THE VIEW FROM SINGAPORE: Former SocGen PB Boss Reflects On His Old Firm's Deal In Asia

Tom King

WealthBriefingAsia

20 March 2014

This week kicked off with a bang in the world of mergers and acquisitions with the widely-trailed deal by Singapore-headquartered . 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, ; 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”.