Singapore banks see fall in wealth management fees as rich clients turn cautious

Lenders in Singapore are seeing less fees from wealthy customers, who are shying away from taking bets in the markets. PHOTO: LIANHE ZAOBAO

SINGAPORE – Asian millionaires’ reduced risk appetite is hitting Singapore banks at a time when they are welcoming more funds than ever from the wealthy.

Lenders in Singapore, which is seen as a safe haven, are seeing less fees from these customers, who are shying away from taking bets in the markets amid United States-China tension and an uncertain economic outlook.

OCBC Bank posted below-expectation quarterly profit on Friday as fee income tumbled due to “subdued customer investment activities”.

OCBC’s results wrap up Singapore’s latest bank earnings season, where local rivals DBS Bank and UOB also suffered from lower fees managing rich clients’ funds. These banks have been expanding their wealth franchises, seeking to compete with global peers, including UBS Group, with Asia held up as among the regions that hold the most promise for this business.

“Last year was a volatile investment landscape,” Mr Sunny Quek, OCBC’s head of global consumer financial services, said at a briefing on Friday, explaining why customers were cautious and stayed on the sidelines.

There was also less financing, given the higher interest rates, he added.

Despite their reluctance, clients’ new inflows surged to a record of about $25 billion in 2022 for OCBC’s wealth unit and Bank of Singapore, its private banking unit. There are signs of trading activity picking up in 2023 and the “huge” inflows set the stage for more activity as sentiment improves, Mr Quek said.

OCBC group chief executive Helen Wong said at the same briefing that she expects wealth fees to rebound in 2023 and grow at a faster pace than net interest income. The lender is pushing ahead to further grow services, with onshore private banking in China and regional wealth teams in key markets.

Bloomberg Intelligence analyst Rena Kwok said: “The lenders could see a recovery in their wealth management income from current low levels in 2023, as many family and high-net-worth clients might look to deploy their funds to generate higher returns.”

‘Dry powder’

At DBS, Singapore’s largest lender, net new money also reached fresh highs in 2023. Still, its net fee income in the fourth quarter fell 19 per cent from a year ago due in part to lower wealth management fees.

UOB also reported lower fees from wealth management in the latest quarter, even as its assets under management rose.

“People were not taking margin financing as rates got higher and animal spirits were low,” DBS CEO Piyush Gupta told a press briefing last week, explaining why wealth management fees were lower. “A lot of this money is now dry powder waiting to be invested.”

He sees a brighter outlook ahead for the business as the bank opened almost 50 per cent of all new family offices that set up in Singapore over the last quarters, he said at last week’s briefing.

“We have a lot of dry powder and the money is likely to be put to work as market sentiments turn optimistic,” he said. BLOOMBERG

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