Southeast Asia's biggest bank, DBS Group, has hired Citigroup China head Richard Stanley to be its new chief executive to breathe life into its China business and propel its expansion outside Singapore.
The 47-year-old Stanley, chief executive for Citigroup in China, previously headed the U.S. bank's Southeast Asian operations. He will replace Jackson Tai, also an American who resigned in September last year to be with his family.
Under Tai's watch, DBS was unsuccessful in attempts to buy banks in China, South Korea and Thailand, but it did clinch a deal to buy Hong Kong's Dao Heng bank in 2001.
Stanley, who helped Citi make two acquisitions in a Chinese banking sector notorious for obstacles faced by foreign players, will take up his new position on May 1.
The move, confirmed by DBS after a Reuters report, comes as the lender is set to unveil its fourth-quarter earnings on Friday, which analysts say would reveal more writedowns due to its exposure to the U.S. subprime mortgage crisis.
Banks are also facing the prospect of weaker loan growth and rising bad loans this year if the global economy slows down.
DBS is expected to post a 22 percent drop in fourth-quarter profit to S$466 million (US$329 million), according to the average forecasts of four analysts in Reuters Estimates.
Investors are pinning their hopes on Stanley to help DBS expand beyond the bank's core markets -- Singapore and Hong Kong.
"China is important and a big piece of Asia," said Teng Ngiek Lian, who manages over $3 billion including DBS shares as chief executive of Target Asset Management in Singapore.
"If he can push forward DBS' business penetration in China, that would be a good thing."
DBS Chief Operating Officer Frank Wong told Reuters in November that it may take 10 years for China to begin making a meaningful contribution to the bank's bottom line.
M&A Experience
A native New Yorker, Stanley joined Citi in 1981 and became China country manager in 1999. He took a position with the bank in Singapore in 2004 before returning to Shanghai in 2005 as China CEO.
He has plenty of China M&A experience after helping to lead a Citi consortium's $3.1 billion acquisition of a controlling stake in Guangdong Development Bank. He also led Citi in its purchase of a minority stake in another Chinese lender, Shanghai Pudong Development Bank.
That experience was a factor in his hiring.
"Mr. Stanley is well-equipped to help DBS Group grow its footprint in emerging markets, especially in the Greater China region," DBS said in its statement.
Since Stanley first moved to China, Citi's headcount in the country has grown from 150 to more than 3,000 as of last year.
Globally, however, Citi is struggling as one of the biggest casualties of the subprime mortgage meltdown. Last year, it replaced its CEO and has been vulnerable to staff defections as its share price has languished.
DBS has the capital to do a deal since it had a tier-1 capital adequacy ratio of 9.2 percent at the end of the third quarter, above the minimum regulatory requirement of 6 percent.
"This converts to excess capital of S$5.6 billion ($3.95 billion), which along with the bank's aspirations of sourcing 50 percent foreign revenues in the next few years, position it well as an acquirer," said JP Morgan analyst Harshan Modi.
Francis Rozario, who heads the financial arm of Singapore state investment agency Temasek Holdings, which owns 28 percent of DBS, was earlier expected to become the CEO to shore up DBS's acquisition drive.
DBS is looking to emerging Asia to boost its earnings, 90 percent of which come from saturated banking markets in Singapore and Hong Kong.
In early February, DBS said it will take over Taiwan's failed Bowa Commercial Bank to boost its Greater China operations.
But other analysts say DBS should work to expand its consumer and small-and-medium sized businesses, balancing its bigger focus on corporate and investment banking, where competition is tough and revenue could be volatile.
At the end of the third quarter, the bank had assets of $163 billion.
Sanjay Jain, an analyst at Credit Suisse, said he would want the new CEO to avoid acquisitions for now as DBS's valuation multiples are lower than those of most potential targets in Asia. DBS is now trading at around 9.6 times estimated 2008 earnings.
Tai's resignation came after DBS shares lagged domestic rivals. Its shares were hit particularly hard last year by news it had more exposure to risky debt than initially declared, and after a troubled investment in Thailand's TMB Bank.