DBS’s recent offer to buy Societe Generale’s private banking operations in Singapore and Hong Kong, as well as certain other parts of the French bank’s trust business in Asia, should come as no surprise to FinanceAsia readers.
It is in line with the stated aspirations of many of Asia’s regional banks. If you pay attention to the public announcements of ambitions to grow in the region, mergers and acquisitions are a key part of the story, along with organic growth and targeted headhunting of key relationship managers.
M&A, clearly, will likely drive the fastest gains — DBS forecasts that the purchase should increase its high-net-worth assets under management by more than 20%.
DBS’s acquisition is the latest in a string of regional bank investments into private banking. Japan’s SMBC, part of Sumitomo Mitsui Financial Group, agreed in July to buy Societe Generale’s Japanese private banking arm. Singapore’s OCBC tripled its private-banking assets when it completed its acquisition of ING’s Asian private-banking operations in 2010.
Meanwhile, Swiss private bank Julius Baer, once considered a boutique outfit, bought Bank of America Merrill Lynch’s private banking business outside of the US in 2012, and is now integrating them, building a franchise that may one day boast a majority of its clients from Asia.
These banks are betting on continued growth in Asia Pacific, which is forecast to be home to the world’s biggest population of high net worth individuals by the end of this year.
Expect the M&A to continue. Japanese and Australian financial institutions, as well as select Asean banks, including Malaysia's RHB, Indonesia's Mandiri and Singapore's DBS, have all stated ambitions to expand parts of their businesses.
Not all will be in private banking but for banks with regional ambitions this is an offering that is hard to ignore given the positive forecasts of Asian private wealth growth.
In the short term, the challenge will be how best to integrate businesses and pursue sound post-merger plans that maximise the skill sets and value-adds of both institutions. And for each new acquisition, banks should learn from previous purchases and apply due diligence to the target selection.
In the medium term, the path to profit improvement will be through offering more dynamic digital services. Those private banks who make the most of analytics to create value-adding advice will not only be more efficient in their services but will also differentiate themselves to their customers, many of whom engage with multiple private banks for advice.
Some banks, for example, study their clients' investment strategies, analyse the returns, and then select the best of these to generate new ideas for relationship managers to take back to their clients. In the best cases this is achieved overnight and, for some areas, even in real time, which becomes a selling point for the banks.
They also distribute advice in a variety of manners since the digital world suits each client differently, with some keen to read the recommendations immediately, whether via text or e-mail, and others still preferring to talk to their relationship managers directly. Many clients want and use all three approaches in parallel and the banks that offer these solutions will strengthen their customer relationships.
In the longer term, the question is how to best service clients: that is, onshore or offshore. For now, many Asian clients are moving wealth offshore to less tax-aggressive domains. As regional banks expand their footprint and buy licences across Asia, they will need to comply with local regulations, which may require onshore accountability.
Beat Monnerat is Accenture’s managing director responsible for the client service group for financial services in Asean as well as for analytics for financial services globally
