Especially in a time of loan growth turmoil.
With Barclays’ divestment of its Singapore and Hong Kong private-wealth business, Singapore banks, DBS, UOB, and OCBC, has reportedly been interested and are scrambling to get their hands on the sale.
According to Maybank Kim Eng, this is because the sale is a golden opportunity for Singapore’s banks to increase their share of the Asian wealth management (WM) industry and bolster earnings.
“WM is increasingly important for Singapore banks. As at 2015, DBS’ WM income contributed 13% to its total income and OCBC’s, 27%,” Maybank Kim Eng said.
Maybank Kim Eng added that both DBS and OCBC have previously made acquisitions to expand in this space.
“OCBC acquired ING’s Asia Private Bank in 2009 for USD1.5b (price/AUM of 5.8%) while DBS bought Societe Generale’s Asian private-banking business in 2014 for USD220m (price/AUM of 1.75%),” Maybank Kim Eng said.
Maybank Kim Eng also said that topping the budding WM business in Asia is meant to counteract slowing loan growth and revenue headwinds.
“If one of the Singapore banks succeeds in bidding, we estimate 1-1.4% accretion for its 2016 net profits. From our back-of-the-envelope assessment since data is lacking for Barclays’ Asian wealth unit, we estimate that fully-loaded CET1 for the purchasing bank could dwindle by 33-45bps,” the report said.
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