Singapore Government Press Release

Media Division, Ministry of Information and The Arts

36th Storey, PSA Building, 460 Alexandra Road, Singapore 119963.

Tel: 3757794/5






In the 26 years since its inception as a statutory board, the Post Office Savings Bank (POSBank) has been a leader in providing retail banking services to the Singaporean public. POSBank’s savings account base covers about 95% of all adult Singaporeans, as well as many students and children. POSBank has been very successful in its mission to inculcate the habit of saving in Singaporeans, especially the young.

However, the market for basic savings accounts, which is POSBank’s core business, is changing. POSBank customers are becoming more sophisticated in their banking and investment needs. The modern POSBank customer expects not just savings accounts, but also fixed deposits, ACU deposits, personal loans and other credit facilities, and investment in unit trusts and other investment products, etc. Recognising this need, POSBank has been steadily moving in this direction. However, POSBank’s organic development can only proceed gradually. The transformation can be achieved much more quickly by merging POSBank with another bank.

At the same time, the Government has encouraged local banks to merge with each other, so as to consolidate the industry and create fewer, but larger and stronger banks. This will help them to hold their own in Singapore, as MAS progressively opens the domestic market to competition from foreign banks. It will also give the local banks the financial strength to cushion increased market and currency risks, and larger asset size to reap economies of scale, in order to become significant regional players.

For the non-government linked local banks, these are commercial decisions which the banks have to make for themselves. However, for the banks in which the government holds a controlling stake, the government will take the initiative to merge the banks, where it makes business sense. This will set the pace for consolidating and upgrading the domestic banking sector.

The Government has therefore decided to privatise POSBank, and accept an offer by DBS Bank to acquire POSBank and its subsidiaries. The acquisition will enhance DBS Bank’s position in global banking. DBS Bank is already Southeast Asia’s largest bank and the 90th largest bank in the world. DBS Bank’s acquisition of POSBank will result in a combined asset base of $93 billion and shareholders’ funds of $9.4 billion, making the enlarged DBS Bank the 65th largest bank in the world.


The Government appointed Goldman Sachs to advise on the valuation of POSBank, while DBS Bank appointed Morgan Stanley Dean Witter to advise on their acquisition of POSBank.

The Government has accepted DBS Bank’s proposal to acquire POSBank in its entirety, except the POSBank Tower (under construction) and some equity/bond investments (in order to comply with the Banking Act), which will be returned to the Government. POSBank’s existing business undertakings, including all its branches and its ATM network, and Credit POSB, will be transferred as going concerns to DBS Bank. Staff of POSBank and its subsidiaries will cross over to become DBS Bank staff on existing terms of employment.

The net tangible asset value of the acquisition is S$1.164 billion. DBS Bank will pay S$1.6 billion (i.e. 1.37 times NTA). Payment will be in the form of non-voting, convertible preference shares. The preference shares represent approximately 22% of the existing issued ordinary share capital of the Bank, or approximately 18% of the enlarged issued ordinary share capital of DBS Bank (assuming full conversion). The Government has committed to DBS Bank not to sell the new shares for three years (until end 2001) subsequent to the acquisition.

The transaction will take place only after DBS Bank shareholders have approved the acquisition at an extraordinary general meeting (EGM) and Parliament has passed the Bill for the Dissolution of POSBank. The closing date for the acquisition is expected in the fourth quarter of 1998.


POSBank will operate as a division within the DBS Bank and continue to service its depositors and customers. The acquisition will cause minimal disruption to the smooth continuation of POSBank operations. In view of the considerable goodwill built up by POSBank among Singaporeans, DBS Bank will retain the POSBank brand name.

DBS Bank has committed to continue providing small depositors with basic banking services at reasonable cost. DBS Bank will enhance the range of banking services to POSBank depositors following the acquisition.

Credit POSB mortgagors currently pay interest rates below DBS Bank mortgage rates. DBS has confirmed that for existing Credit POSB home mortgages, it will maintain the present interest rate differential below DBS Bank's mortgage rates until 31 Dec 1999. Thereafter, DBS will gradually adjust the mortgage rates to competitive market levels over 3 years ending 31 December 2002. This will also apply to home mortgage applications received up to the announcement date.

Currently, interest earned on POSBank savings deposits is tax exempt. As POSBank will now be part of a commercial entity, the tax exemption will have to be withdrawn. However, the tax exemption has enabled POSBank to provide basic banking services to its small depositors at minimal cost, and compensated for the restrictions on POSBank’s loans and investments. Withdrawing it immediately will adversely affect POSBank and its depositors. DBS Bank will need time to restructure POSBank’s assets to yield higher returns, so that it can offer POSBank savings account holders after-tax deposit rates that are competitive with other banks.

To give POSBank and its depositors ample time to adjust, the Government will continue the tax exemption on all savings deposits for about 3 years up to 31 December 2001, and on the first $100,000 of each POSBank savings account depositor for another 3 years up to 31 December 2004. This will apply to both existing and new savings accounts only.


      Time Period Tax Advantage
    Stage One Acquisition to 31 Dec 2001

    (about 3 years)

    for all deposits of POSBank savings account depositors


    Stage Two 1 Jan 2002 to 31 Dec 2004 (3 years) for the first $100,000 balance of each POSBank savings account depositor

The Government’s guarantee on POSBank deposits will be removed on the date of acquisition, when POSBank ceases to be a statutory board.


DBS Bank’s acquisition of POSBank will enhance its position and enable it to better meet the challenge and opportunities of global banking. POSBank customers can also expect to enjoy better banking services.



24 JULY 1998