SINGAPORE BANKS SAY DIVERSIFICATION KEY TO GROWTH Singapore's major banks are diversifying and gradually shifting their asset holdings from loans to debt instruments, banking sources said. The banks following the trend are the <Overseas Union Bank Ltd>, <United Overseas Bank Ltd>, <Oversea-Chinese Banking Corporation> and the <Development Bank of Singapore Ltd>. The shift towards securitisation has been helped by volatile financial markets which have developed hedging facilities such as floating rate notes and bonds for risk management, said Overseas Union General Manager Loh Hoon Sun. Loh told Reuters in an interview that Singapore banks see limited growth in credit risk. More and more of them are switching from term lending to major growth areas such as stockbroking and fee based income, he said. Major local banks ventured into stockbroking after being granted seats on the stock exchange. Bankers said they are now moving into the new government securities market and the Stock Exchange of Singapore Dealing and Quotation System. One foreign banker said the Development Bank and the Overseas Union Bank Ltd have become major players in the equity market in Singapore. Loh said the banks' participation in the stock market has increased business transactions and provided long term growth for the market. The banks are not competition for individual stockbroking firms because of the increased business they generate, he added. Loh said the Stock Exchange of Singapore might expand equity issues by as much as one billion dlrs this year because of the increasing ability of foreign and local market participants to absorb new issues. Loh said <OUB Investment management Ltd>, a subsidiary of the Overseas Union Bank Ltd, has teamed up with a U.K. Firm to launch the Union Global Fund. The fund is for local investors seeking capital growth through a diversified international portfolio. It will invest in international shares with the emphasis on U.S. And Japanese markets, he said. <DBS Securities Singapore Pte Ltd>, a subsidiary of the Development Bank of Singapore, has applied to the Hong Kong Stock Exchange to set up a Hong Kong stockbroking firm. Loh predicted fixed deposit and prime interest rates in Singapore will stay low this year. As a result, banks will be forced to provide fund management services for major clients seeking better returns, he said. Economic analysts and bankers are optimistic the major banks will show profits in 1987, helped by higher income from treasury and investment banking activities. They expect the 1987 after-tax profits of Oversea-Chinese and United Overseas to show stable growth of four to eight pct against respective gains of four and seven pct in 1986. Overseas Union's profits are expected to jump to over 40 mln dlrs from seven mln dlrs in 1986, economists said. The Development Bank's after-tax profits rose 39.2 pct in 1986 mainly due to a dividend of 20.4 mln dlrs paid by <National Discount Company Ltd> before it became a subsidiary of the bank, they said.