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OCBC pays US$320m cash for Barclays' private bank business in Singapore, HK
OCBC Bank has bought Barclays' private bank business in Hong Kong and Singapore, pushing it within a whisker of bigger rival DBS Bank in the wealth management stakes.
The US$320 million cash deal will be OCBC's third bank-related acquisition within 10 years as it bulks up in a very costly industry where size matters.
OCBC on Monday said Bank of Singapore (BOS), its wholly-owned private banking unit, has agreed to buy the wealth and investment management business of Barclays Bank Plc in Singapore and Hong Kong (Barclays WIM) at a price set at 1.75 per cent of Barclays WIM's assets under management (AUM), which stood at US$18.3 billion at end-2015. DBS's purchase of SocGen's Asia private bank two years ago was also priced at 1.75 per of AUM.
Upon completion of the deal by the end of this year, the Barclays assets will be transferred to BOS, swelling its AUM by a third to US$73.3 billion. This compares to the US$75 billion AUM DBS's private bank had at end-2015, which makes DBS the sixth largest private bank in Asia, according to Asian Private Banker.
As for Barclays' staff here - a 2014 Barclays report put the headcount at 380 - BOS chief executive Bahren Shaari said that the final number crossing over to BOS would be determined during the migration period. Following the completion of the acquisition, BOS is expected to have a total of about 400 relationship managers.
OCBC said that the Barclays acquisition, which will be funded through internal cash, is expected to be accretive to the group's earnings per share and return on equity after the first year. It will have minimal impact on OCBC's capital position, which will remain robust following the completion of the transaction.
Chief executive Samuel Tsien said that the wealth management business was strategically important for the group. Over the years, through acquisitions and organic growth, income from that business has grown steadily.
It reached S$2.35 billion in 2015, up 6 per cent from a year ago, and makes up 27 per cent of the group's total income.
OCBC said: "The acquisition of Barclays WIM Singapore and Hong Kong furthers OCBC Bank's strategic goal of deepening its presence in its four core markets - Singapore, Malaysia, Indonesia and Greater China - and particularly in its wealth management business."
While an important acquisition, OCBC's latest deal pales in size to the S$6 billion it paid for Hong Kong's Wing Hang Bank in 2014, and the US$1.4 billion it paid in 2009 for ING Asia Private Bank, which had US$16 billion AUM. The price was about 17 times its normalised 2008 net profit of US$88 million. It was later renamed Bank of Singapore.
Also in 2014, DBS boosted its private bank business when it bought Societe Generale Private Banking Asia (SGPB Asia) which came with US$12.6 billion AUM. It also paid 1.75 per cent of AUM, or US$220 million.
OCBC's move comes amid volatile markets and tighter regulations. Slowing growth in China and South-east Asia has turned many billionaires into millionaires.
Total assets at the 20 biggest banks in Asia fell 4.2 per cent to US$1.47 trillion last year, as the number of relationship managers slipped 1.2 per cent to 5,191, according to the Asian Private Banker.
It noted that half of the league table recorded negative or flat year-on-year growth, while only two banks had double-digit growth. This is in contrast to 2014 when 19 out of 20 banks experienced rising AUMs.
Barclays WIM brings with it a base of more than 1,800 clients, and 88 relationship managers, in two of OCBC's core markets - Singapore and Greater China.
"Within the Asia-Pacific region, where high net worth individual wealth is expected to continue expanding rapidly, both Singapore and Hong Kong feature as leading wealth management and private banking centres," OCBC said.
Barclays WIM has strong coverage of UHNW (ultra high net worth) clients and entrepreneurs, the bank said.
The definition of UHNW clients typically refers to clients having AUMs of US$20-50 million.
"This will reinforce Bank of Singapore's coverage of UHNW clients today, further expanding its client base and strengthening its foundation to attract new clients throughout the region," OCBC said, adding that with little overlap in clients between BOS and Barclays WIM, it "will enable Bank of Singapore to accelerate growth in its key markets".
"The enlarged scale and expanded client coverage that Bank of Singapore now possesses will significantly strengthen its position as Asia's Global Private Bank, as it captures the growing wealth and serves the wealth management needs of high net worth clients in the region."
With the sale, Barclays still has investment banking and corporate banking businesses in Singapore as well as infrastructure support teams, employing about 3,000 people, a spokesman said.
In the stock market, OCBC closed nine cents higher on Thursday at S$8.81.
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