Singapore’s Oversea-Chinese Banking Corporation (OCBC) is in talks with Singapore-based Keppel and Validus- a peer-to-peer lending platform, to form a new digital bank.

According to media reports, OCBC along with its partners are planning to bid for one of the three wholesale digital banking licences offered by regulators in Singapore.

Over the years, the bank has concentrated on lending to small and medium-sized enterprises (SMEs). The decision to form a digital bank will further boost OCBC’s presence in the SME lending space.

But at the same time, a new digital bank means it will be in direct competition with OCBC’s own digital banking unit.

With regard to this, OCBC’s chief operating officer Ching Wei Hong earlier told the media, “We have to accept that there will be cannibalisation. But on the other hand, the mothership should also be in a position to go out and compete.”

OCBC, which is Singapore’s second-largest bank, recently announced that its profits were down by 6 percent to $1.17 billion in the third quarter from $1.25 billion during the same period last year. This is mainly due to a one-time charge of $91 million which came from a refinement in the group’s expected credit loss modelling approach for its OCBC banking unit in Indonesia.

While OCBC’s total income for the quarter increased by 4 percent to $2.66 billion from $2.54 billion year-on-year, the bank’s net interest income for the quarter also increased by 6 percent to $1.6 billion from $1.51 billion.

Earlier this month, the bank also announced a new facility that will allow startups to open a business account in Singapore immediately after incorporation, instead of having to wait for a day.