Bank Of Singapore Is Bullish For Wealth Management Prospects

Tom Burroughes

22 November 2012

Asia’s fast-growing wealth management industry has proven too expensive for some firms to continue in their current form, says the chief executive of Bank of Singapore, but as far as this bank is concerned, it is on track to increase assets and achieve hiring targets.

For a business that is headed for its third birthday in its current guise in January next year, Bank of Singapore has come a long way in confirming its status as one of the most solid financial institutions in this crucial wealth management region. And its chief executive, Renato de Guzman, was in ebullient form when he spoke to this publication recently.

Bank of Singapore was first introduced in 29 January 2010, after OCBC Bank acquired ING Asia Private Bank. The aftermath of 2008 saw a number of debt-laden Western financial firms offloading businesses to restore balance sheets, creating opportunities for the likes of OCBC.

“Bank of Singapore is the only Singapore-based dedicated private bank with a credit rating of Aa1 by Moody’s and the backing of its parent, OCBC Bank, which has been named the World’s Strongest Bank for two years, 2011 and 2012, by Bloomberg Markets, is a natural choice for such global investors seeking a safety net in Asia,” de Guzman said.

“The strong growth in net new money and assets under management which we have experienced in 2011 and continued into 2012 is reflective of global investors’ confidence in our bank. So you can say Bank of Singapore is crisis-proof given its results to date,” he said.

So far, results at Bank of Singapore have stood up well. Since 2010, the firm has chalked up double-digit revenue growth and by the end of September this year, assets under management had risen, year-on-year, to $39.1 billion and the bank is close to doubling its AuM to $46 billion within three years of operations, reaching $40 billion by the end of 2012.

“We are also on track with our acquisition of talents. Our total staff strength has grown by 30 per cent from more than 700 staff by end of 2010, to more than 900 staff by the end of September 2012. We have close to doubled our RM team since 2010 and now have more than 260 RMs of various nationalities that serve global clients,” de Guzman said.

The ascent of a large Asia-Pacific middle class has driven strong demand for private banking services, although this heavy-touch industry has seen firms scramble for talent in the job market merry-go-round, not an ideal situation from the point of view of keeping cost-income ratios tight. (According to Scorpio, the wealth management consultants, they are on average around 78 per cent). de Guzman said these pressures will bring changes to this sector.

“For the private banking business, Asia has been a high-cost environment, particularly with the increasing cost of regulatory compliance. In recent years, several players with unsustainable high cost-to-income ratio have either been sold or closed down. While there has been some consolidation in Asia, I believe it largely affects smaller players that may not have the scale to grow. I expect to see such small-sized private banks becoming niche players," de Guzman continued.

Keeping abreast of change is an expensive business. The bank has allocated a total of $34.0 million in capital spending for this year and the next, mainly to enhance its IT infrastructure and systems.

In April, Bank of Singapore launched an industry-accredited proprietary training programme for its private bankers, as new regulations put greater emphasis on risk management and qualifications. The programme, developed by Swiss Asia Banking School, was accredited by the Financial Industry Competency Standards and the Institute of Banking and Finance. This arrangement is a sign of the kind of moves that larger firms can make – contrasting with the slimmer resources, some might say, of more boutique organisations.

Markets

At present, Bank of Singapore is deepening its market penetration in its home market – Singapore – as well as the offshore markets of Malaysia, Indonesia, the Philippines, Greater China, the Indian Subcontinent and International. It presently serves global clients through its two main booking centres in Singapore and Hong Kong; the bank also has representative offices in Dubai and the Philippines. Last summer, the firm opened its new private banking offices in Raffles Place, Singapore.

“As the rising affluence in Asia is largely driven by first-generation wealth, in particular entrepreneurs/business owners, they are naturally a key market segment that Bank of Singapore focuses on in meeting both their personal wealth management and business banking needs. At the same time, we continue to expand our services to support our Japanese, European and Middle Eastern clients in their Asian diversification investment strategies,” he said.

As far as Bank of Singapore’s market profile is concerned, de Guzman said the bank is “uniquely positioned as the only Singapore-based dedicated private bank”.

If Bank of Singapore was a sportsperson, it would have an impressive list of trophies on the mantelpiece: de Guzman made the point that the bank benefits from the AAA sovereign rating that Singapore, where the bank’s head office is based, is known for and also the strengths of its parent, OCBC Bank. The CEO is not shy of pointing out, for example, that OCBC Bank is rated at Aa1 by Moody’s and has a stable outlook.

Just to ram the point home, de Guzman added: “In less than three years, it has become a widely recognised brand and attained numerous industry awards and accolades that include the Outstanding Private Bank in Asia Pacific by Private Banker International in 2011, Best Private Bank in Singapore by Asian Private Banker for 2011 and FinanceAsia from 2010 to 2012, as well as Best Wealth Management Bank in Southeast Asia and Singapore by Alpha South East Asia from 2010 to 2012.”

Opportunities and risks

“Asia continues to present immense opportunities given its size and the fast growth of its high net worth segment, especially given that its private banking business in key markets such as China are still at an infancy stage of development,” de Guzman said.

“While I cannot comment on the Asia private banking industry as a whole, what we can share is that Bank of Singapore has done very well this year. As a result of the crisis, global investors saw a need to move part of their assets to safer jurisdictions such as Singapore as part of their diversification strategy,” he said.

Some people see Singapore as overtaking Switzerland as the world’s top wealth management centre, while Hong Kong’s prowess as a trading and financial centre is well known. What does de Guzman make of this?

“Post-global financial crisis, investors around the world are looking to diversify their investments to a safer jurisdiction. Given that Asia is also a growth region, it is natural for these global investors to turn to an Asian bank such as Bank of Singapore to manage part of their funds,” he said.

“I think Singapore and Hong Kong will remain as the key wealth management hubs as there are not that many financial centres in this region that will fulfil all requirements needed to become a global wealth management centre.