Bank of Singapore now the heavyweight in NRI segment

Singapore

BANK of Singapore is looking to expand its non-resident Indian (NRI) segment that stretches as far as Rwanda and Congo, following the bolt-on from Barclays' Asian wealth business that has likely given OCBC's private banking arm the largest piece of this pie in Asia.

This comes as it has doubled, over two years, the assets under management (AUM) that comes from this segment, with the total wealth of NRI millionaires estimated to hit US$1.4 trillion by 2019.

"We are probably the largest," said Bahren Shaari, chief executive of Bank of Singapore, in an interview with The Business Times, referring to the bank's NRI private-banking franchise. He further pointed out that many private banks in Asia today have retreated from the segment in recent times.

Given the reach of the Indian diaspora by the former Barclays franchise, Bank of Singapore is now covering NRI clients who have set up base in parts of Africa, with significant communities also in Dubai, Hong Kong, and Singapore, where Bank of Singapore has booking centres.

The bank tries to connect with broader demands of its NRI clients, who are concerned with having wealth that will sustain the family through to the next generation.

"We talk the same language - about family, community, and the next generation," said Mr Bahren.

"What are we doing here?" he added, referring to the private banking business. "It's to give them peace of mind... it's not about making the wealthy wealthier."

As it is, Bank of Singapore has boosted its AUM by nearly 20 per cent just through organic growth alone in 2016, from a year ago, data provided to BT showed. With the acquisition of Barclays' private banking business in Singapore and Hong Kong completed at the end of 2016, Bank of Singapore's AUM all-in growth has cracked 45 per cent from 2015. Its latest reported AUM figure is US$79 billion.

What also stands out is that Bank of Singapore's AUM invested in discretionary assets is about 1.4 times higher than the industry's average.

Discretionary portfolio management turns the overseeing of a portfolio to a manager, based on each individual client's broad wealth management strategy, which allows the manager to be more nimble in shifting positions on behalf of clients.

The proportion of discretionary portfolios can indicate a private banking business that is closer to a true-bred wealth management model, as opposed to an high-end brokerage. Private banks in Asia have discretionary portfolio that make up just 5-10 per cent of all portfolios. For comparison, more than 60 per cent of the portfolio managed by independent Swiss independent private bank Lombard Odier is discretionary.

Mr Bahren, who was part of the management team of the former ING Asia Private Bank that was bought over by OCBC in 2009, observed that the consolidation in the private banking space may continue, pointing to the higher costs of doing business, and the limit to explosive growth.

"You cannot chase growth (alone), you'd run into risk," said Mr Bahren, pointing to both the pressure from bankers who are gunning for big growth, and having managers who are strict in reining in risks. "That tension is important."

All that being said, there remains room for growth in Asian private banking, even as a significant number of high net worth individuals (HNWIs) in this part of the world are still holding dear to cash.

The 2016 Capgemini Asia-Pacific wealth report noted that the region's HNWIs are more likely to keep their wealth in cash or a retail bank account (32.6 per cent) than hold it with a wealth manager (30.6 per cent).

With Asian clients tending to hold properties as source of wealth protection, Bank of Singapore has worked to help clients borrow against fully-paid properties.

Clients have also been shifting more to bonds, reacting to the poorer deposit rates during the long period of quantitative easing. With the former ING bringing in its expertise in emerging markets bonds to the table, Bank of Singapore has benefitted from a head-start in this area.

It has also tried to steer clients away from single bond exposures - which pose concentration and liquidity risks - advising clients to seek exposure through a fund of about 300 bonds that Mr Bahren said has "done well" for clients.

In seeking growth amid the competition, private banks can get a leg-up through the use of data, added Mr Bahren, which he sees as critical to success in time. "You need to be able to manage more clients, more assets, and provide much higher level of advice on a timely, available basis," said Mr Bahren. That means knowing a client right down to his lunch order.

"It's no longer about big data, but about narrow data, such as 'when is your next holiday'," he added.

He also imagines in time a vibrant online platform for private-banking clients to interact with one another, and a community of bankers, to share trending investment ideas.

"The difference is that we would be a trusted platform. What we want to do is to create a community of clients with like-minded interests," he said. "The next generation of clients will be less concerned about sharing data, because they are used to it. The human urge to share is far greater (than privacy)."

But like many private bankers, Mr Bahren is clear technology will drive the business along, not kill it. "You cannot industrialise private banking."