SINGAPORE (Reuters) - OCBC’s (OCBC.SI) path to snapping up Barclays’ (BARC.L) Singapore and Hong Kong wealth management business became much easier after rival DBS Group Holdings (DBSM.SI) was turned off by fears of poaching at the unit, financial sources familiar with matter said.
Oversea-Chinese Banking Corp, Singapore’s second-biggest lender, said on Thursday it agreed to pay $320 million for the operations - its second-largest private banking deal since 2009 and a move aimed at deepening its presence in Southeast Asia, Greater China and the Middle East.
DBS, the only other bidder in the final round, had been seen as an early favourite to win, people close to the auction process said.
But DBS failed to bid aggressively amid talk that several bankers were negotiating to go elsewhere following the departure of Barclays Asian wealth chief Didier von Daeniken for Standard Chartered (STAN.L) in December, they added. The head of Barclay’s wealth management business for South Asia also left in January.
Poaching is always more of a risk for private banks than for other industries as clients will often stay loyal to their bankers and move their assets with them.
StanChart, which makes most of its profits in Asia, has been on a hiring spree in private banking, said one source.
“There is no regret at DBS for losing this,” added a separate person with knowledge of the bank’s strategy, adding that DBS had begun to factor in the extra costs of large retention packages.
A third person also noted issues of compatibility, saying Barclays’ compensation structure gives a handful of senior managers a much greater share of rewards whereas DBS’s pay structure is more equitable.
The sources declined to be identified as they were not authorised to speak to the media. A DBS spokesman declined to comment directly on the Barclays deal, saying only that Singapore’s biggest lender would be disciplined in how it expanded its wealth business.
OCBC declined to comment on whether it would be providing retention packages to keep bankers at Barclays.
Bahren Shaari, chief executive at OCBC’s Bank of Singapore said only that employees stay at an organisation when they believe in its growth plans, adding the enlarged business would provide career opportunities.
Singapore’s banks have been keen to pick up wealth management assets put up for auction by Western banks, many of which are in retreat as they focus on their own markets.
Shaari told Reuters he expects the integration will be smooth as two businesses are led by teams which share the same operating and management philosophy.
“We are working towards an operating model where we work as one team under one roof,” he said.
The deal is set to boost OCBC’s private banking assets by a third to $73.3 billion, putting it just below DBS which is ranked by Asian Private Banker as the sixth-biggest private bank in Asia.
The number of private bankers at OCBC’s Bank of Singapore will climb by 88 to 400.
It is OCBC’s second major acquisition since it pounced on the Asian wealth unit of Dutch lender ING ING.AS in 2009. DBS bought the Asian private bank of Societe Generale (SOGN.PA) in 2014.
OCBC’s purchase price was set at 1.75 percent of Barclays’ $18.3 billion in assets in Singapore and Hong Kong, similar to what DBS paid for SocGen’s private banking arm.
Credit Suisse advised OCBC on the deal, sources said.
The sale is part of drastic restructuring measures by Barclays’ new chief executive, Jes Staley, and comes as several European banks rethink their Asian strategy due to pressure at home to cut costs.
Reporting by Saeed Azhar; Additional reporting by Anshuman Daga; Editing by Edwina Gibbs