Asia millionaires’ reduced risk appetite is hitting Singapore banks at a time when they are welcoming more funds than ever from the wealthy.
Lenders in the city-state, that’s seen as a safe haven, are seeing less fees from these customers who are shying away from taking bets in the markets amid US-China tension and an uncertain economic outlook. Oversea-Chinese Banking Corp., the country’s second-largest, posted below-expectation quarterly profit Friday as fee income tumbled due to “subdued customer investment activities.”
OCBC’s results wrap up Singapore’s latest bank earnings season where local rivals DBS Group Holdings Ltd. and United Overseas Bank Ltd. also suffered from lower fees managing rich clients’ funds. These firms have been expanding their wealth franchises, seeking to compete with global peers including UBS Group AG, with Asia held up as among regions that hold the most promise for this business.
“Last year was a volatile investment landscape,” OCBC’s group head of consumer Sunny Quek said at a briefing Friday, explaining why customers were cautious and stayed on the sidelines. There was also less financing given the higher interest rates, he said.
Despite their reluctance, clients’ new inflows surged to a record of about $25 billion last year for OCBC’s wealth unit and Bank of Singapore, its private banking unit. There are signs of trading activity pickup this year and the “huge” inflows set the stage for more activity as sentiment improves, Quek said.
Chief Executive Officer Helen Wong said at the same briefing that she expects wealth fees to rebound this year and grow at a faster pace than net interest income. The lender is pushing ahead to further grow services, with onshore private banking in China and regional wealth teams in key markets.
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“The lenders could see a recovery in their wealth management income from current low levels in 2023, as many family and high net worth clients might look to deploy their funds to generate higher returns,” Rena Kwok, a Bloomberg Intelligence analyst.
Dry Powder
At DBS, Singapore’s largest lender, net new money also reached fresh highs this year. Still, its net fee income in the fourth quarter fell 19% from a year ago due in part to lower wealth management fees. UOB also reported lower fees from wealth management in the latest quarter, even as its assets under management rose.
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“People were not taking margin financing as rates got higher and animal spirits were low,” DBS’ CEO Piyush Gupta told a press briefing last week, explaining why wealth management fees were lower. “A lot of this money is now dry powder waiting to be invested.”
He sees a brighter outlook ahead for the business, as the bank opened almost 50% of all new family offices that set up in Singapore over the last quarters, he said at last week’s briefing.
“We have a lot of dry powder and the money is likely to be put to work as market sentiments turn optimistic.”
