DBS takes banking back to its post office roots

Basic banking services at all SingPost branches, cash bag deposits for corporates at 4

The relationship between post offices and banks has come full circle. And for those nostalgic for the Post Office Savings Bank of years gone by, well it’s practically coming your way again as DBS Bank yesterday said that it would offer basic banking services at all SingPost branches.

The move will scoop the competition as DBS extends its network to 140 outlets, a massive 75 per cent jump from the current 80.

And the bank said that the tie-up was not a precursor to closing branches. ‘No, of course not. Our branch network remains very important to us,’ said Fen Peh, a DBS spokeswoman in response to the question of whether the SingPost outlets would lead to shuttering of some branches.

‘Real estate is at a premium now, we have to explore different types of customer touchpoints.’

Under the landmark partnership, DBS and Singapore Post Ltd will offer basic banking services at all SingPost’s 60 outlets from Jan 3, 2012.

‘This first-of-its-kind 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.

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 will be given the option of depositing cash bags at four SingPost outlets. They are Bukit Batok Central Post Office, Jurong West Post Office, SingPost Centre Post Office and Yishun Central Post Office.

The banking services will be handled by SingPost staff.

On whether DBS will offer more services at the post office, Ms Peh said that it would depend on the take-up and opportunities.

This is not the first time SingPost has handled banking services. Earlier in January, DBS partnered SingPost to offer the new notes exchanges during Chinese New Year at selected post offices.

Jeremy Soo, DBS head of consumer banking, Singapore, said that the bank already has the largest number of banking touchpoints here. It has over 1,300 automated teller machines and cash acceptance machines.

‘This collaboration with SingPost translates into even greater banking convenience for our four million customers when they visit the post office,’ said Mr Soo.

The irony of the deal will not be lost on old-timers. The Post Office Savings Bank used to provide low-cost banking services to Singaporeans, from as far back as 1877. It went on to become a statutory board and was renamed POSBank in 1990 before being acquired by DBS in 1998.

DBS has now returned banking to its post office roots.

SingPost is not new to providing financial products either. Since 2009, 14 post offices have been selling HDB home loans offered by United Overseas Bank under a five-year exclusive agreement.

The post office also sells unsecured credit facilities from ANZ and Standard Chartered Bank. It offers financial planning services from Prudential Assurance Company Singapore (Pte) Limited and Prudential Asset Management (Singapore) Ltd.

Loh Choo Beng, SingPost executive vice-president, retail & financial services, said that the firm has been transforming to stay relevant and close to customers.

‘This collaboration with DBS/POSB is another effort to provide a higher level of convenience to our customers. By making basic banking services available at our counter, we give our customers a choice to have their banking needs met as they come to us to buy stamps, pay bills, remit money or complete other transactions,’ he said.

SingPost Q2 net profit falls 22.5% to $30.6m

SINGAPORE Post (SingPost) registered a 22.5 per cent year-on- year fall in net profit to $30.6 million for the second quarter ended Sept 30, despite revenue inching up 2.4 per cent to $140.9 million.

The three months saw total expenses rising 7.4 per cent to $111.8 million.

‘Net profit for the group was impacted by the higher cost of business including increased manpower costs due to the tight labour market, as well as investments to strengthen information technology, operations and capabilities to drive new business,’ said group CEO Wolfgang Baier.

Rental and property-related income increased 6.3 per cent to $11 million with higher rental income from Singapore Post Centre. But the group recorded a $1.7 million miscellaneous loss, against a miscellaneous income of $4.3 million a year earlier. This was due mainly to non-cash mark-to-market losses from equity-linked notes as a result of the recent downturn in the stock market, said SingPost.

The group’s Q2 earnings per share (EPS) fell to 1.61 cents from 2.053 cents a year ago.

Mail revenue increased 1.7 per cent to $93.8 million during its second quarter, due to higher contributions from domestic and international mail.

Revenue for logistics increased 10.8 per cent to $53.1 million, driven by growth in Quantium Solution’s regional e-fulfilment activities, transhipment and vPOST shipping activities.

Retail revenue was constant at $17 million, as higher contributions from retail products and online store Clout Shoppe offset the decline in agency services and financial services following the sale of the SpeedCash business in March.

Net cash from operating activities was slightly lower at $42.6 million, compared to $46.3 million in the second quarter of last year.

SingPost maintained its quarterly dividend at 1.25 cents per share.

For the first six months, net profit declined 12.9 per cent year-on-year to $69.9 million despite a 2.7 per cent rise in revenue to $283.2 million while its total expenses grew 6.7 per cent to $221.1 million year-on-year. Half-year EPS fell to 3.654 cents from 4.164 cents a year earlier.

SingPost shares closed trading yesterday at $1.05, up 1.5 cents.

SingPost Q2 net profit falls 22.5% to $30.6m

SINGAPORE Post (SingPost) registered a 22.5 per cent year-on- year fall in net profit to $30.6 million for the second quarter ended Sept 30, despite revenue inching up 2.4 per cent to $140.9 million.

The three months saw total expenses rising 7.4 per cent to $111.8 million.

‘Net profit for the group was impacted by the higher cost of business including increased manpower costs due to the tight labour market, as well as investments to strengthen information technology, operations and capabilities to drive new business,’ said group CEO Wolfgang Baier.

Rental and property-related income increased 6.3 per cent to $11 million with higher rental income from Singapore Post Centre. But the group recorded a $1.7 million miscellaneous loss, against a miscellaneous income of $4.3 million a year earlier. This was due mainly to non-cash mark-to-market losses from equity-linked notes as a result of the recent downturn in the stock market, said SingPost.

The group’s Q2 earnings per share (EPS) fell to 1.61 cents from 2.053 cents a year ago.

Mail revenue increased 1.7 per cent to $93.8 million during its second quarter, due to higher contributions from domestic and international mail.

Revenue for logistics increased 10.8 per cent to $53.1 million, driven by growth in Quantium Solution’s regional e-fulfilment activities, transhipment and vPOST shipping activities.

Retail revenue was constant at $17 million, as higher contributions from retail products and online store Clout Shoppe offset the decline in agency services and financial services following the sale of the SpeedCash business in March.

Net cash from operating activities was slightly lower at $42.6 million, compared to $46.3 million in the second quarter of last year.

SingPost maintained its quarterly dividend at 1.25 cents per share.

For the first six months, net profit declined 12.9 per cent year-on-year to $69.9 million despite a 2.7 per cent rise in revenue to $283.2 million while its total expenses grew 6.7 per cent to $221.1 million year-on-year. Half-year EPS fell to 3.654 cents from 4.164 cents a year earlier.

SingPost shares closed trading yesterday at $1.05, up 1.5 cents.

Dividend play; upside from buybacks & growth

• Generates S$50m cash annually after paying dividends; deployed in six M&A transactions YTD

• Singpost still needs to deploy idle cash, so share buybacks are likely to continue

• Upgrade to BUY with unchanged TP of S$1.17. We see a favorable +23% reward versus –4% risk

Singpost is a cash machine; deployment of cash is key. Free cash flow usually exceeds earnings, as regular capex of S$10-15m is less than depreciation expenses of S$20-25m. Singpost pays 6.25 Scts DPS each year, which translates to S$120m in dividends versus free cash flow of ~S$170m.

Six M&A transactions done in the last six months. SingPost has used S$65m to acquire stakes in six regional companies in the logistics, e-commerce and e-substitution sectors. Contribution from these acquisitions is estimated to be minimal in FY12F as Singpost invests in people and resources to manage these businesses. However from next year onwards, these investments will start to pay off.

Share buybacks may continue to deploy idle cash. Singpost pays fixed rate of 3.5% on its 10- year bonds while it stands to gain over 6% yield by buying back its own shares. Treasury shares can also be used later for regional expansion.

Trading at 13% discount to its average 1-year forward PE of 13.8x. Singpost has been resilient to market volatility, falling 10% vs. 20% decline in broader STI over the last two months. We upgrade stock to BUY at our TP of S$1.17 based on DDM (cost of equity 7.7%, growth rate 2%) for its >6% yield and steady earnings growth through acquisitions. We assume that dividends can grow by 2% p.a. in the long term.

Dividend play; upside from buybacks & growth

• Generates S$50m cash annually after paying dividends; deployed in six M&A transactions YTD

• Singpost still needs to deploy idle cash, so share buybacks are likely to continue

• Upgrade to BUY with unchanged TP of S$1.17. We see a favorable +23% reward versus –4% risk

Singpost is a cash machine; deployment of cash is key. Free cash flow usually exceeds earnings, as regular capex of S$10-15m is less than depreciation expenses of S$20-25m. Singpost pays 6.25 Scts DPS each year, which translates to S$120m in dividends versus free cash flow of ~S$170m.

Six M&A transactions done in the last six months. SingPost has used S$65m to acquire stakes in six regional companies in the logistics, e-commerce and e-substitution sectors. Contribution from these acquisitions is estimated to be minimal in FY12F as Singpost invests in people and resources to manage these businesses. However from next year onwards, these investments will start to pay off.

Share buybacks may continue to deploy idle cash. Singpost pays fixed rate of 3.5% on its 10- year bonds while it stands to gain over 6% yield by buying back its own shares. Treasury shares can also be used later for regional expansion.

Trading at 13% discount to its average 1-year forward PE of 13.8x. Singpost has been resilient to market volatility, falling 10% vs. 20% decline in broader STI over the last two months. We upgrade stock to BUY at our TP of S$1.17 based on DDM (cost of equity 7.7%, growth rate 2%) for its >6% yield and steady earnings growth through acquisitions. We assume that dividends can grow by 2% p.a. in the long term.