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Tag: wealth

  • HSBC’s big push into Asia

    HSBC’s big push into Asia

    HSBC’s adjusted pre-tax profit of $6,033m for the first quarter is in many senses disappointing. It was down 3% from a year earlier and fell short of analysts’ estimates. From an Asian perspective, however, HSBC’s Q1 financial results highlight the scope of its expansion in the region – growth which has also contributed to its rising cost base. If you’re thinking about applying to HSBC in Asia, here’s what its latest numbers tell us about jobs at the bank.

    Asia generated $4,756m in adjusted profit before tax in Q1, up 8% from a year earlier. By contrast, Europe’s contribution to profit fell 72% to $222m over the same period, while North America’s declined 16% to $438m. Asia now accounts for 79% of HSBC’s profit. This suggests that the firm is doubling down on its pivot to Asia (and to China in particular), a strategy that seeks to redeploy $100bn or more of assets into the region. HSBC announced the plans in 2015, adding that it would hire 4,000 staff in the Pearl River Delta region in southern China, although it still faces strong competition from local banks there.

    HSBC is hiring investment bankers in China…

    HSBC Qianhai Securities, the first joint-venture securities company in mainland China to be majority owned by a foreign bank, has been hiring in the first quarter. HSBC made “made strategic hires in our securities joint venture in mainland China”, group chief executive John Flint, said in a statement within the bank’s financial report, without elaborating. Qianhai, which was launched in December, already has licences to offer equity and debt sponsoring and underwriting, equity research and brokerage of locally-listed securities, and domestic and cross-border M&A advisory. First quarter investment in Qianhai contributed to rising costs at HSBC, Flint said.

    HSBC is hiring more technologists, product managers, developers and content producers as it expands its digital-banking team in Hong Kong, its main digital development centre alongside London. This expansion appears to have continued into Q1. Flint said in his statement that the bank has “invested to enhance our digital capabilities in all our global businesses”.

    HSBC’s Asian private bankers are getting more productive

    HSBC’s Global Private Banking division makes up just 2% of its profits globally, but it is expanding in Asia, particularly in Hong Kong. Revenue in the division increased by $45m or 10%, “mainly in Hong Kong, as higher investment revenue reflected increased client activity, and deposit revenue increased as we benefited from wider spreads”. Although HSBC’s report doesn’t reveal regional revenue or profit figures for GPB (or other divisions), it does disclose client assets. First-quarter AUM in Asia rose 18% year-on-year to $131bn. But while rivals – from UBS to UBP – have been aggressively hiring in the sector, HSBC’s headcount of relationship managers in Asia stayed static at 470 last year, according to Asian Private Banker. The AUM increase suggest that HSBC’s existing RMs are becoming more productive.

    The first quarter was also a fruitful one for RMs working in wealth management in Asia. Their unit (which serves clients who aren’t rich enough to use the private bank and is part of HSBC’s wider Retail Banking and Wealth Management division) saw its global income rise 27% year on year to $1,829m. The increase “was primarily in investment distribution, reflecting higher sales of retail securities and mutual funds in Asia, following increased investor confidence”.

    Like their counterparts at rival Asia-focused banks Standard Chartered and DBS, Asian transaction bankers performed well at HSBC in Q1. Revenue within the Commercial Banking division increased by $0.3bn or 10%, notably in global liquidity and cash management, as HSBC “benefited from wider deposit spreads in Hong Kong and mainland China”. Credit and lending revenue also increased in Hong Kong.

  • Singaporean banks bulk up in wealth management

    Singaporean banks bulk up in wealth management

    A pullback by global competitors is giving Singaporean banks opportunities to expand their wealth management operations in Asia. The latest case in point came on May 11, when Oversea-Chinese Banking said it is buying National Australia Bank’s retail banking operations in Singapore and Hong Kong.

    OCBC will acquire a mortgage portfolio worth $1.7 billion and a deposit portfolio of about $3.05 billion from NAB at around book value, the banks said. NAB’s retail business in Asia has centered on selling mortgages to wealthy individuals for overseas property investments. Australia’s largest bank, however, is selling off these businesses out of Singapore and Hong Kong, as it streamlines its Asian strategy to focus on corporate banking.

    When the transaction goes through, likely by the end of the year, OCBC’s mortgage portfolio will increase by 4%. But the real prize is the customer base of 11,000 affluent individuals — 7,000 in Singapore and the rest in Hong Kong. OCBC is keen to cross-sell its wealth management products, including asset management and insurance, to these people. Some of the customers may grow rich enough to be served by Bank of Singapore, its private bank subsidiary that looks after the superrich.

    OCBC has been aggressive about expanding its wealth management market share. The bank completed the acquisition of Barclays’ Asian private banking business in November 2016. The $227.5 million deal added $13 billion worth of Asian assets under management to Bank of Singapore’s portfolio. At the end of March, the unit’s assets under management came to $85 billion, more than 50% higher than the $55 billion at the end of 2015.

    DBS Group Holdings is showing similar aggressiveness. Last October, the state-linked bank announced it would buy the wealth and retail operations of Australia’s ANZ in five major markets in Asia. It agreed to pay a premium of 110 million Singapore dollars ($78 million) above book value. Upon completion, the transaction will boost DBS’ customer base by 1.3 million in Singapore, Hong Kong, China, Taiwan and Indonesia. Of those, 100,000 are wealth management clients, including 3,500 high net worth individuals.

    Seeking Scale

    Despite the growth of Asian wealth, banks face stiff competition for customers as well as talent. Globally, meanwhile, regulatory and compliance pressures are pushing up their operating costs. This is prompting a strategic rethink by some players. “Though NAB has grown a healthy private wealth business in Hong Kong and Singapore, without greater scale, its competitive position is not compelling,” said Peter Coad, the Australian bank’s executive general manager for international branches.

    “Without the scale, it is very hard to create a sustainable business” today, Tan Su Shan, head of consumer banking and wealth management at DBS Bank, said last year when the ANZ deal was announced. “You need to invest in digitalization, people, platforms and processes.”

    For Singaporean banks, though, expansion in wealth management enhances stability. “Income generation from wealth does provide earnings diversification for the banks, and the income is less volatile [than] trading income and deal-related income streams, like investment banking fees,” said Morningstar analyst Michael Wu.

    DBS was the No. 6 player on the region’s private banking scene in 2016, according to Asian Private Banker, followed by Bank of Singapore at No. 7. United Overseas Bank, the city-state’s third-largest bank, entered the top 20 in 14th place, having brought in more high net worth individuals via its corporate banking network.

    In the quarter through March, all three banks recorded profit increases despite sluggish interest income, thanks to stronger wealth management contributions.

    Asked if OCBC needs more acquisitions to achieve a bigger scale, CEO Samuel Tsien said he would continue looking at “opportunities that fit into our culture.”

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  • OCBC buys Australia bank’s retail, wealth business in Singapore, Hong Kong

    OCBC buys Australia bank’s retail, wealth business in Singapore, Hong Kong

    With Australian banks retreating from the retail business in Asia, OCBC has scooped up the retail and wealth business in Singapore and Hong Kong of Australia’s largest business bank, National Australia Bank (NAB), to bump up both its mortgage portfolio and customer base.

    Observers said the deal reflects the surging costs for foreign banks in competing against local players in the retail and wealth space in Asia.

    While there is undoubted growth in wealth in the region, non-domestic players would have to spend significantly to expand their product and services suite beyond a boutique presence.

    “In American football, there’s a phrase, ‘Go big or go home’. And based on a cost-benefit analysis, it was time to go home,” said one observer, pointing to NAB’s exit from the Asian wealth business.

    The negotiations for the profitable business unit took about three months, The Business Times understands. The acquisition, in effect, has Singapore’s second-largest bank buying up about US$1.7 billion of mainly residential mortgage loans, with more than half of the properties in the major Australian cities of Sydney, Melbourne and Brisbane, OCBC announced on Thursday. Notably, over 50 per cent of these mortgage loans are booked in Hong Kong.

    The purchase price will match the value of the loan-book at the time that the transaction closes, which is expected to be by the end of the year.

    To be clear, the purchase comes with a US$3.05 billion deposit portfolio comprising a mix of currencies that include the Australian, Hong Kong, Singapore and US dollar.

    OCBC will reach about 11,000 new customers, with more than 7,000 in Singapore and about 4,000 in Hong Kong. Most of the customers are Singapore and Hong Kong residents.

    With the mortgages increasing the bank’s overall mortgage portfolio by about 4 per cent, one analyst noted that the bump is “negligible”.

    “OCBC does get 11,000 customers out of it – though how sticky they are is another issue. (But) the low customer acquisition cost is probably the attraction for OCBC,” he said.

    OCBC said the acquired business will be earnings accretive to the bank within the first year of completion.

    The mortgage portfolio is made up of mainly home loans with an average loan-to-valuation ratio of below 60 per cent, as weighted according to the value of the loans. NAB also has a “strong track record with negligible delinquencies”, OCBC said.

    The business adds to the bank’s overseas property financing programme for real estate in Australian cities such as Sydney, Melbourne and Perth.

    “This deal makes financial and strategic sense to us,” said Ching Wei Hong, OCBC’s chief operating officer, noting that the mortgage loan book would have required “time and money” to grow via organic means.

    “The mortgage portfolio to be transferred to us is a high quality and well-supported one, (while) the customers are in the affluent segment that we have been building.”

    The deal also comes amid surging profit contribution of regional business for OCBC. The bank’s shares closed on Thursday at S$10.56, up 10 cents.

    The market is drawing comparisons between the NAB transaction and the one signed by DBS and ANZ in November, with ANZ selling most of its wealth and retail business in Asia for S$110 million to Singapore’s largest bank.

    That S$110 million represented about 0.5 per cent of the S$23 billion of assets under management from ANZ’s wealth business, mostly out of Singapore and Hong Kong.

    The ANZ sale to DBS also included loans and deposits, but was also in effect a self-funded loan book. At the point of announcement, DBS said it would take up about S$11 billion of loans once financed by ANZ, as well as S$17 billion in total deposits owed to former ANZ customers.

    It should also be noted that ANZ took a A$265 million (S$275 million) loss on the sale to DBS, reflecting write-offs taken for software, goodwill and fixed assets, as well as transaction costs. By contrast, NAB said the sale will not have a material financial impact on it. It is now focused on helping business customers in Australia and New Zealand access the Asian markets.

    In a media statement, Neil Parekh, NAB’s general manager for Asia (ex-Greater China) said: “We wanted a buyer that could meet our customers’ growing demand for a wide range of wealth management solutions in Asia. OCBC is uniquely qualified to do so.

    “We will work closely with OCBC during the transition to completion to ensure a smooth process for customers moving to a business with a comprehensive product offering and strong presence in Asia.”

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  • Barclays raises less than expected from Asia wealth unit sale

    Barclays raises less than expected from Asia wealth unit sale

    Barclays has raised almost a third less than expected from the $225m sale of its wealth and investment management business in Singapore and Hong Kong to Singapore’s Oversea-Chinese Banking Corp (OCBC).

    When the deal was announced in April, Barclays had indicated it could fetch $320m from selling the business, which had $18.3bn of assets under management at the end of last year and was initially valued at about $500m.

    However, when its Asian wealth management clients were given the choice of whether to join OCBC, some of them decided to either stay at Barclays or to join another bank, reducing the overall price of the deal, which was fixed at 1.75 per cent of assets under management.

    Jes Staley, Barclays chief executive, said: “This is another example of the great progress we have made this year in Barclays non-core, as we aim to reduce risk weighted assets to £23bn in 2017 and reintegrate the remainder of the unit back into the group.”

    The bank said it remained committed to Asia, where it still has offices in Singapore, Hong Kong, China, India and Japan after cutting jobs and pulling out of several smaller markets in the region.

    Barclays said the deal would reduce its risk-weighted assets by about £800m. It follows the sale of the bank’s US wealth management business and of several retail banking and credit card operations in Spain, Portugal and Italy.

    Last month, the British bank called time on 150 years in Egypt by selling operations in the north African country in a $500m deal, and it is in the process of selling down its 50 per cent stake in its larger South African-listed operation.

    Singapore-based banks have been busy acquiring several of the Asian wealth management businesses that have been sold in recent years by foreign banks that decided to sell up having struggled to achieve sufficient scale.

    ANZ Banking Group said earlier this year it was selling its wealth management and retail business in Singapore, Hong Kong and three other Asian markets to DBS, the Singapore-based bank that also bought Société Générale’s Asian private bank in 2014.

    But some big western banks, such as UBS, Credit Suisse, HSBC and Standard Chartered, are still seeking to expand in Asian private banking and wealth management, betting on continued rapid growth in the number of millionaires and billionaires in the region.

    DBS last year became the fifth largest private bank in the Asia-Pacific region, after UBS, Citi, Credit Suisse and HSBC, according to a ranking of assets under management for rich clients published by Private Banker International. It is the first time a Singapore bank has broken into the top five in Asian wealth management.

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  • UOB Indonesia Projects 5.2% Growth in 2017

    UOB Indonesia Projects 5.2% Growth in 2017

    Bank UOB Indonesia projects Indonesia’s economy to grow next year despite the global slowdown. UOB Indonesia president director Kevin Lam said Indonesia’s economy will grow steadily at around 5.2 percent in 2017, up from this year’s 5.0 percent.

    Kevin is certain that the government will maintain the country’s growth momentum through various economic policy packages aimed at boosting investments. Several infrastructure projects that are currently underway are also expected to help achieve economic equality and income growth.

    “The projects also create jobs, thus contributing to household consumption,” he said in a press conference after the UOB Indonesia Economic Outlook 2017 event in Jakarta.

    Kevin said the government’s effort to attract investors by releasing policy packages—comprised of relaxations and deregulations—is working. According to the UOB Asian Enterprise Survey 2016, nearly a quarter of the respondents, which were Asian companies, chose Indonesia as a destination for their expansions in the next three to five years.

    Last week, Finance Minister Sri Mulyani Indrawati projected that Indonesia’s economy in the fourth quarter will reach 5.0-5.1 percent, “due to fiscal expansions.”

    The minister said state institutions will have plenty of expenditures ahead of the year-end, and the state’s spending figure will reach 96 percent of the target.

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  • DBS to acquire ANZ’s Asian wealth assets

    DBS to acquire ANZ’s Asian wealth assets

    DBS Group said it plans to buy Australia and New Zealand Banking Group’s (ANZ) wealth and retail businesses in five Asian markets – part of a big private banking push for the Singapore lender and the first significant retreat from Asia for ANZ.

    The businesses in Singapore, Hong Kong, China, Taiwan and Indonesia, will be sold for around S$110 million, in a deal that underscores how smaller players are being squeezed out of private banking due to lack of scale.

    “Further investments do not make sense for us given our competitive position and the returns available to ANZ,” Chief Executive Shayne Elliott said in a statement.

    Mr Elliott also told an analysts call the bank would look to exit its retail and wealth assets in the Philippines, Vietnam, Cambodia and Laos separately.

    He added that for the bank to have remained competitive it would have had to invest further in developing its branch network and digital capacity.

    The deal will help DBS build up its leading position in the region, said Ms Tan Su Shan, DBS’ head of consumer banking and wealth management, noting that the Singapore lender had recently entered the top five bank rankings for the Asia-Pacific region.

    DBS and local rival Oversea-Chinese Banking Corp have been aggressively bidding for the Western private banking assets for sale in Asia.

    DBS, Singapore’s biggest lender, is also weighing a bid for ABN AMRO’s Asian private bank, sources have told Reuters.

    ANZ TO FOCUS ON INSTITUTIONAL BANKING IN ASIA

    The ANZ transaction is expected to be completed progressively from the second quarter of 2017, with full completion in all markets expected by early 2018.

    Most of its staff currently employed in the affected units will join DBS, ANZ said, adding that it will focus on its institutional banking business in Asia instead.

    ANZ, Australia’s third-largest bank by market value, also said it would take a loss of A$265 million on the sale, including write-downs, and added the sale was expected to increase its Tier 1 capital ratio by 15 to 20 basis points. The losses are set to be booked in the first half of the current financial year.

    They will come of top of A$360 million in one-off charges that will be booked in the year just ended. Those earnings are due to be released in full on Thursday.

    In 2009, ANZ acquired the Royal Bank of Scotland’s retail, wealth and commercial businesses in Taiwan, Singapore, Indonesia and Hong Kong as well as institutional businesses in Taiwan, the Philippines and Vietnam for US$550 million.

    The move was part of a “super-regional strategy” led by former ANZ Chief Executive Mike Smith, who left the bank last year.

    DBS Q3 PROFIT STABLE, BAD DEBT CHARGES UP

    The news comes as DBS posted a slight increase in third-quarter net profit, in line with expectations, although bad debt provisions rose sharply due to its exposure to the troubled oil and gas sector.

    Singapore banks are grappling with growing risks to earnings as credit woes deepen for the offshore services sector, which has been hit hard by an almost two-year rout in oil prices that lasted until early this year.

    DBS said net profit came in at S$1.071 billion in the third quarter that ended in September, versus a profit of S$1.066 billion a year earlier. That compares with an average forecast of S$1 billion from five analysts polled by Reuters.

    Bad debt charges rose to S$436 million in the third quarter from S$178 million a year ago.

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  • DBS Indonesia to boost wealth management services

    DBS Indonesia to boost wealth management services

    Private lender Bank DBS Indonesia, a subsidiary of Singapore-based DBS Group Holdings, is seeking up to 38 percent growth in its consumer business revenue this year, primarily driven by the bank’s move to expand its wealth management services.

    DBS Indonesia’s consumer banking group director Wawan Salum said on Monday that wealth management had contributed 48 percent to the bank’s consumer banking revenue.

    “Indonesia, China and India are top priority markets for DBS,” he said in Jakarta.

    Wawan said the bank’s wealth management revenue was also boosted by the growing number of priority customers who had individual savings of more than Rp 500 million ( US$37,979 ).

    He further explained that DBS Indonesia was eyeing a 30 percent growth in its priority customers this year. To reach the target, he said, the bank would expand its digital product lines to respond to customer needs.

    Wawan said DBS Indonesia would also increase the relationship management skills of its officers so they could be more effective in their interactions with customers. “We will also use big data to understand the behaviors and needs of our customers,” he said.

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  • Asean: The Future in Wealth Management

    Asean: The Future in Wealth Management

    Southeast Asia’s economic boom is resulting in the emergence of a new middle class, heralding vast opportunities for global wealth management.

    Since the 1970’s, growth in this region was primarily driven by exports and manufacturing.

    Today, the Association of Southeast Asian Nations is on its way to become one of the world’s leading consumption hubs, fuelling demand for a variety of goods and services, including financial services.

    Asean is composed of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.

    We believe Asean’s middle class will play an increasingly important role in the shift in the balance of global demand over the next few decades, opening up new and unprecedented opportunities for the region and the world.

    With about 600 million people, Asean countries represent only half of India’s population but collectively generate a larger gross domestic product. By 2020, Asean GDP is expected to grow at an annual average of 6 percent and reach $4.7 trillion.

    By 2020, Asia is likely to contribute to more than half of the total global middle class population, with Asean accounting for more than $ 2 trillion of new consumption, according to the International Monetary Fund. Half of Asean’s projected population will be aged under 30.

    With growing purchasing power comes greater aspirations among Asean consumers, driving stronger demand for property, cars, quality education and health care as well as financial services and wealth management.

    Consumption patterns in Asean, however, are not even across this expansive and diverse region. We expect consumers in developing economies to continue directing a large portion of their disposable income towards improving general living standards whilst those in mature markets will forge ahead in consumption and investments.

    For example, discretionary spending by more affluent middle class populations in Singapore, Malaysia and Thailand is far more pronounced in the region; while spending in Indonesia and the Philippines is focused on vehicles, appliances and education services to enhance quality of life.

    Whilst Vietnam has the highest rate of credit card ownership, its emerging middle class is only starting to develop an appetite for luxury goods.

    As populations across Asean become more affluent and the region’s emerging middle class continues to expand, there is a pressing need for services that will help individuals and families preserve, protect and perpetuate their new found prosperity.

    As Southeast Asian populations age, they will need new channels to save for retirement, fund rising costs of health care and ensure adequate insurance protection in the absence of well-established social security systems.

    We expect financial wealth in Asean to grow even faster than in China over the next five years, creating opportunities in international wealth and asset management. Asean has one of the highest saving rates in the world at around 30 percent and international reserves amounting to $800 billion.

    While financial assets remain heavily concentrated in cash and in some markets, concentrated on single assets such as stocks, we expect investment behavior among Asean savers to eventually build a diversified portfolio of assets and move away from home biases.

    Regional financial integration and market liberalization such as what is unfolding in China will allow for more efficient risk diversification of assets.

    The development of its financial systems will also provide easier access to financing.

    We see a future where wealth growth, protection and financing retirement, education and lifestyle needs will become priority goals for Asean consumers. It is critical that financial solutions are designed to meet these long term saving needs, offer transparency and fair value.

    It is important that consumers have access to timely and relevant market information to help them make informed investment decisions either through self-directed channels or through qualified advisors.

    There is also a need to ensure banking and wealth management cater to new consumer behavior.

    As the new Asean working class gains greater financial independence, they seek new experiences through travel, education and employment opportunities overseas. They are also among the most active online users, accessing news and information, doing their shopping and conversations virtually — given social media’s deep penetration in the region, particularly in Indonesia, the Philippines and Vietnam.

    The rise of the middle class will continue to be the big story for Southeast Asia’s economies over the coming years. The promise of growth will transform one of the most overlooked regions in the world to one of the most important.