Banks find profit in cus­tomers’ wealth

Singapore Business Review - - CONTENTS -

Sin­ga­pore banks’ ef­forts to in­vest in wealth man­age­ment seem to be pay­ing off quite well, if their most re­cent fi­nan­cial per­for­mance is any­thing to go by. Ac­cord­ing to Chia Shuhui, se­nior an­a­lyst at BMI Re­search, wealth man­age­ment has a con­sid­er­able po­ten­tial for growth and Sin­ga­pore banks would con­tinue to de­velop their ex­per­tise in this area as strong eco­nomic growth in South­east Asia leads to in­creased de­mand for such prod­ucts.

OCBC’S wealth man­age­ment fee in­come in­creased by 50%, which led to a 14% jump in the bank’s net profit in the first quar­ter of 2017. Wealth man­age­ment now ac­counts for al­most a third of the group’s to­tal in­come. Chia also notes that DBS’ net prof­its were boosted by a con­sid­er­able growth in wealth man­age­ment (in­creas­ing by 26% y-o-y), with wealth man­age­ment ac­count­ing for 15-20% of the bank’s to­tal in­come.

Sim­i­larly, UOB’S profit inched up 5.4%, thanks to the 56.1% in­crease in fund man­age­ment and wealth man­age­ment in­come. Whilst

Sin­ga­pore banks are well-placed to cap­i­talise on the grow­ing mid­dle class and the grow­ing de­mand for wealth man­age­ment prod­ucts.

wealth man­age­ment ac­counts for ap­prox­i­mately 15-20% of

UOB’S in­come, the bank’s wealth man­age­ment seg­ment has more than dou­bled since 2010.

Kr­ishna Guha, eq­uity an­a­lyst at Jef­feries, notes that whilst data dis­clo­sure is not gran­u­lar enough, it is in­ter­est­ing to note that rev­enue mar­gins for OCBC and DBS wealth man­age­ment are 1.7% and 1%, re­spec­tively, and the ra­tios have been quite sta­ble. “Fee con­sti­tutes about 45% of wealth rev­enue which is higher than those at group level (30-35%). The sta­ble rev­enue mar­gins sug­gest that even though wealth rev­enue has link­ages to mar­ket sen­ti­ment, DBS and OCBC most likely have a good mix of the key rev­enue sources, namely fi­nanc­ing, man­age­ment/ad­vi­sory, and mar­ket ac­cess/trans­ac­tions,” Guha adds.

A wealth man­age­ment hub

BMI Re­search’s Chia reck­ons that given the large size of the ASEAN mar­ket, Sin­ga­pore banks are wellplaced to cap­i­talise on the grow­ing mid­dle class and the grow­ing de­mand for wealth man­age­ment prod­ucts. “ASEAN’S pop­u­la­tion of 625m ac­counts for ap­prox­i­mately 8.8% of the global pop­u­la­tion and con­sists of a rapidly ris­ing mid­dle class. We fore­cast ASEAN to grow at an av­er­age of 5% over the next decade (com­pared to the global av­er­age of 2.9%),” he adds.

OCBC bought Bar­clays’ pri­vate bank­ing busi­ness in Sin­ga­pore and Hong Kong in 2016, and now plans to buy Na­tional Aus­tralia Bank’s pri­vate wealth and re­tail bank­ing busi­ness in th­ese two cities. DBS also ac­quired ANZ’S wealth busi­ness in five mar­kets.

Sin­ga­pore banks’ wealth in­vest­ments pay off

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