In The Post - UOB's Foray Into Heartland Home Loans

Source : The Business Times, March 10, 2009

Bank ties up with SingPost to sell HDB loans and challenge rivals on their turf

In a surprise move, United Overseas Bank (UOB) has tied-up exclusively with SingPost to sell HDB home loans, muscling its way into mass market mortgages that have so far been dominated by rivals DBS Group Holdings and OCBC Bank.

UOB which has previously targeted private property buyers and the affluent yesterday said it has forged a strategic alliance with SingPost to distribute UOB HDB Home Loans.

The bank will initially start with four SingPost outlets and plan to have up to 24 post office branches by the end of the year to sell HDB homes loans. SingPost has 62 branches all over the island.

'The latest move extends UOB's HDB home loans' distribution network beyond its 57 branches,' UOB and SingPost said in a joint statement.

The exclusive arrangement is for more than 5 years, said Claudia Lim, SingPost corporate communications manager.

SingPost dedicated staff trained by UOB will be selling the HDB home loans, said Ms Lim.

Eddie Khoo, UOB's executive vice-president for personal financial services, said the latest initiative 'is really about bringing convenience to customers by extending the bank's distribution network beyond the walls of our own branches to reach customers'.

'At the macro level, and in the longer term, we see this as a strategic investment as this additional channel enables us to serve our customers better through convenience and accessibility.'

The surprise move will likely spark off a fierce tussle with rivals DBS and OCBC who may seek to protect their turf. Both banks claim to be the market leader. DBS said it has captured HDB buyers through its POSB customers while OCBC has focused on HDB mortgages from the time the government liberalised the market in Jan 2003.

'POSB is the market leader in HDB home loans,' said a DBS spokeswoman. The bank has 53 POSB branches.

'We were also the first in the market to introduce POSB Home Ideal First for first-time homeowners, offering them a 7-day return policy which allows them to assess if the home loan is suitable for their needs,' she said.

Gregory Chan, OCBC head of secured lending, said the bank's team of mobile home loan specialists visit potential customers who are too busy to come to its branches, to explain details of home loan packages and to process applications.

'At the same time, we work with property agents from the largest property firms in Singapore who are in direct contact with home buyers and help market our home loans. This business model has served us well and we continue to be the top player in the HDB home loan market,' said Mr Chan.

Mass market home loans are just about the safest products as Singapore enters its worst recession ever because the prices of HDB homes did not surge wildly during the property bubble. And now, they are not skidding sharply.

In contrast, the prices of some high-end properties have crashed as much as 50 per cent from the peak reached last year. A Citigroup report in January said that, in the high-end segment, properties have seen price corrections of about 35 per cent from a year ago and they could fall by another 30-40 per cent this year.

David Conner, OCBC chief executive, said last month while announcing the bank's 2008 results that negative equity for its property portfolio was low because of the bank's focus on HDB home loans.

He also noted that HDB mortgages are for owner occupation and the loan quantums are small.

'A big part of our portfolio is HDB - prices have not gone up as much - and we do not anticipate a big fall,' he said.

OCBC's home loan book negative equity was 0.7 per cent while 81 per cent of homes for which it has made loans are owner-occupied.