DBS Group Holdings Ltd. will buy retail and wealth-management businesses from Australia & New Zealand Banking Group Ltd. in five Asian countries, in a move that lodges the Singaporean lender firmly in the ranks of the regions largest private banks.
DBS will pay S$110 million ($79 million) above the book value of the businesses, which operate in Singapore, Hong Kong, China, Taiwan and Indonesia, the lender said in a stock-exchange statement. The deal will add S$23 billion of wealth assets to DBSs books, taking its total assets under management to S$182 billion, it said.
DBS has made significant strides in the wealth business, and recently became the first Singapore and Asian bank to break into the top five private banks in Asia-Pacific, Tan Su Shan, the lenders consumer banking and wealth management head, said in the statement. This acquisition will further cement our leadership position.
Like its larger rivals UBS Group AG and Credit Suisse Group AG, DBS has expanded its wealth business in recent years to profit from Asias burgeoning ranks of millionaires, a thrust that included buying Societe Generale SAs Asian wealth-management division in 2014. The deal also further diminishes the presence of Australian banks overseas as they seek to refocus on more profitable businesses such as mortgages in their home market.
ANZ Bank said it will take a A$265 million ($201 million) loss on the deal, which marks a major step in Chief Executive Officer Shayne Elliotts drive to unwind his predecessors expansion into Asia. The bank had previously been seeking to earn as much as 30 percent of profit from outside Australia and New Zealand by 2017.
Our strategic priority is to create a simpler, better capitalized, better balanced bank focused on attractive areas where we can carve out winning positions, Elliott said in a statement to the stock exchange. ANZ will focus its resources in Asia on institutional banking, he said.
The Melbourne-based lender is still reviewing its businesses in Cambodia, Laos, Vietnam and the Philippines, Elliott said on a call with investors.
DBS shares dropped 0.3 percent to S$14.85 as of 9:25 a.m. in Singapore. In Sydney, ANZ stock added 0.3 percent to A$27.69
DBS is aiming to complete the purchases from ANZ by early 2018, the bank said. The businesses being acquired have total deposits of S$17 billion, loans of S$11 billion and serve about 1.3 million customers, including 100,000 high net-worth individuals, DBS said.
You have a situation where one mans poison is another mans meat, given also the assets are in places DBS already has presence and can scale up, Kevin Kwek, an analyst at Sanford C. Bernstein & Co., said in an e-mailed reply to questions. Wealth management is a good business for its funding and fee potential, and long-term growth, so to us its a positive.
Earlier this year, the bank lost out to smaller Singaporean competitor Oversea-Chinese Banking Corp. in buying Barclays Plcs wealth and investment-management business in Asia. UBS was the largest private bank in the region at the end of 2015 with $274 billion of assets, according to figures compiled by Asian Private Banker.
Separately, DBS, Southeast Asias largest lender, said Monday net income was little changed at S$1.07 billion in the three months to September from a year earlier as soaring allowances for credit and other losses offset gains from non-interest income. Provisions for soured assets jumped to S$436 million from S$178 million a year ago.