Uncertainty dents Singapore wealth management business

Wealth units at Singapore lenders delivered a mixed picture during the final quarter of 2018, with fears over the effect of Brexit and the trade war dampening sentiment

The previously prolific wealth units at Singapore’s three largest lenders saw their influence diluted following DBS, OCBC and UOB’s full-year results.

After a long run of consecutive quarters which delivered a steady stream of new assets and record revenues, the momentum of the hitherto unswerving wealth units decelerated as the pace of growth slowed. Like many of their global peers, the trio of Singapore lenders took a hit in the fourth quarter of 2018. 

With geopolitical concerns such as Brexit, and more pertinently for Asian-based clients, ongoing Sino-US trade tensions weighing on sentiment heading into the year-end, investors pulled back. 

As a result, the wealth businesses of all three Singaporean banks, habitually dependable providers of revenue, suffered as clients retreated from making major investment decisions during the last three months of 2018.

Mixed outlook

The predictions of slower interest rate hikes in the US this year compounds the anxiety for the banks keen to lend to their wealthiest clients. 

While OCBC and DBS managed to augment their assets under management, the smallest of the trio, UOB took some pain.

Net fee and commission revenue at UOB fell to S$467 million (US$344.4 million) in the last quarter of 2018, representing an 8% reduction compared to one year ago, as higher fees from credit cards were offset by lower wealth management and loan-related fees.

UOB chief, Wee Ee Cheong, said his bank, whose wealth business is less influential than its Singapore cohorts, will focus on developing ecosystem partnerships, while leveraging ASEAN’s extensive base of mobile-first and mobile-only customers through its digital bank.

At OCBC, higher credit card, loan and trade-related fees were offset by a fall in wealth management fees which the bank ascribed to passive investment activity influenced by the current cautious sentiment. 

In spite of this, OCBC Bank’s wholly-owned private banking subsidiary Bank of Singapore, registered new money inflows, modestly increasing assets under management to S$139 billion as of December 31 2018, up 3% from a year ago. 

Signs of life

Regardless of market uncertainties and the challenging investment environment, OCBC CEO Samuel Tsien says, “We are confident that our focused strategy, strong capital and funding base, and disciplined cost control will allow us to continue to prudently expand our franchise.” 

The city-state’s largest bank, DBS, saw its wealth management income fall 9% in the fourth quarter of 2018 compared to the previous quarter, evidence of the weak market sentiment.  

A positive for the bank, however, is it is still attracting new money, increasing assets under management by 7%, taking them to S$220 million. DBS includes its Treasures, Treasures Private and DBS Private bank in its wealth reporting. 

DBS chief executive, Piyush Gupta, is less concerned than his peers and sees evidence that his bank’s wealthiest clients are shrugging off ongoing concerns and are re-engaging in market activity. 

However, with no date for a Trump-Xi meeting firmed up and no solid indication that a trade deal between the world’s two largest economies will soon be signed, together with the ongoing Brexit fiasco, ultra-wealthy clients may yet choose to abstain from investing until these major market influences are clarified. 

Attention will now turn to the next reporting window in late April-early May, to see how much, if at all, the trio’s wealth businesses can recover their former prominence. 

 

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Date

14 Mar 2019

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