OCBC welcomes more of the truly rich

THE sale of Barclays private bank business in Hong Kong and Singapore is done, months after talk started that the UK-based bank saw it as a non-core business.

Barclays has been shedding its Asian and other non-core sectors since 2014, in a reorganisation which saw it refocus on UK and US markets, a process which also saw thousands of people thrown out of work.

OCBC Bank on Thursday emerged the buyer of that private bank business after reports said only two parties were keen; the other being bigger rival DBS. A source at DBS said it did not regret losing because of the higher retention packages it might have to pay to retain Barclays' executives. An OCBC source said Barclays preferred its fully-owned Bank of Singapore over DBS because BOS is a pure private bank play.

In 2009, when OCBC bought ING Asia Private Bank which it renamed Bank of Singapore (BOS), it retained its senior managers. They included then CEO Renato de Guzman who retired last year and current CEO Bahren Shaari.

In Thursday's deal, OCBC bought the assets booked in Hong Kong and Singapore, amounting to US$18.3 billion and with them 1,800 clients.

In 2014, Barclays said its Asia private bank's main markets are Greater China, Indonesia and India. It also has a joint venture in Japan. Assets under management then was US$38 billion. The private bank business in Asia employed about 650 people, some 380 in Singapore.

A Barclays spokesman in Singapore said the India and Japan business continues as usual. Other Asian clients whose assets were booked in London or in other booking centres were also not included in the sale to OCBC.

OCBC's acquisition is its third in the past decade. After buying BOS in 2009, in 2014 it acquired Hong Kong's Wing Hang Bank.

The latest transaction cements its strategy of focusing on core markets of Singapore, Malaysia, Indonesia and Greater China. But the focus of this deal is really on the billionaires in Hong Kong and Singapore, both mature markets. Seems Barclays knows a lot of these billionaires.

According to OCBC, Barclays has successfully penetrated the Forbes Rich List of India, Indonesia and China. Barclays banks over 50 per cent of the top 50 names on Forbes China Billionaires List, penetrates about 25 per cent of the top 100 names on Forbes India Billionaire List and already serves more than 50 per cent of the top 40 names on Forbes Indonesia's 50 Richest List. That's just saying some of these billionaires are its customers, not how much money they put with Barclays.

OCBC said Barclays' value is in its ultra high net worth (UHNW) pool of customers. As such, there is little overlap with existing clients. Based on Barclays' US$18.3 billion assets under management (AUM) and 1,800 clients, it works out to an average US$10 million per customer.

The definition of UHNW typically refers to individuals having AUMs of US$20-50 million.

OCBC has been trying to upgrade its clientele. 2013 was the year of spring cleaning, weeding out clients whose AUM had fallen below US$1 million, according to then BOS chief executive Mr Guzman.

Although the acquisition will see BOS leapfrog several rungs in the Asian Private Banks' league table, putting it within the top 10 from the current 11th position, it is still a long way from the leaders.

Swiss banking giant UBS leads the Asia league with AUM of US$274 billion, followed by Citi's US$210 billion and Credit Suisse at US$150 billion.

Private banking is a notoriously expensive business and scale is critical. Cost to income ratio averages 73 per cent, according to a McKinsey Survey 2015 for Asia.

BOS chief Mr Shaari, who cut its private banking teeth in his 10 years at UBS prior to joining ING Asia Private Bank in 2009, has said ideally a relationship manager (RM) should not have more than 30 clients.

DBS, with US$75 billion AUM including Treasures Private Banking, has 289 RMs. BOS currently has 314 RMs serving AUM of US$55 billion as at end-December.

Amid increasingly volatile financial markets and slowing growth in the region, being able to increase fee paying clients of the richest variety is not bad. This is unlike commercial and retail banking which depends on thin margin loans with higher risks of turning sour during recessions or periods of no growth.

Mr Shaari will have his work cut out: making sure the ultra high net worth feel at home, and will then transfer some of their billions to BOS.

lisen@sph.com.sg

This article was first published on April 8, 2016.
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