[SINGAPORE] Succession troubles surfaced recently at local-listed property and hotel group City Developments Limited (CDL), when executive chairman Kwek Leng Beng clashed with his son and CDL’s group chief executive officer Sherman Kwek over corporate governance issues.
Billionaire Kwek Leng Beng, 84, joined CDL’s board in October 1969 and has been the group’s executive chairman since January 1995.
Besides being synonymous with CDL, Kwek Leng Beng has been leading locally listed Hong Leong Finance for decades. He joined the board of what is now Singapore’s largest finance company in March 1979 and has been its executive chairman since November 1984.
Hong Leong Investment Holdings
According to latest annual reports, HLIH has a direct and deemed interest of about 49.3 per cent in CDL and 45.9 per cent in Hong Leong Finance, as well as an indirect interest of about 77.7 per cent in Bursa-listed HLFG.
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HLIH has no single majority shareholder. Its shareholders are various members of the storied Kwek/Quek family whose fortune can be traced to Kwek Hong Png – Kwek Leng Beng’s father – and his siblings.
Kwek Leng Beng and his cousins – Kwek Leng Kee, Malaysian tycoon Quek Leng Chan, Quek Leng Chye, Hong Leong Asia’s executive chairman Kwek Leng Peck and Kwek Leng Keow – are among HLIH’s key shareholders.
Kwek Leng Kee, Kwek Leng Peck and Kwek Leng Beng’s nephew Kevin Hangchi are directors of Hong Leong Finance.
Hong Leong Finance’s net profit climbed 11 per cent year on year to S$104.1 million in 2024. Last year’s net profit exceeds the pre-Covid pandemic net profit of S$103.1 million in 2019 by about 1 per cent.
However, Hong Leong Finance’s numbers pale when compared with Singapore’s largest bank, DBS, which posted net profit of S$11.3 billion in 2024, or 77 per cent above that of 2019.
Including the proposed final dividend, dividend per share (DPS) for Hong Leong Finance is up 10 per cent from a year ago. In comparison, DBS’ DPS increased 27 per cent in 2024.
Investors value DBS much more than Hong Leong Finance. Despite the market sell-off, the former trades at a large premium to its latest reported book value, whereas the latter trades way below book value.
Hong Leong Finance prides itself on serving the small and medium-sized enterprises (SMEs) in Singapore. However, the local banking trio of DBS, OCBC and UOB are also strong in serving SMEs. And the trio has much larger balance sheets and geographic footprints.
Moreover, competition in Singapore’s financial services scene has intensified with the emergence of digital banks. For example, GXS and MariBank can serve retail and corporate customers.
Hong Leong Financial Group
From a competitive standpoint, Hong Leong Finance can, subject to overcoming any regulatory hurdles, benefit from being part of HLFG. For one thing, it might be better able to serve many SMEs that are looking to grow in neighbouring Malaysia – whether in the Johor-Singapore Special Economic Zone or elsewhere.
HLFG is a diversified financial conglomerate encompassing businesses that provide a range of financial products and services, including commercial and Islamic banking under Hong Leong Bank, insurance, investment banking, stockbroking and asset management.
HLFG is the majority owner of its crown jewel, Bursa-listed Hong Leong Bank, which ranks among Malaysia’s largest banks. Hong Leong Bank also holds a major stake in the Bank of Chengdu in China.
Quek Leng Chan – one of Malaysia’s richest persons – is chairman of both HLFG and Hong Leong Bank, which are part of Malaysia’s Hong Leong Group that he founded together with Kwek Hong Png.
Perhaps Hong Leong Finance can be brought under HLFG’s umbrella via either HLFG or Hong Leong Bank acquiring some shares in Hong Leong Finance, whether from HLIH and/or other shareholders.
Sure, questions loom over succession issues at 81-year old Quek Leng Chan’s vast business empire, which includes GuocoLand, of which he is chairman and a major shareholder.
Nonetheless, HLIH and the wider Kwek/Quek family may find there are tremendous synergies from having Hong Leong Finance be an integral part of HLFG, which boasts a diverse range of offerings of financial services and products.
Meanwhile, Hong Leong Finance’s minority shareholders gain if the finance company can better help SMEs here better tap Malaysian opportunities. Also, Hong Leong Finance might find both revenue and cost-saving opportunities from working closely with various HLFG businesses.
In addition, through working closely with Hong Leong Finance, HLFG and Hong Leong Bank can more effectively service their Malaysian clients in the Singapore market.
In short, deepening the relationship between Hong Leong Finance and members of HLFG can help deliver long-term value for stakeholders from both sides in an increasingly complex environment.
Sharpening Hong Leong Finance’s competitiveness is particularly crucial, given the economic shock caused by the US’ rising trade protectionism. The Kwek/Quek family should explore changing the ownership of Hong Leong Finance to benefit themselves and minority shareholders.
The writer owns shares in Hong Leong Finance
