HONG KONG/SINGAPORE (Reuters) - Singapore’s third-biggest bank, OCBC (OCBC.SI), announced its arrival as a serious wealth player on Thursday after clinching a surprise deal to buy Dutch-based ING’s ING.AS private banking unit in Asia for $1.5 billion (925 million pounds).
Oversea-Chinese Banking Corp beat HSBC (HSBA.L) to the deal, which will triple the assets the Singapore bank manages for the rich and position it for opportunities in the fastest-growing private banking region of the world.
“What this would do is put the private bank on a firmer footing,” Trevor Kalcic, banking analyst at RBS in Singapore, said of OCBC. “They had a very small private banking operation.”
ING’s sale of its Asian private bank, with about $16 billion in assets, is its third major disposal in less than a month and the second in the Asia-Pacific region, as it seeks to restructure following a government bailout in October 2008.
OCBC shares fell 0.5 percent to 7.64 Singapore dollars after resuming trading, while ING shares rose 1.8 percent to 12.705 euros at 9:08 a.m. British time, the highest level in almost a year.
Analysts, while happy with the price achieved by ING, reiterated that it was unfortunate the bank was selling assets in the present market.
“We continue to see ING’s divestments in current market circumstances as suboptimal,” SNS Securities said in a research note. “Although we see the transaction price for the Asian private banking activities as satisfying, ING continues to sell future profitability and presence in important growth markets.”
OCBC said in a statement the acquisition would take its private bank assets to $23 billion.
“We are committed to investing more in the business and look forward to capturing greater market share of the growing number of high net-worth individuals in Asia and other markets,” said OCBC CEO David Conner.
The purchase price, excluding ING’s surplus capital of $550 million, is about 5.8 percent of ING’s private banking assets in Asia. By comparison, Julius Baer agreed to pay about 2.3 percent of ING’s Swiss banking assets in a deal on October 7, excluding the surplus capital.
The CEO of HSBC’s private bank, Chris Meares, told Reuters earlier this month that private banking assets in growth markets such as Asia could command a price of 2-3 percent of assets.
OCBC said the deal would cut its tier-1 capital by 1.5 percentage points to 13.9 percent.
Citigroup analyst Robert Kong said that OCBC’s tier-1 capital exceeded the 12.5 percent for its local peers, giving it ample ammunition to seek M&A opportunities.
OCBC’s private bank, which lost a third of its bankers to foreign rivals in 2006, is run by French national Olivier Denis. OCBC also controls insurance firm Great Eastern (GELA.SI) and asset manager Lion Global Investors.
ING’s private bank in Asia is run by Renato de Guzman, who has been instrumental in building the business in his home country Philippines and Indonesia.
ING is in the midst of raising 6 billion (5.5 billion pounds) euros to 8 billion euros through asset sales under a restructuring programme announced in April, and plans to ultimately exit 10 of the 48 countries where it does business.
The restructuring follows 10 billion euros in state aid ING received in October 2008 and a 22 billion euro asset guarantee it received from the Dutch state in January 2009.
Analysts have been mostly unhappy with the assets sales because of the price and the pressure to sell in a weak market.
Additional reporting by Ben Berkowitz in Amsterdam; Editing by Neil Chatterjee, Muralikumar Anantharaman and Simon Jessop