Barclays deal stokes Singapore rivalry in fight for scale

It’s a case of déjà vu for Singapore’s DBS, which has lost out to local rival OCBC – as in the ING private bank deal in 2010 – in the race for Barclays’ Asian wealth unit. UOB was also bidding.
Barclays deal stokes Singapore rivalry in fight for scale

Singapore’s OCBC has scored another win over local rival DBS in the battle for private bank assets with the purchase of Barclay’s wealth and investment management (WIM) business in Asia, amid ongoing industry consolidation.

That the other big Singapore bank, UOB, was bidding – among others – underlines the fierceness of competition for the assets of wealthy individuals in the region.

DBS had also been a bidder for ING's Asian private bank back in 2009, which was ultimately bought by OCBC and combined with its existing wealth business to form Bank of Singapore (BoS).

With the addition of $18.3 billion in assets from Barclays WIM's Hong Kong and Singapore businesses, BoS’s AUM will rise by a third to $73.3 billion from $55 billion, putting it almost level with DBS’s $75 billion in high-net-worth AUM (as of end-2015).

Industry sources see BoS as a good fit with Barclays, but question whether the latter will retain its current level of assets under management given that staff attrition has already started, mainly among frontline personnel.

DBS has not confirmed that it was bidding for Barclay’s Asia WIM business, but nor has it denied speculation to that effect.

DBS would not comment on the Barclays deal, apart from to say: “We will continue to grow our business, both organically and through acquisitions, and will be disciplined in evaluating and pursuing opportunities.”

An industry source said: “A lot of people speculated that DBS was the front-runner. I don’t know for sure why OCBC won the bid. But it makes sense, given that BoS has reached a point of maturity after its acquisition and integration with ING private bank.”

He added that Barclays and BoS complemented each other capabilities-wise. “BoS has a strong focus on managed investments. As a percentage of AUM, its managed-investment business is probably the biggest in the market [in Asia]. Barclays, on the other hand, is strong in providing portfolio solutions.”

The acquisition also help build BoS’s scale, which seems to be the mantra for private banks in the region, said Mohit Mehrotra, strategy consulting leader for Southeast Asia at Deloitte. It will also strengthen BoS’s ability to serve ultra-high-net-worth clients and will help it offer an integrated proposition, he noted.

OCBC is acquiring Barclays Asia WIM business for $320 million in cash, equivalent to 1.75% of Barclays WIM’s Singapore and Hong Kong AUM. The offer looks to be in line with other recent deals in Asian private banking and a lot cheaper than its purchase of ING's Asian private banking business, reports FinanceAsia, a sister publication to AsianInvestor.  

The deal will deepen OCBC’s operations in four core markets – Greater China, Indonesia, Malaysia and Singapore – particularly for its wealth management business. The transaction is subject to approval by the Singapore High Court and is expected to be completed by the end of this year. 

Barclays Asia WIM has 88 relationship managers and a client base of around 1,800. However, rivals have been circling the UK bank for talent and making hires. Sources have suggested that Barclays WIM will lose some assets as a result of the deal due to client attrition.

Barclays did not comment as of press time.

The deal was pre-empted by several senior departures. Didier Von Daeniken, formerly Asia-Pacific head of Barclays WIM, left in December to run Standard Chartered Private Bank. And Srinivas Siripurapu, Barclays’ head of wealth management for South and Southeast Asia, resigned in January.

Meanwhile, industry observers expect more M&A activity to take place in the wealth management sector, as businesses models are reviewed and profits are squeezed.

“This is the year of consolidation,” said Steven Seow, Asia head of wealth management at Mercer. “There will be more to come, given that it has become harder to achieve sustainable profitability. Clients are getting smarter, squeezing margins from banks, and the market is not doing that well."  

Other recent wealth industry acquisitions include EFG’s purchase of BSI, Julius Baer buying China’s Jupai Holdings, UBP’s Coutts deal and DBS’s takeover of Societe Generale’s Asian private bank. And industry observers say there is more M&A activity to come.

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