks and bonds which are also exempt from GST.

Gold is also being held as an alternative to cash.

And experts said the government's latest move may boost gold trading among retail investors.

Nicholas Trevethan, senior commodities strategist, ANZ, said: "GST on money, or on what is essentially money, removing that is a sensible and practical idea. I think it's a good way to encourage in particular, retail investment demand amongst Singaporeans. You want that solid base within the country in order to help it develop as a trading hub and as an international trading centre."

Analysts estimate the value of gold traded in Singapore to be worth about US$282 billion over the last year.

Gold traders said the GST exemption will lower the barriers to entry for investors and will further boost interest in the precious metal.

World Gold Council managing director Albert Chang said: "The tax exemption on bullion is an indispensable initial step to boosting the dynamics of the gold trading market."

And the council expects a greater volume of physical gold transactions to take place from October 2012 when the new tax exemption will be in place.

However, market players said more needs to be done before Singapore can take on other gold trading hubs such as Hong Kong and Dubai.

Lee Song Teck, CEO, The Gold Guarantee, said: "First of all, an equivalent of the London Bullion Market Association needs to be set up, to encourage the market and government. What this body can do is to help gold-related industries such as refineries... if more are around, it would help boost the gold industry in Singapore."

Since the budget announcement last Friday, spot gold price has increased 1.6 per cent to US$1,755 on Wednesday.

And local traders said that they have seen about 5 to 10 per cent increase in sales.

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.