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March 17, 2014 5:38 am
DBS, southeast Asia’s biggest bank by assets, has bought the Asia private banking business of Société Générale for $200m in cash, in the latest illustration of Singapore-based banks’ push into wealth management.
Under the deal DBS will buy the French bank’s wealth management units in Singapore and Hong Kong, as well as some of its trust business.
The move, part of SocGen’s cost-cutting and disposal programme, also highlights how tough competition to manage the wealth of Asia’s emerging entrepreneurs is forcing weaker players out of the business just as Singapore banks are pushing into the sector.
Growth in assets under management at the private banking divisions of DBS and Singapore rivals Oversea-Chinese Banking Corporation and United Overseas Bank outpaced the 11 per cent growth in regional private wealth in 2011.
The SocGen acquisition is also the first major deal by Piyush Gupta, chief executive, since DBS last year walked away from a S$9bn (US$7.1bn) attempt to buy a majority stake in Indonesia’s Bank Danamon.
DBS said the transaction was part of its ambition of becoming a leading wealth manager in Asia, and would increase the value of the bank’s “high net worth assets under management” by more than 20 per cent. It would be accretive to DBS’s full year 2015 earnings.
Jefferies, the investment bank, estimated the acquisition would increase assets under management at DBS’s private banking unit by 15 per cent to S$125bn, from S$109bn in fiscal year 2013.
Krishna Guha, analyst at Jefferies, said the price that DBS paid appeared fair compared with other recent private banking acquisitions, such as the 2009 purchase of ING’s Asian wealth management business by OCBC, which ranks second by assets in Singapore after DBS.
Mr Guha estimated DBS had paid the equivalent of 1.75 per cent of assets under management, compared with an average price for private bank deals since the 2008 financial crisis of 2.4 per cent of assets under management.
Tan Su Shan, group head of consumer banking and wealth management at DBS, said its private banking business had grown about 20 per cent a year since 2010, “putting us among the top 10 players in Asia”.
“We have now reached a stage where we are ready for inorganic growth. This transaction will give us access to new clients and strong, experienced teams, thereby strengthening our position as a top-tier wealth manager in the region,” he said.
DBS shares closed up 0.1 per cent on Monday in Singapore at S$103.92.
Private wealth in Asia excluding Japan grew more than five times faster than the 2 per cent global average in 2011, to $24tn, or a fifth of global wealth, according to Boston Consulting Group. That proportion is projected to grow to 27 per cent by 2016.
However, bankers say that even as assets under management are growing fast in Singapore – narrowing the gap with Switzerland – that is not translating into profits for many banks that have rushed to Singapore to tap growing wealth in southeast Asia.
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