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Taking a closer look at the private banking sector in Singapore

Over the past 2 years, a total of 8 private banks have exited Singapore, which includes Barclays Private Bank, Coutts International and most recently, ANZ.

But this is not due to lack of demand. It should be noted that out of the 8 entities, 2 were actually shut down by the Monetary Authority of Singapore as a result of anti-money laundering violations. The rest have cited a more conventional business reason as to why they have seemingly abandoned what is still a pretty lucrative market.

 

Size does matter

Simply put, just like most industries, you need to have scale to run a sustainable private banking business; especially given its relatively high cost of operations.

And while local institutions have been relatively more successful in growing their footprint, some international banks have not been able to grow their private banking arm as much as they previously projected.

It is this type of situation that has forced ANZ's hand to sell off their private banking business even though it is still making healthy profits. For the most recent financial year, it generated a cash profit of A$50 million.

 

What exactly is private banking, and how does it engage its Singaporean clientele?


Source: Thinkstock/Getty Images
Source: Thinkstock/Getty Images

Source: Thinkstock/Getty Images

Private banking is essentially a range of particular services designed to help high net-worth individuals (HNWI) grow their fortune.

It is not exactly the same as wealth management, although the two do share some similarities. A private banker offers financial management services with the aim to help his client address all of their financial circumstances.

There are requirements that need to be met to obtain a private banking account, and one such factor is a substantial amount in one’s bank account.

 

Private banking in Singapore

Singapore is home to 150,000 millionaires who in total, hold US$541 billion in assets. In fact, 5% of individuals here make up 1% of global wealth-holders, which is a significant number considering that the island makes up a mere 0.1% of the world’s adult population.

As such, there is no shortage of an addressable market here. Which explains why numerous financial institutions want to get their hands on a piece of the pie. 


Source: Thinkstock/Getty Images
Source: Thinkstock/Getty Images

Source: Thinkstock/Getty Images

Citibank’s Citigold Private Client, for instance, is designed for HNWIs with investible assets above S$1mil.

The private account holder would have a dedicated team under him, which includes a relationship manager, a senior service manager and an inter-disciplinary team of specialists to provide advice from treasury matters to commercial banking.

UOB’s Investment Approach takes a holistic stance. Their investment strategy looks into macro and secular trends as part of their in-depth financial analysis.

This involves bi-monthly forum discussions with investment specialists and economists of the Group on global market trends, and a weekly market strategy.

UOB Private Banking customers also benefit from the UOB Private Bank Concierge package, which includes UOB Medical Concierge, UOB Concierge Travel and the UOB Reserve Card, all of which complement a private banking client’s lifestyle needs.

 

Where we stand in 2016

Excerpts from Credit Suisse's Global Wealth Report for 2016 indicate that the mid-term wealth creation will take a moderate pace due to Brexit. Despite this factor, Singapore’s wealth per adult is still among the highest in the world (it stands at US$277,000 this year).


Source: Thinkstock/Getty Images
Source: Thinkstock/Getty Images

Source: Thinkstock/Getty Images

Local banks here have seen a need to fortify their hold within the private banking space in this region, what with DBS buying into Societe Generale’s Asian unit. A similar move was done by OCBC’s Bank of Singapore, when they acquired Barclay’s asian arm.

The Group Head of Consumer Banking and Wealth Management for DBS, Tan Su Shan, had this to say about the private banking business in the country:

We have now reached a stage where we are ready for inorganic growth. This transaction will give us access to new clients and strong, experienced teams, thereby strengthening our position as a top-tier wealth manager in the region.”

Bahren Shaari of Bank of Singapore shared his views on private banking with Forbes. According to him, HNWIs are now more compelling and tech savvy.

Private banks are changing to meet the evolving needs of their client base. There are, however, some things that cannot be substituted.

Clients treasure values, especially ones which are shared with their banks and staff – transparency, prudence, a good relationship and hard work are beautiful milestones in a mutually beneficial banking relationship.

(By Annette Rowena)

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