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Broker's take: DBS keeps 'buy' on OCBC following acquisition of Barclay's wealth unit

Thursday, April 7, 2016 - 16:42

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OCBC Group's US$320 million acquisition of Barclays plc's wealth and investment management business in Asia is "positive" for the Singapore bank and is expected to boost its earnings after a year.

OCBC Group's US$320 million acquisition of Barclays plc's wealth and investment management business in Asia is "positive" for the Singapore bank and is expected to boost its earnings after a year.

DBS Group Research said in a note on Thursday that the acquisition "will continue to raise the bank's wealth management income momentum".

"Since the acquisition of ING Private Bank Asia (renamed BOS), OCBC has successfully seen its wealth management income rise sequentially. This acquisition will further seal its wealth management business franchise. The acquisition is expected to be accretive to OCBC Bank's earnings per share and return on equity after the first year," analyst Lim Sue Lin wrote.

Ms Lim has a target price of S$9.40 for OCBC, which was trading around S$8.81 a share, up nine Singapore cents, or 1.03 per cent at 4.28pm. More than three million shares were traded.

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"The potential reach of its differentiated non-interest income franchise should support valuations," the analyst said.

Early Thursday, OCBC said that it has bought the wealth and investment business of Barclays Bank in Singapore and Hong Kong for US$320 million, which will be funded by internal cash from Bank of Singapore (BOS), its subsidiary.

The acquisition adds US$18.3 billion to OCBC'S current assets under management (AUM) of US$55 billion as at end-December 2015, an increase of 33 per cent to US$73.3 billion. It also comes with an additional 1,800 customers.

The transaction is expected to be completed by end-2016.

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