DBS Group Holdings Ltd Has Just Lost Out On a Lucrative Area for Growth

Last week, Oversea-Chinese Banking Corp. Limited (SGX: O39) and United Overseas Bank Ltd (SGX: U11) were among 9 foreign banks (banks from Japan, Thailand, China, Australia, and Malaysia were part of party too) that that were given preliminary approval for a banking license to set up shop in Myanmar. The duo would have up to 12 months to meet other regulatory requirements before their licenses can be finalised.

According to IE Singapore, Singapore was Myanmar’s third largest trading partner in 2012 – bilateral trade between the two nations was already at S$3 billion in 2013 and is expected to grow in the future – and one of the country’s largest investors. With more and more companies from Singapore venturing into Myanmar, OCBC and UOB looks set to benefit from the influx of capital into the country given their newly minted preliminary licenses. However, one Singapore bank seems to be left out from the whole picture and that is DBS Group Holdings Ltd (SGX: D05).

DBS, despite having a representative office in the city of Yangon in Myanmar since 1993,  is the only major bank in Singapore which did not receive an approval from the Central Bank of Myanmar.

A full banking license in Myanmar would allow foreign banks to offer their full range of banking products and services. Without a license, DBS would thus be restricted from expanding its presence in the country. On the other hand, both OCBC and UOB have the option of opening more new branches in the country once they satisfy all the conditions laid out by the Central Bank of Myanmar, after which their banking licenses would be given a full stamp of approval.

It seems that DBS might really be missing out on a potentially strong area of growth. Myanmar has a population of more than 60 million. On top of that, the country is geographically suited to link up Southeast Asia with two of the most populated nations in the world, namely India and China. With the gradual opening of its economy, Myanmar is expected to grow its Gross Domestic Product at an annual clip of 7% to 8% for the next decade.

Foolish Summary

With Myanmar’s economy steadily opening up to foreign investments and the growing influx of capital from Singapore-based companies,  it seems fairly obvious that the country’s an area for Singapore-based banks to tap into for future growth.

DBS, being currently unable to obtain a full banking license in Myanmar, seem to be losing out on a major growth opportunity as compared to the other two local banks.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim does not own any company mentioned above