Asia millionaires’ reduced risk appetite is hitting Singapore banks at a time when they are welcoming more funds than ever from the wealthy.
(Bloomberg) — Asia millionaires’ reduced risk appetite is hitting Singapore banks at a time when they are welcoming more funds than ever from the wealthy.
Lenders in the city-state, that’s seen as a safe haven, are seeing less fees from these customers who are shying away from taking bets in the markets amid US-China tension and an uncertain economic outlook. Oversea-Chinese Banking Corp., the country’s second largest, posted below-expectation quarterly profit Friday as non-interest revenue tumbled 42%, largely because of “subdued customer investment activities.”
OCBC’s results wrap up Singapore’s latest bank earnings season where local rivals DBS Group Holdings Ltd. and United Overseas Bank Ltd. also suffered from lower fees managing rich clients’ funds. These firms have been expanding their wealth franchises, seeking to compete with global peers including UBS Group AG, given Asia is among regions that hold the most promise for this business.
“Rising interest rates and volatile market conditions in the near-term seem unlikely to have driven an inflection,” said Rena Kwok, a Bloomberg Intelligence analyst. “The lenders could see a recovery in their wealth management income from current low levels in 2023, as many family and high net worth clients might look to deploy their funds to generate higher returns.”
OCBC, which owns private bank Bank of Singapore, reported a slight increase in assets under management to S$258 billion ($192 billion) as of end-December. More fresh funds from clients offset a market valuation decline, the bank said. Chief Executive Officer Helen Wong is determined to further grow services, with onshore private banking in China and regional wealth teams in key markets, the bank said Friday.
Dry Powder
At DBS, Singapore’s largest lender, net new money and assets under management reached fresh highs. Still, its net fee income in the fourth quarter fell 19% from a year ago due in part to lower wealth management fees. UOB also reported lower fees from wealth management in the latest quarter.
“People were not taking margin financing as rates got higher and animal spirits were low,” DBS’ CEO Piyush Gupta told a press briefing last week, explaining why wealth management fees were lower. “A lot of this money is now dry powder waiting to be invested.”
He sees a brighter outlook ahead for the business, as the bank opened almost 50% of all new family offices that set up in Singapore over the last quarters, he said at last week’s briefing.
“We have a lot of dry powder and the money is likely to be put to work as market sentiments turn optimistic.”
–With assistance from Patrick Winters.
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