SINGAPORE/HONG KONG Singapore's DBS Group Holdings (DBSM.SI) is in advanced talks to buy Societe Generale's (SOGN.PA) Asian private bank, a deal that would help boost its private banking assets by almost a third, sources familiar with the matter said.
It was unclear how much Southeast Asia's biggest lender would be willing to pay for the bank, but previous estimates from financial sources have valued it at between $300 million and $400 million.
A successful deal would make it the third major transaction in Asia's competitive private banking landscape since the global financial crisis, as smaller players struggle to generate enough revenue to support expensive bankers and rising regulatory costs.
DBS managed $46 billion in private banking assets at the end of 2012 and that could rise by another $15 billion if it takes over SocGen's Asia unit, the sources said. That would make it Asia's sixth or seventh largest private bank in an industry dominated by UBS UBSN.VX and Citigroup (C.N) with assets of more than $200 billion each.
Sources said the discussions between DBS and SocGen were advanced, with one characterizing the talks as being at a "delicate stage.". They declined to be identified as they were not authorized to speak to the media.
A DBS spokeswoman reiterated the bank's stance that boosting wealth management is one of its key strategic priorities but declined to comment on the possibility of talks. A Singapore-based SocGen spokeswoman declined to comment.
DBS and ABN AMRO had emerged as front runners after five suitors were short-listed in the final round of bids, the sources said. It was not immediately clear if ABN AMRO was still in the picture.
Economic growth has led to a surge in Asian millionaires and billionaires. Their combined wealth, at $6.6 trillion this year, is expected to overtake that of their European counterparts in 2017 and U.S. peers in 2024, according to a Wealth-X and UBS World Ultra Wealth Report.
But profit margins are thin for the industry's smaller players, especially those managing less than $20 billion, because the asset bases at those levels don't generate enough revenue to support expensive bankers and cope with rising regulatory costs and technology spending.
Societe Generale's private bank sale follows two major transactions since the financial crisis - the sale of ING's private bank in late 2009 to Oversea-Chinese Banking Corp (OCBC.SI) and Bank of America's (BAC.N) sale of its Asian and European private banking units to Julius Baer (BAER.VX).
The industry has also seen smaller deals such as the sale of HSBC's (HSBA.L) private bank in Japan to Credit Suisse (CSGN.VX) and Julius Baer's taking over of Macquarie Group's (MQG.AX) private banking unit in Asia.
(Editing by Edwina Gibbs)