The head of DBS Bank, Southeast Asia’s largest financial group, on Monday became the third senior financial executive to depart in the past week from posts linked with Temasek, the Singapore state investment company, reports the FT. However, he is not (for now, anyway) destined for a China private equity fund, unlike at least two other Temasek executives.
DBS, whose biggest shareholder is Temasek, said Jackson Tai, a US-born banker, would step down towards the end of the year as vice-chair and chief executive “to spend more time with his family” in the US.
DBS denied the resignation was due to the bank’s recent disclosure that it had one of the largest exposures among Asian financial institutions to CDOs that included US subprime debt. But a Tuesday comment on Asian investor site mojostock.com sums up the buzz in the region about Tai’s exit:
News flow for DBS has been painful over the past few months, including:
1) writing-down its TMB Bank investment by S$159mn in 2Q07; 2) disclosing S$1.1bn of additional exposure to CDOs via an ABCP Conduit called ROSA;
3) loss of a primary dealing license for government bonds in Indonesia. However,we would not link the exit of Jackson Tai to any specific event, but rather view it as an opportunity for the bank to reinvigorate its top management.
Given DBS’s large discount that it trades at versus peers, we believe investors will welcome change. We see two leading candidates to be CEO as Frank Wong, current COO of DBS, and Francis Rozario, an ex-Citibanker who previously ran Indonesia’s Danamon Bank and who now has a leading role in advising Temasek on its regional banking investments.
Shares in DBS have fallen more than 7 per cent this year against gains of 15 per cent and 12 per cent, respectively, for local rivals OCBC and UOB.
Mr Tai’s resignation followed Temasek’s announcement last week that Jimmy Phoon, its chief investment officer since December, was leaving to “spend more time with his family”.
Meanwhile, the resignations of Frank Tang and Terry Hu, who headed Temasek’s China investment operations, have also just been announced – although Tang and Hu are leaving to set up a China-focused private equity fund.
Although the departures appear unrelated, the FT notes, it “represents the biggest shake-up in the Temasek-linked financial sector in the past five years” and followed a previous house cleaning in 2002 after Ho Ching, the wife of Singapore’s prime minister, took over as head of Temasek.
DBS said it would conduct a global search for a new chief executive, whose two previous occupants were also foreigners. For now, however, Koh Boon Hwee, DBS chairman, will take an active management oversight role with immediate effect, the bank said.
Tai, who became chief executive in 2002, is credited with restoring stability to DBS after the brief two-year reign of Philippe Paillart, who was criticised for overpaying for Hong Kong’s Dao Heng Bank in 2001 in a S$10bn deal.
Mr Tai joined the bank in 1999 as chief financial officer. But he was seen as failing to expand DBS operations in Asia.
There were abortive bids for China’s Guangdong Development Bank and South Korea’s Korea Exchange Bank.
DBS is also expected to reduce its stake in Thailand’s TMB Bank under a recapitalisation plan that would make ING, the Dutch group, the Thai bank’s largest shareholder.
Analysts said that a shareholder furore over the Dao Heng deal made DBS cautious in making new acquisitions.
This has left Temasek assuming the lead role among Singapore financial institutions in buying stakes in regional banks, including Bank of China, China Construction Bank (which just made a howlingly successful debut in Shanghai on Tuesday), Indonesia’s BII and Danamon Banks, and Standard Chartered.