February 24, 2017 / 9:22 AM / a year ago

EXCLUSIVE-Royal Bank of Canada reviews Asia wealth business for possible sale -sources

HONG KONG/TORONTO, Feb 24 (Reuters) - Royal Bank of Canada (RBC), the country’s biggest lender, has put its Asian wealth management business under review, which could lead to its sale, four people familiar with the matter told Reuters.

The Canadian bank’s move comes after several Western firms have withdrawn from private banking in Asia, hit by pressure to reduce costs at home, slowing growth in the region and rising compliance costs.

Most recently, the Netherlands’ largest lender ABN Amro Group agreed in December to sell its private banking operations in Asia and the Middle East, which has $20 billion in assets, to LGT, a business run by the Princely Family of Liechtenstein.

The RBC review was prompted because the bank’s global head of wealth management feels the Asian business, with less than $10 billion in assets, lacks the scale to generate adequate profit, the people added.

There is, however, no certainty that the review will result in a sale, one of the people said. RBC’s main wealth management markets in Asia are Hong Kong and Singapore, the region’s two biggest wealth hubs.

“There will definitely be a question mark over profitability of this kind of a business that lacks scale,” said a person with knowledge of the development. “Is it a core business for RBC in Asia? The answer is, probably not.”

All the people Reuters spoke to declined to be named as the review is confidential.

RBC spokeswoman Lisa Hutniak declined to comment on rumours or speculation.

In fiscal year 2016, RBC’s revenue from international wealth management, including Asia, was C$430 million ($330 million), down from C$639 million in 2015 and C$722 million in 2014. The bank does not separately disclose the figures for Asia.

That compares with C$2.45 billion in revenue from its wealth management business in Canada and C$4.12 billion from the United States.

While some smaller Western wealth managers have left the region, Asia is emerging as a key battleground for bigger firms such as UBS and Credit Suisse as their traditional markets show slower growth and as countries like China and India produce more millionaires.

With nearly 5 million individuals with $1 million in liquid assets, Asia Pacific is the fastest-growing wealth region in the world.

Last year, Barclays agreed to sell its wealth and investment management business in Hong Kong and Singapore to a unit of Singapore’s Oversea-Chinese Banking Corp (OCBC) .

A crackdown on money laundering by Asia’s main private banking centres is forcing wealth managers to spend more on compliance procedures, which industry executives say may prove too onerous for smaller players. ($1 = 1.3084 Canadian dollars) (Reporting by Sumeet Chatterjee in Hong Kong and John Tilak in Toronto; Additional reporting by Denny Thomas in Toronto; Editing by Will Waterman)

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