Most Read Stories
Curtains for a serial banker
In March 2006, the curtains were drawn on the controversial banking career of Khoo Teck Puat when his estate inked a deal to sell his stake in Standard Chartered Bank to the Singapore government for $4 billion. Here is an inside look at the former bank clerk and an ex-fugitive who built a multi-billion dollar fortune in seven decades.
It was late 1965 and Tungku Abdul Rahman, Prime Minister of Malaysia, was feeling the heat.
The father of independent Malaysia had just ended the disagreeable business of overseeing the secession of Singapore from the Federation of Malaysia. The tiny city-state, led by the forceful Cambridge-trained lawyer, Lee Kuan Yew, had declared itself a sovereign nation.
With numerous details still yet to be sorted out between the two countries, the Tungku (“prince” in Malay as Abdul Rahman was a scion of the royal family of Kedah state) found himself embroiled yet again in another crisis.
Vexingly, it was also related to Singapore.
Malaysia, a former British colony, gained independence on August 31, 1957. Three years later, Khoo Teck Puat, an acquaintance of the Tungku, started Malayan Banking Berhad, now known as Maybank.
Khoo was born in Malaysia but worked his entire life at the Overseas Chinese Banking Corporation (OCBC), then the biggest local bank in Singapore. He started out as an apprentice clerk, before rising steadily through the ranks to become deputy general manager, the No. 2 position at the bank.
In 1959, when denied the top post and a seat on the board, Khoo quit OCBC in a huff, bringing with him an entire generation of mid-level bankers. A year later, he launched Maybank. He was 47.
At Maybank Khoo pioneered branch banking in Malaysia. He set up outlet after outlet, often in rural areas which until then had never enjoyed the benefits of modern banking.
Between 1960 and 1965, Maybank opened more than 100 branches. It was the fastest-growing bank in the world, and a symbol of pride for the young nation.
Then disaster struck.
Rumours started circulating that Khoo had channelled much of Maybank’s money to his own companies in Singapore; and the bank was unable to meet its obligations. The tens of thousands of Malaysian farmers who had put their life savings in the bank for its high interest rates started to panic. A bank run was imminent.
The Tungku went into frantic damage control. Khoo was expelled from Maybank, and the prince contacted owners of a few private lenders, including at least one in Singapore, offering to sell them Maybank for the nominal sum of a dollar. But as he also insisted the buyer take over the lender’s potential bad debts, no one took up his offer.
Things went from bad to worse. In 1966, Maybank experienced its first run, which only stopped after the Malaysian government stepped in and took control of the business.
The story has a nice ending, of sorts.
Forty years since its darkest days, Maybank, still under government control, has flourished. With annual profit of $1 billion, it is not only the biggest bank in Malaysia, but is also a force to be reckoned with in regional banking circles.
Khoo did not do too badly, either.
Ousted from the daily running of Maybank, he stayed on its board until 1976. He also managed to convince his successors at the bank to let him buy its Singapore assets at a knock-down price of M$50 million ($16 million). These formed the base of the Goodwood group, Khoo’s hotel-and-property empire.
Still, it was in banking that Khoo really excelled.
As a rule, the overseas Chinese consider owning a bank the best way to gain respectability and raise capital.
Many made a fortune out of it. They include Chin Sophonpanich (whose Chinese surname was Chan), founder of Bangkok Bank; Mochtar Riady (Li) of Indonesia’s Lippo Bank; and Henry Sy of the Equitable PCI Bank of the Philippines.
But Khoo was unique, even amongst them. He was perhaps the only Asian who was a multinational serial banker.
In a career that spanned more than seven decades, Khoo left an indelible mark on four banks in four different countries—namely, OCBC in Singapore, Maybank in Malaysia, the National Bank of Brunei (NBB), and Standard Chartered Bank of the UK. No other banker could rival his record.
Nevertheless, Khoo’s career was marked by controversy. In 1965 while Maybank was tottering, Khoo persuaded the then Sultan of Brunei, Omar Ali Saifuddien III, to allow him to start NBB.
Brunei was just beginning to enjoy the riches of an oil-producing nation. The setting up of NBB was timely as it provided an outlet for the petrodollars.
Khoo also persuaded the Brunei royal family to take up shares in NBB, so that he could leverage on their names for his operations.
At one point, the royal family’s combined stake in NBB was said to be as high as 30 per cent; the balance 70 per cent being held by Khoo who installed his eldest son, Ban Hock, as chairman of the bank
For two decades, Khoo had his way with NBB, both in Brunei and elsewhere in Asia.
This was helped by the impression—never confirmed or denied—that the bank had sovereign or government backing. As was the case with Maybank, Khoo “borrowed” heavily from NBB to expand his own business empire outside of sleepy Brunei.
One of his acquisitions was the high-profile purchase of the Southern Pacific Hotel chain of Australia in 1986, which, unexpectedly for Khoo, raised alarm bells among the Brunei authorities.
Khoo was also unfortunate in that the purchase coincided with the death of his protector, the former Sultan Omar.
The old man had abdicated in 1967. His son and successor, Sultan Hassanal Bolkiah, was less enamoured of Khoo.
Quietly he hired investigators from the US to sift through NBB’s finances, and was shocked to discover the bank’s chronic exposure to Khoo’s companies.
Sultan Bolkiah shut down NBB, threw Ban Hock in jail (where he stayed for two years), and issued a warrant of arrest for Khoo on charges of defrauding the bank.
The next two years were a nightmare for Khoo, who had to go on the run. His assets were seized by the Brunei Ministry of Finance.
Even his palatial home in Singapore was sold to local entrepreneur, Ong Beng Seng, who used the ground to build the swanky Four Seasons Hotel.
In 1988 Khoo offloaded his Australian hotels and raised $340 million, which he used to settle his debts with the Brunei government and to get Ban Hock out of prison. It was only after the dust had settled that Khoo was able to return to Singapore to live out his last years.
Amidst all this turmoil, Khoo made what he would later call “the best investment of my life”.
Stanchart, a bank based in London but active in the Far East, was facing a hostile bid from compatriot Lloyds. It turned to Khoo and two other tycoons, Sir Y K Pao of Worldwide Shipping in Hong Kong and Robert Holmes a Court of Australia, for help. The three men ended up buying a combined 37 per cent stake in Stanchart, and Lloyds withdrew its bid.
Till today, it remains a mystery where Khoo got his money for the Stanchart purchase.
It did not escape notice, however, that the deal had come right after he was accused by the Brunei government of removing some $600 million from NBB.
A year after Stanchart, while Khoo remained on the run, the global financial meltdown of 1987 hit Asia.
As the share price of Stanchart plunged, both Pao and Holmes a Court cut their losses. Khoo held on, firmly believing it would be worth much more in the long run.
It was an unusual stance by a man who was then not only a fugitive, but had also just turned 70.
By the 21st century, Khoo was more than vindicated. The rise of China has boosted the value of his Stanchart shares way above his purchase price. Owning that stake alone made him one of the richest men in Asia.
But for all his wealth, the octogenarian could not have failed to realise that none of his 14 children (from two marriages) was going to follow him into banking, a fact that perhaps had much to do with Ban Hock’s incarceration in Brunei. The consummate banker, who passed away in February 2004, was to leave behind no heir to carry on his banking exploits.
Not surprisingly therefore, as soon as it was prudent, Khoo’s heirs sold their Stanchart stake. All things considered, they probably would rather enjoy the huge proceeds ($4 billion) than have anything to do with a bank.
Lee Han Shih is the founder, publisher and editor of asia! Magazine.