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BT EXCLUSIVE

Bank of Singapore cracks AUM target two years early

It crosses its 2020 target of US$100b in assets under management; plans to invest S$200m in technology, continue keeping a lid on costs

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Bank of Singapore CEO Bahren Shaari believes most banks will be able to adapt to the use of artificial intelligence. What will set any of them apart from the pack will be the strength of their research.

Singapore

BANK of Singapore, the private banking arm of OCBC Bank, has hit US$100 billion in assets under management (AUM) two years ahead of schedule, but is wary of market conditions that may temper growth in the years ahead, its top executive has said.

Aiming to have its 400 bankers manage US$500 million each over the next four years - or a total AUM of US$200 billion by then - Bank of Singapore is putting some dollars into technology investments to raise efficiency, said Bahren Shaari, chief executive of the private bank.

It will spend about S$200 million over the next two years to boost digital capabilities.

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"Clearly, costs will continue to be an area that we need to manage," said Mr Bahren in an interview with The Business Times. "The focus on efficiency is a big thing."

The technology investment will go towards creating more personalised content for Bank of Singapore's clients, with Mr Bahren keen to get client segmentation done as a matter of science. Right now, bankers are primarily in charge of determining the client profile. But data analytics and digital tools can help to capture individual clients' behaviour better.

In time, said Mr Bahren, most banks will be able to adapt to the use of artificial intelligence (AI); what will set any of them apart from the competition then would be the strength of their research. Bank of Singapore boasts of more than 40 research analysts, among the most on the street.

"AI itself will become a commodity," he said. "The key question is how you translate research into advice."

To be clear, Bank of Singapore has shown healthy cost management. Its cost-to-income ratio - a measure of a private bank's cost efficiency - stood at between 55 per cent and 60 per cent as at the first quarter of 2018.

By comparison, cost-to-income ratios for pure-play private banks stood at around 73 per cent in 2016, a Boston Consulting Group study showed.

Still, Mr Bahren said, costs have to come down further, amid uncertainty in market conditions. The private bank is also careful about hiring too many bankers, given the high cost base and the limitations of the talent pool.

There is also the challenge behind dealing with underperformers. He put it bluntly: "The bigger your pay cheque, the shorter your runway. If you don't hire good people, then don't hire. Otherwise you'd double the work because they have got to be managed out."

Bank of Singapore has also recorded better-than-expected migration of assets from its acquisition of Barclays Wealth in Singapore and Hong Kong. Some US$13 billion in AUM was transferred to Bank of Singapore in 2016.

Its AUM base of US$102 billion as at March 31, 2018 was driven by inflows from the Greater China and Middle East regions. The AUMs grew 19 per cent from a year ago, and the bank is looking to have more Chinese clients set up family offices to have their wealth managed out of Singapore.

Bank of Singapore will also continue to pursue "bespoke" solutions for clients in the area of alternative investments.

At the moment, clients such as family offices are offered access to deals such as pre-IPO investments from developed markets, as well as US real estate funds.

Bank of Singapore is also pursuing partnerships to spur growth in markets in Asia. In March, it announced a partnership with Japan's SMBC Trust Bank to try to reach rich clients in the country.

Mr Bahren was plain in saying that the success of partnerships is not clear cut, because it depends on how quickly both partners can scale up efforts.

But he noted that partnerships help with access to markets where the bank does not have an onshore competitive advantage, especially in managing regulatory requirements.