Barclays purchase reflects OCBC push

Barclays AUM, which stood at US$18.3 billion at the end of last year, will boost Bank of Singapore's AUM of US$55 billion (S$74 billion).
Barclays AUM, which stood at US$18.3 billion at the end of last year, will boost Bank of Singapore's AUM of US$55 billion (S$74 billion).PHOTO: OCBC
Barclays AUM, which stood at US$18.3 billion at the end of last year, will boost Bank of Singapore's AUM of US$55 billion (S$74 billion).
WORKING THROUGH ISSUES: After we submitted our final bid letter, in our conversations with the senior executives of Barclays, we made the effort to understand their objectives and work through issues with them. - OCBC CHIEF FINANCIAL OFFICER DARREN TAN.

Bank sees need to cultivate growth in private and corporate banking side of business

OCBC Bank's US$320 million (S$431 million) purchase of Barclays Bank's private banking business in Singapore and Hong Kong is a good reflection of where the bank sees future growth, said OCBC chief financial officer Darren Tan.

With financial technology start-ups gradually making inroads into "high-volume, low-value -add" services such as payments and foreign exchange, traditional banks have to cultivate the growth of businesses at the other end of the spectrum, such as private banking and corporate banking, he said.

These businesses may churn out a lower volume of transactions but require more value-add and deep, long-term relationships between the bank and customer, making them less likely to be disrupted by fintech players, he added.

OCBC said last week that its private banking unit, Bank of Singapore (BOS), was acquiring the wealth and investment management business that Britain's Barclays Bank has in Singapore and Hong Kong. The deal will add more than 1,800 clients and 88 relationship managers to BOS.

Barclays assets under management (AUM), which stood at US$18.3 billion at the end of last year, will also provide a boost to BOS' AUM of US$55 billion.

OCBC has been presented with several opportunities, but Barclays' sale stood out because it "ticked all the boxes for us", said Mr Tan.

"The business being put up for sale was in the private banking space, which fits one of our core businesses. Geographically, the business was in Singapore and Hong Kong, which are our core markets."

Also, BOS can offer the same suite of products that Barclays has been serving its private banking clients, and more - it can tap OCBC for commercial banking services and insurance products, he added.

"And the client base overlap, as we learnt during the due diligence, was amazingly very, very minimal."

According to a Reuters report, rival DBS Bank had put in a bid amount similar to OCBC's but later had second thoughts about the deal amid talk that several Barclays bankers might be poached.

Mr Tan declined to comment directly on the matter, but said: "After we submitted our final bid letter, in our conversations with the senior executives of Barclays, we made the effort to understand their objectives and work through issues with them," he said.

"The senior executives of Barclays were appreciative of our sincerity.

"Although I was not told specifically that we were the preferred bidder, I did go away from the meeting feeling quite positive."

Towards the end of the swift four-month deal-making process, Mr Tan became more optimistic that Barclays was leaning towards OCBC's bid.

"And because of our collaborative and reasonable approach (to the negotiations), we were able to complete the deal quite quickly."

During the due diligence, he added, he learnt that several Barclays relationship managers knew various BOS executives, including chief executive Bahren Shaari, with whom they had crossed paths in previous roles.

"So they felt we have a good fit culturally, and through their interactions with us, we had a good feeling that both teams could work seamlessly together".

A version of this article appeared in the print edition of The Straits Times on April 14, 2016, with the headline 'Barclays purchase reflects OCBC push'. Print Edition | Subscribe