DBS in ambitious move to expand wealth business with ANZ asset buy

A woman walking past an Australia and New Zealand Banking Group branch in central Sydney.
A woman walking past an Australia and New Zealand Banking Group branch in central Sydney.PHOTO: EPA

DBS Bank's move to acquire ANZ Banking Group's wealth management and retail banking business in five Asian markets underscores its ambitious strategy to expand its wealth management operations.

DBS announced yesterday that it will acquire ANZ's businesses in Singapore, Hong Kong, China, Taiwan and Indonesia for about $110 million.

It is aiming to complete the transaction in stages by early 2018.

DBS chief Piyush Gupta told a briefing for the bank's third-quarter earnings that it deemed the deal a "win-win transaction" for each party.

The transaction will bump up DBS' assets under management in wealth by $23 billion to $182 billion. High-net-worth clients from the acquisition account for $6 billion, and will lift the bank's assets under management in that area to $115 billion.

Mr Gupta said: "That is a nice add-on to our wealth franchise. The bulk of the business is from Singapore and Hong Kong, so this complements our Singapore and Hong Kong base quite nicely."

The five markets served by ANZ cater to about 1.3 million customers - about 100,000 of them are affluent or private wealth customers and 1.2 million are retail clients.

These had a revenue of $825 million, with $93 million generated in Hong Kong and $319 million in Singapore, in the financial year ending Sept 30.

Ms Pearlyn Phau, DBS' deputy group head of consumer banking, noted that about 570 relationship managers will be added to its workforce. In Indonesia, the bank will gain about 410,000 customers, increasing its base sixfold. It will grow its customers by 21/2 times to 530,000 in Taiwan.

Said Mr Gupta: "Our consumer businesses in Indonesia and Taiwan have just broken even in the last 12 months. In the larger scheme of things, we expect to make $8 million to $10 million next year in both places.

"By getting the operating leverage and the scale that we get from the ANZ add-on, we can see ourselves making $40 million to $50 million over two to three years in those two markets."

Local banks are finding themselves well-placed as financial institutions from outside the region give up their private wealth businesses amid a tough regulatory environment, and despite the ranks of the ultra-wealthy in South-east Asia and China growing at the fastest rate in the world.

Take OCBC Bank, which in April snagged the wealth and investment management business that Britain's Barclays Bank had in Singapore and Hong Kong.

Mr David Hisco, ANZ New Zealand chief executive, told The Straits Times that more complex regulations have meant higher costs, and ANZ would need to scale up with more branches and digital offerings to make it work.

"Looking at the investment required in that with the investments we could make elsewhere, we felt this couldn't be our No. 1 priority," he said.

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A version of this article appeared in the print edition of The Straits Times on November 01, 2016, with the headline 'DBS expanding wealth management ops with ANZ asset buy'. Print Edition | Subscribe