Bank of Singapore growing fast thanks to Hong Kong
The Bank of Singapore, the private banking arm of OCBC, has experienced rapid growth by aggressively expanding its presence in Hong Kong and other cities in Greater China.
“Greater China has been the main driver of our growth,” the bank’s chief executive, Bahren Shaari said.
Bank of Singapore had US$89 billion of assets under management (AUM) as of the end of June, up from US$61 billion at the end of June 2016. The half-year figure represents a rise from US$79 billion at the start of the year, which saw Bank of Singapore ranked seventh in the region in terms of AUM by Asian Private Banker.
Growth has been primarily driven by Hong Kong, where the bank increased its relationship managers by 49 per cent, and its assets under management by 70 per cent in the last 12 months.
OCBC bought ING’s private banking business in Asia in 2009 and rebranded the unit as Bank of Singapore. This was one of many withdrawals from the region, as banks sold their private banking operations, unable to devote sufficient resources to the business in the wake of the global financial crisis.
In April last year Bank of Singapore announced it would purchase Barclays’ wealth business.
In May parent OCBC announced that it would acquire National Bank of Australia’s private wealth assets in Hong Kong and Singapore.
Bank of Singapore’s growth in Hong Kong was primarily related to offshore mainland Chinese assets, Shaari said, adding that the time was not yet right to set up operations on the mainland.
“Onshore wealth in Asia, be it in China, or India or Indonesia far outweighs offshore wealth, so the banks have to look towards these big markets, but the timing is important. If you go in too early, you lose a lot of money, if you go in too late, all the business has been taken.”
Shaari said that there were a number of developments that had to take place in the mainland Chinese private banking industry before Bank of Singapore would look to expand there.
“First clients’ return expectations have to moderate. Before clients used to demand double digit growth rates, and now this has come down to about 6 per cent, so there has been some progress.
Secondly, there has to be regulations in place that protect institutions. Clients have to understand that higher returns mean higher risk, and that they can’t expect the bank to make up the losses.
Thirdly, there needs to be a greater range of financial instruments available.”
Shaari said that while things were improving, more progress was needed in terms of regulation and range of product options.
Shaari said future acquisitions by the bank would be evaluated on a case-by-case basis, depending on the opportunity, adding that he expected more consolidation to take place in the private banking industry.
“There is greater transparency now, and that means you get margin compression as clients want to know what it is that they’re paying for. Also costs are rising because of compliance and technology, while capital market performance in the future will not be as good as it has been recently,” Shaari said.
“All of these issues are making it harder to run the business, and so banks will have to increase in size.”
Shaari said he agreed with Asian Private Banker data that suggested the ideal minimum size for a private bank, in terms of AUM, was between US$30 billion to US$50 billion.
“As technology becomes more important, and I expect to see the real change come in the next couple of years, those numbers will rise even higher,” Shaari said.