DBS Group Holdings Ltd. (DBS), Southeast Asia’s biggest bank, agreed to buy Societe Generale SA (GLE)’s Asian private banking business to bolster market share in a region where millionaires’ wealth may top North America this year.
The $220 million transaction includes private-banking operations in Singapore and Hong Kong as well as “selected parts” of the French bank’s trust business, Singapore-based DBS said in a statement today. The price represents about 1.75 percent of Societe Generale Private Banking Asia’s $12.6 billion of assets as of Dec. 31.
The purchase will accelerate DBS’s growth by increasing its high-net-worth assets under management by more than 20 percent, the bank said. Singapore is poised to surpass Tokyo as the Asian city with the most ultra-rich people within a decade, a report from Knight Frank LLP showed this month.
“DBS has now made it clear that this segment of the market is strategically critical for future growth,” Sebastian Dovey, managing partner of Scorpio Partnership, a London-based consultancy, wrote in an e-mail today. “It will need to recognize the investment it now must make to establish the combined entity as a credible regional force.”
The transaction, which will be funded with cash, will add to earnings one year after it’s completed, DBS said. The sale will probably close in the fourth quarter.
DBS is hoping to retain Societe Generale clients with a combined $10 billion of assets with the purchase, Tan Su Shan, the lender’s head of consumer banking and wealth management, told reporters inSingapore today.
The sale is likely to have a positive impact on Societe Generale’s net income and capital ratios as measured by Basel III standards, the Paris-based bank said in a statement.
Olivier Gougeon, chief executive officer of Societe Generale’s Asian private banking unit, will move to DBS, as will a majority of his 330 staff members, he said today at the Singapore briefing.
Following the sale, Societe Generale’s Asia clients will get access to DBS’s banking services, while DBS customers will be able to tap the French lender’s private banking and other services in Europe, the Singapore bank said.
DBS, led by Chief Executive Officer Piyush Gupta, had been competing with Dutch lender ABN Amro Group NV for Societe Generale’s Asian private banking business, with both companies making final offers in November, two people with knowledge of the matter said at the time.
The price of DBS’s purchase as a percentage of the Societe Generale unit’s assets compares with an industry average for a similar wealth-management business of 1.47 percent, according to Scorpio’s Dovey.
“We expect there was a recognition of a slight premium to this based on the brand, caliber of the personnel and the business mix,” he said. “These three factors are critical to clients.”
When Oversea-Chinese Banking Corp., DBS’s Singaporean rival, purchased ING Groep NV’s Asian private-banking business in 2009 for $1.46 billion, it paid 5.8 percent of the target’s assets under management, Jim Antos, a Hong Kong-based analyst at Mizuho Securities Asia Ltd., wrote in a report today.
DBS shares rose 1.1 percent to S$15.90 as of 4:45 p.m. in Singapore. The stock declined 4.7 percent since DBS abandoned a $6.5 billion bid to buy PT Bank Danamon Indonesia in August.
The Singaporean lender ran Asia’s ninth-largest private bank at the end of 2012 with assets of $46 billion, according to a Private Banker International study published in October. Zurich-based UBS AG topped the list, followed by Citigroup Inc., with Societe Generale ranked No. 18.
Last year, the assets managed by DBS for clients with more than S$1.5 million each climbed by 21 percent to S$69 billion ($55 billion), the bank said today.
Wealth management firms worldwide expect consolidation to accelerate amid rising pressure on profit margins and increased regulatory and tax scrutiny, PricewaterhouseCoopers LLP said a June report.
Societe Generale, France’s second-largest bank by market value, has been selling assets from Japan to North America and is eliminating jobs as it tries to boost profitability.
Wealth among Asia-Pacific millionaires may top North America’s as soon as this year as Japanese economic growth boosts investor returns in the country, according to a September report by Cap Gemini SA and Royal Bank of Canada. Asians with at least $1 million in investable assets are expected to see their riches climb to $15.9 trillion by 2015 from $12 trillion in 2012, according to the report.
Singapore will have 4,878 people with $30 million or more in assets excluding their principal residence by 2023, a 55 percent gain from last year, and trailing only London globally, Knight Frank said in a report published March 5.