Singaporean bank DBS has agreed to pay $220 million for Société Générale Private Banking's Asian business.
DBS estimates that the deal will boost its $54 billion in wealth management AUM by some $10 billion. This figure allows for potential client attrition following the acquisition – SGPB has $12.6 billion in AUM in Asia, around 10% of the French group’s $117 billion.
SGPB’s Asia business – headed by Olivier Gougeon, who will be moving to DBS – comprises operations in Hong Kong and Singapore. The firm also has a Middle East private banking and trust business – DBS is also buying the latter.
The price tag may change depending on the net asset value and AUM of the business at the completion of the transaction, expected in the fourth quarter this year.
Tan Su-Shan, DBS’s head of wealth management and consumer banking, says she expects most of SGPB’s 330 Asia staff to move to the new entity, including senior management, relationship managers and their assistants. But she admits that middle- and back-office staff will be transferred “as needed”.
The Singaporean bank says the all-cash deal creates “significant revenue synergies, as SGPB's Asian clients will have access to DBS’s universal banking platform, including retail, corporate and investment banking”.
The two banks have also signed a memorandum of understanding that will allow DBS’s clients to access products and services sold to SocGen’s European clients, such as structured products, derivatives and wealth planning. In turn, the French firm’s European clients will be able to access Asian products through DBS.
DBS also expects to achieve cost efficiencies due to pooling of infrastructure, IT and other support services.
Asked whether cost pressures led to the sale, Jean-François Mazaud, global head of SGPB, was non-committal. “I looked at the situation and said I want to be the leader [in banking] in France, a leading private bank in Europe and I want to grow my business at marginal cost,” Mazaud tells AsianInvestor. He suggests the plan is to focus efforts on SG’s corporate and investment banking business in the region, which he says is growing fast.
Rising competition and costs in the wealth management industry in Asia has made life increasingly difficult for all market players, and the smaller businesses above all. Several have either closed or scaled back substantially in recent years, including Israel’s Bank Hapoalim last year and Liechtenstein-based VP Bank in 2012. Meanwhile, Italian insurer Generali is seeking a buyer for its private bank arm, BSI, which had started a regional buildout in 2009.
The drive to boost scale and create greater cost-efficiencies has contributed, at least in part, to some significant acquisitions in recent years, including Swiss bank Julius Baer’s acquisition of Merrill Lynch’s wealth management arm in late 2012.