Why It Matters

Singapore banks scaling up

Singapore banks are locked in a race to expand their wealth management business, with DBS Bank the latest to ramp up its offerings.

In what is becoming a familiar pattern, the lender is acquiring the wealth management and retail banking arms of a foreign player that has found the terrain here too tough.

In this case, DBS is buying ANZ Banking Group's wealth businesses in five Asian markets for about $110 million. The move will add about 1.3 million people to DBS' client list, including about 100,000 deemed affluent or private wealth customers.

OCBC Bank made a similar move in April, paying US$320 million (S$440 million) for the wealth and investment management business that Britain's Barclays Bank ran here and in Hong Kong.

These acquisitions have arisen now because major foreign names are giving up their private wealth businesses in this region despite Asia's private wealth growing at the fastest pace in the world.

Slimmer margins amid rising costs, complex regulatory compliance and mounting pressure for higher returns are among their reasons for leaving as they are unable to achieve the scale needed to be quickly profitable. This makes it a great time for Singapore banks to snap up these assets, to build the scale needed to overcome the same challenges without additional burden.

Local banks seem to have taken a steady approach over the years. In 2008, DBS acquired the sound assets of Bowa Bank in Taiwan, took over Royal Bank of Scotland's retail and commercial banking businesses in China in 2010 and snapped up Societe Generale's Asian private banking business in 2014.

OCBC acquired the coveted Asian private banking arm of Dutch giant ING in 2010 while United Overseas Bank intensified its focus on its private bank in 2014 to capitalise on growing wealth in Asia.

The next thing to keep an eye on is how the new assets will be integrated as clients are loath to move around. Private banking is largely relationship-driven so retaining talent is also tricky.

Local banks making the right moves will get a leg up from the acquisitions, and see them bear fruit.

A version of this article appeared in the print edition of The Straits Times on November 05, 2016, with the headline 'S'pore banks scaling up'. Print Edition | Subscribe