DBS Bank yesterday said that it will buy the Asian private banking business of Societe Generale for US$220 million, accelerating its ambition of becoming a leading wealth manager in Asia.
The deal will also widen the gap with DBS’s closest rival, the Bank of Singapore, a unit of OCBC Bank.
The price represents about 1.75 per cent of assets under management (AUM), based on the AUM of Societe Generale Private Banking Asia (SGPB Asia) of US$12.6 billion as at last Dec 31. This is a steal: OCBC in 2oio paid US$1.46bn which represents 5.8% of the unit’s assets under management, after adjusting for surplus capital of US$550m*.
Last Tuesday’s BT went on: DBS’s AUM will go up by about 23 per cent to S$85 billion from the current S$69 billion with the purchase, seven months after it was reported the French lender wanted to divest the business to redeploy capital into its core markets.
Swiss bank UBS is the largest private bank in Asia-Pacific, followed by Citi Private Bank and Credit Suisse, in that order according to trade journal Private Banker International in a 2012 survey.
That survey ranked DBS and Bank of Singapore ninth and 10th, respectively.
DBS is onto a winner with this FT and his FT COO. Well DBS deserves it, given the FTs it has had where “T” stands for Trash. SGX needs that kind of luck where both its CEO and COO are FTs where “T” certainly doesn’t stand for Talent. They did Temasek no favours by saying everything was kosher about the share price movements of Olam (More on this next week).
Coming back to OCBC. Its CEO is a Hongkie FT with great credentials. But he hasn’t shown whether the “T” is for Talent or Trash. So far the mkt inclines to the latter. OCBC’s share price crashed (and have yet to recover) when OCBC annced purchase of Hong Kong’s Wing Hang Bank few months ago. Deal is still pending. Hopefully, it dies a natural death.
My fav bank is still UOB where the chairman and CEO are true blue S’poreans. But UOB has limited visions which suits my taste here. DBS is for those who want to own a bank can be the leading regional bank in place of CIMB. It always had the vision but the FTs leading it let it down. Gupta has the talent (and luck) to make it the leading regional bank despite DBS not having significant presences in Indonesia and M’sia. It’s expansion plans in Indonesia were thwarted. S’pore has to play ball with Indonesia (allowing Indonesian banks more privileges here) for DBS to be able to buy Temasek’s Bank Danamon stake.
Finally, yesterday’s BT had a story about the difficulties our three banks were facing. UOB’s finance director said “Funding pressures will serve as a growth constraint for mid-sized banks like us outside of Singapore, particularly amid a backdrop of tightened liquidity conditions in the region. UOB has always emphasised funding stability. We must also be selective in the customer segment we engage in and avoid large concentration risks.” Taz straight talk.
So is [C]ompetition in US-dollar funding is likely to intensify, given the anticipated growth in trade financing, and the liquidity requirements of Basel III, says OCBC’s Mr Tan. Trade financing is still mostly greenback-denominated.
DBS’s Ms Chng says: “The so-called ‘balkani-sation’ of the financial landscape is an emerging risk, potentially resulting in captive capital and liquidity pools within each jurisdiction and impacting the pursuit of synergies across regional operations.”
But sadly they couldn’t resist sprouting PR rubbish
“From a capital perspective,” says Darren Tan, chief financial officer of OCBC Bank, which is negotiating to buy Hong Kong’s Wing Hang Bank, “we prefer to acquire majority stakes where possible. However, in instances where a majority stake is not immediately available, we will still give the opportunity due consideration if there is strategic value in the acquisition.”
United Overseas Bank’s approach to overseas growth is to expand the platform for customers to tap trade flows within the region, says its CFO, Lee Wai Fai.
DBS puts priority on pursuing organic growth, and adopts “a disciplined approach” to M&A, says Chng Sok Hui, its CFO … She adds that DBS is adopting a digital strategy to expand its footprint in growth markets.
What do they mean?
*My 2010 analysis: But maybe OCBC shld have waited. The purchase of ING’s Asian private banking business could come to haunt OCBC. A few days before this deal was annced, ING sold its European biz, at a fraction of the multiple that it got for Asia. Only time will tell if the growth in Asian wealth and OCBC’s ability to grow the private banking biz will justify the hefty premium that OCBC paid.
It paid US$1.46bn which represents 5.8% of the unit’s assets under management, after adjusting for surplus capital of US$550m. This compares with the 2.3% measure paid by Julius Baer for ING’s Swiss assets which is in line with another European purchase by an American private equity group of a smallish private banking outfit — RHJI’s purchase of Kleinworth Benson from Commerzbank.
Trumpets pls. BTW, I don’t blame the previous FT CEO of OCBC, Richard O’Connor. He was retiring. In such circumstances, usually the CEO would not take the lead in such a move: he’d go with the flow. Rightly, as he wouldn’t be the person running the show.. This is what happened here, I’m reliably informed. BTW too, he did a great job. Ngiam Tong Dow (remember him) called him an honorary S’porean, I think.