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DBS Chief Quits as Shares Fall, Asia Drive Slows

Reuters
Monday, 24 Sep 2007 | 9:44 PM ET

Singapore lender DBS Group's chief executive resigned, after a run of bad news battered the company's share price, leaving an unfulfilled quest to make the bank a big Asian player.

Jackson Tai's sudden resignation from Southeast Asia's biggest lender comes after DBS shares were hit last month by news it had more exposure to risky debt than initially declared, and after a troubled investment in Thailand's TMB Bank.

DBS said in a statement Tai, 57, would relinquish his post as CEO and vice-chairman towards the end of the year due to family reasons, adding it had started an "extensive global search" for his replacement.

The task of making DBS a bank of more than two cities -- Singapore and Hong Kong -- will rest with a successor.

"The key thing will be whether the future strategy of the leadership will be to focus on the retail market or whether the investment banking focus will continue, which means M&A," said Jaj Singh, an analyst at UBS.

At the end of first half 2007, Singapore accounted for 64% of DBS's net profit while Hong Kong accounted for 26% -- together forming 90% of the group's bottom line.

Last week, DBS said it had declined to take part in the recapitalisation of Thailand's TMB Bank, after choosing not to raise its 16% stake in TMB earlier this month.

DBS has already booked a S$159 million (US$104 million) impairment on the value of its stake in TMB.

Last month DBS surprised investors by saying its exposure to risky collateralised debt obligations (CDOs) was nearly double what it had initially declared.

The revelation pushed its shares into a loss for the year, while shares of domestic peers Oversea-China Banking Corp and United Overseas Bank have rallied 15% and 12% amid a booming Singapore economy.

Tai, who worked for JPMorgan as an investment banker for more than two decades, explored acquisitions in China and South Korea.

In 2001 DBS acquired Hong Kong's Dao Heng Bank. Tai, who was president at that time, said the purchase was an important step toward building DBS into an "Asian powerhouse."

But in early 2006, DBS announced it would book a charge of S$1.13 billion in the fourth quarter of 2005 to write off some of the goodwill it paid to acquire Dao Heng, which pushed its fourth-quarter profit into the red, its full-year profit down 15% and hit its shares.

Risky Debt

DBS Chairman Koh Boon Hwee, who will actively oversee management decisions before Tai's successor is found, said the departure is not related to the CDO exposure, less than 1% of DBS assets.

Tai said the CDO exposure, if stress tested, would have no material impact on the bank's capital. "I am very sorry to be leaving my colleagues, my life is DBS, but I have to go to my family, it's been a long time," a calm Tai said at a news conference.

Tai, a Chinese American who grew up washing dishes in New York's Chinatown, joined the bank in 1999 as its chief financial officer before assuming roles as its president and chief operating officer.

Last year, Tai told Reuters he hoped DBS would earn half of its revenue overseas in three to five years.

DBS Chairman Koh, who will run the bank and lead the search for a new CEO, became DBS chairman on January 1, 2006. He also sits on the board of Singapore state investor Temasek Holdings, which owns 28% of the Singapore lender.

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