DBS Vickers remisiers, UOB Kay Hian tie knot after marathon courtship

Singapore

AFTER marathon talks over seven to eight months involving several broking firms, heavyweight remisiers at DBS Vickers Securities have finally brokered a deal with UOB Kay Hian.

Under the deal, the remisiers and their colleagues - who have become friends over decades - totalling about 100, will have a new home by late October at UOB Kay Hian, one of Asia's largest brokerages, which is backed by the UOB Group.

Though clients brought in by remisiers legally belong to the house, DBS Vickers nevertheless agreed to transfer its offline retail securities brokerage business to UOB Kay Hian by the completion date on Oct 28, 2019. Hybrid clients, using online and offline services, will be given an option to continue with the bank or follow their remisiers.

After the transfer is completed, UOB Kay Hian will have about 800 dealers and remisiers in Singapore, making it the largest brokerage here. As of June, UOB Kay Hian has 2,000 dealers and remisiers on a group basis, including those at its overseas units.

UOB Kay Hian's senior executive director Esmond Choo told The Business Times: "We are delighted to be given the opportunity by DBS to acquire their remisier base. We are very grateful for that.

"UOB Kay Hian is a listed broker with net assets of S$1.48 billion. This allows us to scale and do a lot of business. With this acquisition, we will have 25 per cent of the retail market share in Singapore. Now, we are 20-21 per cent''.

The remisiers' departure comes after DBS, Southeast Asia's largest bank by market value, said early this year that it would transfer its retail equity trading under DBS Vickers to the bank by year-end. The revamp is part of an integration strategy the bank initiated six years ago in 2013, following a growing demand by customers for a one-stop platform which gives access to an array of banking, brokerage and wealth management solutions.

A few remisiers have chosen to retire. Some will leave separately for other brokerages like Lim & Tan Securities as well as RHB Securities in Singapore. A handful have accepted DBS's offer and assume new roles like relationship managers and investment counsellors in the bank.

News of DBS's restructuring prompted four leading brokerages here - UOB Kay Hian, RHB, CGS CIMB and PhillipCapital - to express their interest amid talks that DBS Vickers' remisier base was available for sale at S$1. However, after further discussions involving migration details and headcount numbers, many did not return to the negotiation table, preferring to court high performing remisiers individually to join them.

BT understands that DBS had worked with several remisiers to search for a buyer that would adopt the DBS Vickers remisiers as a team. In the end, UOB Kay Hian emerged the most sincere and best suited to adopt the group.

Mr Choo said the remisier base advisory model has been central to UOB Kay Hian. Historically, it has grown through a series of mergers and acquisitions since the early 2000.

Established by the late Khoo Kay Hian under the name of Kay Hian & Co (Pte) to deal in commodities and securities, the group merged with UOB Securities and United Overseas Bank Group's overseas stockbroking interests including in Hong Kong, Thailand, Indonesia and the Philippines) to become UOB-Kay Hian Holdings Ltd in Oct 2000. It went on to buy the sales base from Credit Suisse First Boston, RHB-Cathay Securities and OUB Securities and others.

Mr Choo, a well-respected veteran in the stockbroking industry, said the environment has become more challenging for everyone, not just the dealers, but exchanges too.

"Look at the news of Hong Kong Exchanges and Clearing (HKEx) looking to buy the London Stock Exchange (LSE). It is all about size and depth," he said.

HKEx is pressing on with a £32 billion (S$55 billion) takeover bid for LSE, which also owns the Milan exchange and has a significant American presence through its FTSE Russell index subsidiary and LCH, its derivatives clearing house which dominates the US dollar swap market.

He explained that as the market is variable in terms of volumes, it is hard to predict topline because volumes can be up or down significantly. Securities houses can only control costs and lines of business to diversify their topline. This is what UOB Kay Hian has been busy doing over the years to be more than just a remisier base business.

Back in 2001-2002, following the demutualisation of the Stock Exchange of Singapore (SES) and the Singapore International Monetary Exchange (SIMEX) on Dec 1, 1999 to form Singapore Exchange Limited (SGX), about 90 per cent of the brokerage's income was generated by SGX trades.

"Today, less than half of our revenue is derived from SGX trades. We are a different animal from before,'' Mr Choo said. "The other half of the revenue comes from global equities from major markets like Hong Kong and the US, which are important markets for us."

These days, UOB Kay Hian offers other products and services like Contracts for Difference (CFD), Exchange Traded Funds (ETFs), Leveraged Foreign Exchange as well as bonds.

"We are not a discount broker. We are active in corporate advisory, the initial public offer (IPO) market, placements and high value added services which investment bankers will perform,'' Mr Choo said. The brokerage also boasts of very active advisory teams in Indonesia, Malaysia, Hong Kong and a small emerging team in Thailand.

DBS Vickers remisiers, many in their 40s and 50s, are bringing along a good base of clients who trade the global market.

"DBS Vickers will sit well with our model. Apart from local markets, these remisiers have clients who trade Canadian, US and Hong Kong markets. The clients are fairly diversified in terms of what they can serve,'' he said.

"The adoption of DBS Vickers' remisiers business will improve our scale in Singapore. With scale, our overheads will be lower," he said, sharing that the new remisiers will not be subject to fresh key performance indicators for two years.

Over the decades, Singapore has witnessed traditional retail broking business which uses self-employed remisiers declining as retail customers shift to self-directed online trading.

In a research note, Maybank Kim Eng believes that DBS' move to offer multi-products, integrated advisory services should enable the group to lower costs, compared to maintaining single-product specialists such as retail stock brokers.

"While brokerage only contributes 5-6 per cent to fee income, the current move marks further execution of a return to commercial banking - by maximising sustainable income and managing costs. This should support rising return on equity and 5.5 per cent prospective yields,'' Maybank Kim Eng said, maintaining a buy on DBS.