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More consolidation in Asian private banking as OCBC to buy NAB's Singapore and Hong Kong business
Southeast Asia's second largest lender by assets Oversea-Chinese Banking Corporation (Singapore Exchange: OCBC-SG) (OCBC) announced Thursday it is buying National Australia Bank's (: ) (NAB) private wealth business in Singapore and Hong Kong — the latest sign of consolidation in Asia's wealth industry.
OCBC and NAB said at the end of February, the unit to be sold had a $1.7 billion mortgage portfolio and a $3.05 billion worth of deposits of a mix of currencies. The business serves about 11,000 customers across Singapore and Hong Kong .
The purchase consideration will be at around book value, or net asset value, of the business at the time of completion expected before the end of 2017, the two lenders said.
"The sale of our Private Wealth business, which is largely a retail business for Private Wealth clients in Hong Kong and Singapore, means our banking offer in Asia remains very focused on business, corporate and institutional customers," NAB's executive general manager for international branches Peter Coad said in a statement.
For OCBC, the addition of $1.7 billion of mortgage loans will increase the overall size of its mortgage portfolio by about 4 percent based on its book as at end-March. With regards to the $3.05 billion deposits, the lender said it will transfer deposits booked in Hong Kong to OCBC Wing Hang and those in Singapore to OCBC.
"This deal makes financial and strategic sense to us. A mortgage loans book of more than 2 billion Singapore dollars is not small. It would have taken us time and money to grow our mortgage loans organically by that amount. We are now getting an immediate boost to our mortgage loans book," said OCBC's chief operating officer Ching Wei Hong.
The sale of NAB's private wealth unit in Singapore to Hong Kong to OCBC follows several similar deals over the last few years. European players such as Barclays (London Stock Exchange: BARC-GB) and Societe Generale (Euronext Paris: GLE-FR) exited the Asia wealth management scene by selling their units to Singapore's OCBC and DBS, respectively.
DBS (Singapore Exchange: DBSM-SG), Southeast Asia's largest lender, also snapped up ANZ's (: ) retail and wealth management businesses in Singapore, Hong Kong, China , Taiwan and Indonesia .
The Singapore banks benefited from their expanded wealth management units. In the last few weeks, DBS, OCBC and their smaller rival United Overseas Bank (UOB) reported better than expected first quarter net profits thanks to their wealth management businesses.
William Ma, chief investment officer at Noah Holdings, told CNBC's "Street Signs" that OCBC's latest acquisition is a "very smart move."
"I think this is a very smart move. If you look at Chinese community, wealth management and asset management is going to be a bigger and bigger industry. We believe it is a good way to access the consumers, the middle class in China's market. We believe the decision is a very smart move," Ma said.
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