This publication spoke to the former head of private banking at Societe Generale for his reflections on a deal that saw his old firm sell its Asian PB business to Singapore-based DBS.

This week kicked off with a bang in the world of mergers and acquisitions with the widely-trailed deal by Singapore-headquartered DBS to buy the Asia private bank of Societe Generale. SocGen has already commented on its strategy to this publication. (See here.) What do others make of it? Well, one person with a very interesting perspective is that of the former head of SocGen’s private bank, Daniel Truchi, who left in 2012; he helped forge his status in the French bank by his efforts to raise the profile of the Asian private banking business before switching to Paris.

Your correspondent – who has been working in Asia for over 20 years - asked Truchi what he made of the deal. I also attended the presentation in Singapore by DBS about an acquisition that helps propel it up the wealth management league table. To a room packed full of DBS and Societe Generale Private Bank Asia management, the voice of Piyush Gupta, the CEO of DBS Bank speaking via a line from Dubai, resonated a confident and buoyant tone as he spelt out the key points of the long drawn out deal.

The Societe Generale Private Bank has come a long way since I first got to know it in its early days in Hong Kong in the mid-eighties when the offering was unrecognisble from today’s version. It would have been hard to believe back then that the prestigious French bank would be bought by a Singaporean retail bank.

So what does Truchi, who now runs his own family office business from Geneva, make of the development?

What is your opinion of the deal?

"The only thing I could say it that SG has built a well established franchise in Asia starting from scratch,” Truchi said. “Aside of this deal, and on a more general view, Asia is the region to be in wealth management. This is where the creation of wealth is the strongest. A number of international institutions continue to invest in this region. Naturally it is competitive but the matter is to have a long term vision and define a competitive edge. Without a real competitive edge in wealth management or having a strong Investment banking arm or a significant retail presence, it is difficult to achieve a real breakthrough,” he said.

”In addition, the cost of doing business has increased substantially. Therefore, if in the meantime, you do not enjoy a growth in assets under management and a more efficient cost/income ratio by implementing a efficient operational system, you are exposed to a scissor effect,” he continued.

What might be next?

"This type of opportunity is quite rare and I do not think similar acquisitions will happen in the near future. On the contrary, I perceived a strong interest from international and regional banks to establish new ventures in Asia,” he replied.

Can this work for both parties i.e. can DBS can have access to the SG network in Europe and SG can have access to the DBS network throughout Asia? Are there potential synergies across the investment banking/corporate banking?

"I cannot comment on that [price paid by DBS]; but from what I read about the deal, it looks like an asset sale without synergies being developed between the two networks,” Truchi said, adding that as far as the $220 million price DBS has agreed to pay (on successful completion), that the percentage looks “below the average” for prices paid recently.

More to come

Truchi is very diplomatic about his old firm. As for what I think, well, there may be more deals to come if only because of the desire to boost economies of scale – which means consolidation. Cost income ratios across many Asian focused private banking businesses are running hot. The cost of doing business in Asia today has become a very expensive commitment. Only a few weeks ago Singapore came out on top as the most expensive city in the world and Hong Kong is not far behind. Rankings from groups such as real estate firm Knight Frank, and others, confirm this trend. Burgeoning regulatory costs that cannot be avoided, ever increasing salaries for star rainmakers and some of the most expensive office rentals on the planet all come together to squeeze the life out of already thin revenues. It was frequently thought that first movers into the Asian private banking hinterlands were doing well all they had to do in the early days was open the gilded doors and the clients would flood in. But the demographic across Asia is changing fast. UHNW clients are younger, more independent, they are entrepreneurs who may well be ahead of the banks in using technology to manage their own assets.

They need access to an Asian network of branches or offices as they conduct their regional business.   
There is no doubt that banks with an Asian wide consumer banking platform stand to gain the most now. These institutions have already built deep and robust foundations of wealthy and aspiring clients. They tap into the large SME resources the long standing loyal family depositors. It is these banks that will shape the wealth management models going forward. These banks have the liquidity to snap up the fragile western private banks who can no longer afford to do business in the region. 

Time is on their side and with that they can be choosy. One of the SocGen staff happy with the deal commented to me that they were fortunate to have tied the knot with DBS. He mentioned that other banks are out there on the shelf but no suitor has picked them up. A point in case may be BSI; the Swiss Italian bank has been “available” for in excess of a year but has so far only attracted window shopping. 

Undoubtedly the deal to bring in the Asian Private Banking business of Societe Generale to DBS has a good chance of success under the leadership of CEO Piyush Gupta but most importantly the dynamic Tan Su Shan, group head of consumer banking and wealth management. In them DBS have two committed and focused bankers who sincerely care and who know where they are heading in “New Asia”.