The Republic's biggest bank, AIB, is negotiating to take a £400 million stake in one of Singapore's biggest banks, the Keppel Tat Lee Bank. If the deal is concluded, AIB will become the first foreign bank to invest in Singapore's banking sector since it gained independence in 1965.
The negotiations will be confirmed today, with AIB expected to emerge as the partner taking a 25 per cent interest in the bank. The move closely follows confirmation of merger negotiations between its nearest rival, Bank of Ireland, and the former UK building society Alliance & Leicester. AIB already has a presence in Singapore, operating treasury, private banking and investment management services through AIB Govett Asia. The acquisition of a minority interest in Keppel Tat Lee bank would give the bank a significant foothold in the Asia Pacific region. Analysts suggest it could be a first tentative step by the bank towards becoming a bigger player in that market.
Keppel Tat Lee is Singapore's fifth largest bank and emerged out of a merger between Keppel Bank and Tat Lee Bank last year. It has a stock market value of $2.3 billion (£1.7 billion). Keppel Tat Lee shares surged in Singapore yesterday, buoyed by renewed optimism that it had finally found a foreign partner. Its shares will be suspended today as it announces details of the proposed alliance with AIB.
An AIB spokeswoman refused to comment on the reports yesterday.
Keppel Tat Lee provides commercial banking, stockbroking, fund management, financial futures broking and factoring services in Singapore, Hong Kong and South China. It has 39 branches in Singapore and employs 1,100.
In line with Asian banks, Keppel Tat Lee is recovering from the impact of the 1997 currency crisis. In 1997, its pre-tax profits dropped by 20 per cent to 73.3 million Singapore dollars (£33 million) mainly due to large provisions for loans advanced in the troubled region. Before the provisions, operating profits rose by 22 per cent to $218.9 million (£96 million).
Earlier this month, the Singapore government unveiled a package of measures to liberalise the domestic banking sector. Deputy Prime Minister Mr Lee Hsien Loong had urged local banks to consolidate to cope with greater competition.
The acquisition would bring further diversity to AIB's group earnings. Outside the Irish market it has established sizeable operations in the US through its All-first subsidiary and is aggressively expanding its presence in eastern Europe.
The bank is set to double the size of its Polish banking business at a likely cost of more than £300 million (€381 million) after the Polish government decided to grant AIB the right to exclusive negotiations on the sale of 80 per cent of the Wroclaw-based Bank Zachodni.
Last year, AIB reported profits of £826 million (€1.05 million). Some £200 million was generated by its US activities with a further £48 million realised from Poland. £396 million was earned from its Irish banking activities.
