DBS sees strong growth in private bank business

DBS Private Bank (DBS PB) has generated strong growth in assets under management (AUM) this year, despite the market volatility and economic uncertainty brought on by Covid-19.

DBS PB's AUM rose by over 9 per cent in the current year to end-June, and net new money inflow surged by 170 per cent.

The bank's wealth management business comprises Treasures, Treasures Private Client and PB. The entire business' AUM rose 7 per cent year on year to S$251 billion as at end-June.

Joseph Poon, DBS managing director and group head of the private bank, said it is "on course" for a 7-8 per cent AUM growth this year.

"Our business has really gone up to higher than pre-Covid times; the rebound has been very strong... I think this speaks to our brand and our client base. (We) hope we'll see this growth maintained all the way to the end of the year."

The PB segment has benefited from inflows from its traditional markets such as Asean and Greater China, but it is also seeing inflows from Europe and the US, particularly from family offices looking to establish a foothold to invest in Asia.

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"European and US family offices see Singapore as a lighthouse from which they can see the rest of Asia, whether for financial market investments or actual businesses they may want to invest in or partner with."

The bank is looking to expand further in Thailand and the Philippines, where high-net-worth families are keen to diversify their exposures and invest in real estate investment trusts. In Thailand, he said, DBS is on track to double its AUM to S$8 billion by 2023.

Meanwhile high-net-worth clients have raised cash holdings to up to 40 per cent since the Covid-19 crisis, from a typical allocation of under 30 per cent. Mr Poon said clients are looking for opportunities to invest on the back of weaker asset prices. "They believe there would be distressed assets or distressed prices going forward."

Another reason is to buttress clients' own business risks. "During these times, they want to be cashed up and have enough liquidity in case their business requires it. They can basically bolster their existing business and that's a smart move."

For investments, DBS advocates a "barbell" approach, comprising growth and income components. This is reflected in the DBS CIO Barbell Portfolio strategy, comprising over 50 securities. For growth, it recommends a number of secular themes including e-commerce, technology, media and healthcare. For the income component, it seeks growth companies with sustainable and reliable dividends.

It has structured an investment note based on the barbell strategy - the DBS CIO Barbell Note. As at July 27 (year to date), the note has chalked up year-to-date returns of 11 per cent net of fees, outperforming its benchmark by about 6 per cent.

Mr Poon said clients who invested in the note have generally stayed invested, even through the market plunged in March - an event which might have prompted panic selling. "We're very proud that we did this and clients believe and trust it. Clients stayed invested and were able to ride the bump better than anyone else."

Another theme gathering pace is sustainability or investing with environment, social and governance (ESG) values. DBS has adopted MSCI ESG ratings for its wealth-management business to provide clients with greater transparency into the ESG characteristics of their portfolios.

Mr Poon said the bank hopes to raise awareness of sustainability issues, particularly among business owners. "We felt it was really important for us to engage our clients in this part of the world where they enjoy growth trajectories, that they should also be aware that there are consequences. Things need to be built around making sure the growth is sustainable for stakeholders and not just shareholders.

"Sixty per cent of our clients are business owners. If they begin to take this on board... in terms of how they treat employees and customers, and are careful about their supply chains, the multiplier effect will be huge for years to come."

DBS has also created the ESG MSCI Asia Outperformance Note, which has generated an average alpha of 12.2 per cent since its 2018 inception to Aug 28.