OCBC Bank has agreed to acquire National Australia Bank's (NAB) private wealth business in Singapore and Hong Kong, as it powers ahead in the race among regional banks for the highly lucrative wealth management market.
Just last November, OCBC bought the wealth and investment management businesses run by Britain's Barclays Bank in Singapore and Hong Kong for US$227.5 million (S$321 million).
Its latest acquisition comes with a mortgage portfolio worth about US$1.7 billion of mainly residential mortgages, and a deposit portfolio of about US$3.05 billion - a mix of currencies - as at Feb 28, said the bank yesterday.
The deal, which has been a few months in the making, is slated to be completed before the end of this year, subject to regulatory approval. The final price has not been set but will be at the net asset value at the time the deal is completed.
The businesses serve about 11,000 customers across the two markets - more than 7,000 in Singapore and about 4,000 in Hong Kong. They are primarily affluent customers.
UPSELLING SERVICES AND PRODUCTS
OCBC will be able to leverage on some customer stickiness in NAB's mortgage portfolio to capture more market share in high-quality mortgages in Hong Kong and Singapore without compromising too much on rates... We expect a lot of work to be done quickly to upsell a comprehensive suite of wealth services and products.
MR JEREMY TEONG, Phillip Securities Research investment analyst.
OCBC chief operating officer Ching Wei Hong noted in a statement: "A mortgage loans book of more than $2 billion is not small. It would have taken us time and money to grow our mortgage loans organically by that amount."
More than half of the properties are in major cities in Australia such as Sydney and Melbourne, and come with a weighted average loan-to-valuation ratio of below 60 per cent. The portfolio has negligible delinquencies, reflecting the high credit quality among the affluent customers. Mr Ching said the bank can "extend additional banking services" to these customers.
The move continues a consolidation trend in Asia. For instance, DBS Bank said late last year it was buying ANZ's businesses in Singapore, mainland China, Hong Kong, Taiwan and Indonesia for about $110 million.
Wealth management has given local banks a boost in recent years, as they grow assets under management (AUM) and fee income.
Mr He Yuxuan, an analyst at Daiwa SB Investments (Singapore), said: "With more banks seeking to focus on their domestic businesses - selling off overseas operations - we may see more of such opportunities for Singapore banks to... also cross- sell their products and services."
Indeed OCBC chief executive Samuel Tsien is focused on such opportunities. On Tuesday, he said the bank will continue to grow in wealth management "organically, and should there be opportunities that fit into our culture, then we will look at those".
He said: "The acquisition of Barclays is a plus factor because it is strong in products such as foreign exchange derivatives, and we're able to incorporate those into (OCBC private banking unit) Bank of Singapore's product features."
Phillip Securities Research investment analyst Jeremy Teong said: "OCBC will be able to leverage on some customer stickiness in NAB's mortgage portfolio to capture more market share in high-quality mortgages in Hong Kong and Singapore without compromising too much on rates."
However, he noted the two markets are highly competitive and the affluent clients are savvy about their options. "We expect a lot of work to be done quickly to upsell a comprehensive suite of wealth services and products," said Mr Teong.
Despite that, he believes Singapore banks will continue acquiring "as a cost-effective way to grow the balance sheet" and a ready pipeline of wealth businesses could be available as "wealth businesses that do not have the scale in this region will find it uneconomical to compete".
Mr Tsien had also stressed the importance of scale, saying: "Once you have the scale, you're able to amortise the basic cost you need to spend on private banking over a larger customer base. If you can... it will be more attractive to us."