UK-headquartered Barclays sold its wealth operations in Singapore and Hong Kong to OCBC’s private banking arm earlier in April. The sale comes as part of Barclays’ restructuring strategy to refocus on its core business and markets. Has ‘refocusing’ become essential for private banks to thrive and is Asia still the golden goose it was touted to be? Head of content for WealthInsight, Ouliana Smith, dishes the details
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In April 2016, OCBC’s private banking arm, Bank of Singapore, agreed to buy Barclays’ wealth operations in Singapore and Hong Kong. The deal worth $320m is anticipated to close at the end of 2016, subject to the approval of the Singapore High Court. As of 31 December 2015 the businesses in Singapore and Hong Kong had over 1,800 clients and managed total assets under management (AUM) of $18.3bn.
Barclays’ sale of this Asian unit is not only big news considering the bank’s recent divesting strategy but also for Asia’s private banking sector, which has witnessed little acquisition activity over the past five years.
In 2014, DBS emerged as a big buyer of Western assets after it acquired Societe Generale’s Asian private banking activities; DBS paid $220m for the franchise. In the same year, DBS was in talks to acquire Coutts International (including Coutts Asia) from Royal Bank of Scotland (RBS). Subsequently, Coutts International was sold to Union Bancaire Privée (UBP), a Swiss-based family-owned private bank, and the transfer of its Singapore and Hong Kong activities was completed on 11 April 2016.
The deals seem set to strengthen Asian banks’ presence in their financial hubs while Western banks continue pursuing interests in the domestic markets as well as countries where they can leverage their expertise and establish scale of operations.
Barclays, in particular, has been ‘ruthless’ with its restructuring and its ambitious plan to divest over the course of the last three years. In part to help minimise redundancies and increase cross-selling synergies, it integrated its wealth management operations into the Personal and Corporate Banking and Africa Banking divisions in 2014.
However, earlier this year, Barclays announced that it is planning to sell nearly 62% of its stake in Barclays Africa Group. It has also made a pledge to sell off its non-core international private banking businesses apart from the UK, Monaco and Geneva units.
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By GlobalDataTo date, its strategy seems to be bearing fruit. According to the latest results posted in March 2016, Barclays’ Personal and Corporate Banking arm, which includes the wealth business, registered an attributable profit of £2.18bn in 2015, up 6% compared to £2.06bn in 2014. Barclays is seen to be making significant progress as it seeks to dispose of its non-core risk weighted assets since the beginning of 2016.
In addition to the newly announced deal, earlier this month, Barclays completed the sale of its wealth management operations among other businesses in Portugal to Spain’s Bankinter. As part of the deal, 84 branches along with approximately 1,000 banking and insurance employees of Barclays have migrated to Bankinter and Bankinter Vida.
Barclays co-head of non-core, Harry Harrison, said at the time of the announcement: "Completing the sale of Barclays’ retail, wealth, insurance and part of the corporate banking business in Portugal today demonstrates further progress towards our target of managing down Risk Weighted Assets in Barclays Non-Core to around £20bn by the end of 2017."
Interestingly, not everyone is refocusing their business around home markets, like Barclays. A notable acquisition in Hong Kong, which was in contrast to the trend above, took place in 2014, when St. James’s Place, a UK-based wealth manager, acquired The Henley Group, a provider financial planning and wealth management services based in Hong Kong. The group had about $665m AUM and 4,000 expatriate clients in Hong Kong, Singapore and Shanghai. The acquisition of The Henley Group marked a tentative first step for St James’s Place in a possible long-term expansion overseas and regions with large UK expatriate populations.
From an Asian perspective, what are players competing for? OCBC takeover will deepen the bank’s presence in its core markets of Singapore, Malaysia, Indonesia and Greater China. According to WealthInsight there were 200,020 high net worth individuals (HNWIs) in Hong Kong in 2015, which is higher than 158,929 HNWIs estimated in Singapore. The number of HNWIs is expected to grow by 1% in Hong Kong in 2016 compared to 4% in Singapore to reach 202,085 and 165,250 respectively.
In comparison, however, HNWIs in the UK are projected to grow by 2% from 707,861 in 2015 to reach 725,494 in 2016.
Additionally, the wealth management industry in Hong Kong had emerged as the financial hub of Asia, but more recent times Hong Kong’s economy has been under economic pressure due to deceleration in the Chinese economy.
Such market uncertainty further underpins foreign banks’ commitment, such as Barclays’, to refocus on its core business and markets to remain profitable. Time will tell how many other players follow suit and how the rest push on with gusto for more wallet share from the Asian wealthy.
