SingPost – BT

Fond memories of POSBank

But DBS-SingPost tie-up won’t yield products of that era

LAST week’s news that DBS Bank will offer basic banking services at the post office has conjured up expectations that it might revive the people’s bank.

Millions of Singaporeans have fond memories of what it was like to do their banking at the Post Office Savings Bank and it had little to do with nostalgia; the sentiment is firmly grounded in dollars and cents.

For instance, many of us had our mortgages with Credit POSB because it was the cheapest in town.

In 1998, the year that the government handed POSBank to DBS on a platter, a POSBank spokeswoman then estimated that the merger would eventually cost its customers about 12 per cent more in monthly instalments, based on the Credit POSB mortgage rate then of 6.75 per cent and DBS Bank’s rate of 8.25 per cent.

Offering cheaper loans did not mean POSBank did not make money.

In fact, it was raking it in. In 1997, the last year before it was swallowed up by DBS, POSBank posted $219 million in group net surplus (read profit) to the government.

Biggest mortgage provider

It was Singapore’s largest bank in several respects.

POSBank was the nation’s biggest mortgage loan provider, it had 150 branches and 672 ATMs and 5.7 million accounts. Not many will remember this, but it was also innovative: POSBank was the second bank to introduce ATMs in 1979, after Chartered Bank.

No wonder that in the subsequent years following the sale to DBS when many branches were closed as part of integration, it was often greeted with uproar.

Fast forward to Jan 3, 2012 and DBS/POSB customers will be able to access basic banking services at all SingPost’s 60 outlets.

The tie-up in Singapore between a postal service provider and a bank will enable DBS/POSB customers to conduct banking transactions at 140 outlets, up substantially from the bank’s 80 branches today, the bank said in a statement last Thursday.

Under the agreement with SingPost, banking services available to DBS/POSB customers at post offices include cash withdrawals and cash deposits of up to $5,000.

In addition, customers can also submit a POSB Everyday Savings Account application form at a SingPost outlet.

DBS corporate banking customers are not left out, they can deposit cash bags at four SingPost outlets.

The tie-up will not be cheap but should cost DBS considerably less compared to opening its own branches.

Neither DBS nor SingPost has revealed the expected cost or revenue to either parties from the landmark agreement.

SingPost earned $22 million from financial services for its 2010/11 financial year. The amount came from selling remittance services, UOB’s HDB home loans, ANZ and Standard Chartered Bank unsecured credit facilities and financial planning provided by Prudential .

DBS is working with SingPost to boost security measures at the post offices which could include having an armed guard and installing a safe to meet regulatory requirements.

Benefits trump costs

But the benefits of extending DBS’s network should far outweigh the costs, especially if later the bank increases the type of products it pushes through the post office such as credit cards and home loans.

SingPost and UOB have an exclusive five-year contract which began in 2009 for selling HDB home loans.

In the meantime, DBS could rake in much cheaper deposits compared to its rivals and make higher margins from selling loans.

In fact, in the parliamentary debate in 1998 on the privatisation of POSBank, former Ayer Rajah MP Tan Cheng Bock noted that while most POSBank depositors live in HDB flats with housing loans from the Housing & Development Board, ‘all the borrowers of Credit POSB are owners of private properties’.

But DBS/POSB customers could be disappointed if they think the new tie-up would lead to POSBank-type products or loans.

A DBS spokeswoman has told BT that there would be no rebranding come Jan 3.

As other banks look on and tote up the advantages that DBS might have on them in this scoop, the latter will have to work hard to fulfil customers’ expectations.

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