China Economy

Bank of Singapore out to exploit mainland wealth to double portfolio

Bank of Singapore eyes rising affluence in China to double the amount under its care

PUBLISHED : Monday, 22 October, 2012, 12:00am
UPDATED : Monday, 30 May, 2016, 5:00pm


Related topics

Asian private wealth manager Bank of Singapore is looking to cash in on China's rising affluence to reach its goal of doubling its global assets under management in four years.

Bank of Singapore, which was formed after Oversea-Chinese Banking Corp acquired Netherlands-based ING Group's Asian private banking business in 2010, said it was close to achieving its earlier goal of doubling assets under management in the three years from 2010.

The bank continues to grow even as private wealth managers in Asia have been struggling this year to shore up their bottom lines because of high costs and slowing growth. Many banks in Hong Kong have or are in the process of letting go underperforming private bankers.

Return on assets - a measure of profitability - among private banks in Asia remained the lowest in the world at 65 per cent, despite the huge potential the region provided, said Frankie Leung, a partner at Boston Consulting Group.

One reason for this poor performance was the high cost-income ratio of private wealth managers in Asia, which stood at an average 80 per cent, Leung said. The ratio for commercial banks is usually about 50 per cent.

Sermon Kwan, the chief executive for greater China at Bank of Singapore, said the bank had managed to keep its costs below those of industry rivals and grew its assets under management by 20 per cent to US$36 billion from a year ago. The bank had more than 260 relationship managers and 860 staff in March.

For private banks to stay profitable, each relationship manager needed to attract and maintain at least US$150 million in assets to manage, said Kenny Lam, a McKinsey partner who specialises in private banking.

Bankers who fail to bring in enough assets to manage often face the risk of being laid off after regular performance reviews.

The dismal investment environment, which has led to much lower trading activities, and a fragmented market - exacerbated by increasing competition from newcomers - has made this year especially tough for private banks. Even so, many private banks are still trying to gain access to mainland wealth through their bases in Hong Kong.

According to the Global Wealth Report 2012, issued by Swiss bank Credit Suisse this month, mainland China already has 964,000 millionaires, and that number is projected to climb to 1.9 million by 2017, with household wealth expected to reach US$38 trillion.

In contrast, according to a recent survey of 1,600 people in Hong Kong by HSBC, one in five reported a decrease in wealth in the six months to July.