Asian private banks are benefiting from an influx of Western money as the economic uncertainties and debt woes in the United States and Europe prompt high-net-worth individuals to seek what they see as the relative strength of Asian banks.
The 20 largest private banks in the Asia-Pacific region have increased their assets under management 89 percent since 2007, to more than $1 trillion, according to a recent survey by Private Banker International.
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International banks continue to hold pole position in terms of assets under management from high-net-worth clients in the region. UBS had $182 billion in assets under management at the end of 2010; Citigroup had $179 billion, and HSBC $150 billion.
But Asian banks are making inroads. Right behind DBS at 11th position was Bank of Singapore, which was formed in 2010 after OCBC Bank expanded its wealth management unit with the acquisition of ING’s Asian private banking assets. In 13th position was the Hong Kong-based Hang Seng Bank , ahead of ABN Amro, RBS Coutts and Société Générale Private Banking.
Renato de Guzman, chief executive of Bank of Singapore, said the private bank added a “substantial” $6 billion of assets under management in 2011 to reach $32 billion.
“The increase reflects our growing market share in several markets where we operate and outflow of funds from institutions affected by the sovereign debt crisis,” he said.
Asian banks have also been benefiting from the strong growth in wealth generated in the region. According to the 2011 Capgemini/Merrill Lynch Wealth Report, the wealth of high-net-worth individuals in the Asia-Pacific region grew 9.7 percent in 2010, to $10.8 trillion, compared with a 6.3 percent growth in Europe, to $10.2 trillion.
Piyush Gupta, chief executive of DBS Bank, said several wealthy European families had reached out to the bank because they wanted to move some of their money into “safer Asian banks as a result of what they have been through in the last few years, first with American banks and then European banks.”
“I call this the pillow money, which they just want to put to sleep,” Mr. Gupta said.
The shift in assets is being felt in the management ranks of private banking.
Tan Su Shan decided in June 2010 to leave her job as Morgan Stanley’s head of private wealth management for Southeast Asia to join the smaller and lesser-known DBS Private Bank as its new head of private banking.
“I had been with Morgan Stanley for a while and I was ready for a change,” Ms. Tan explained recently. “Being Asian, I also really do believe in the coming of age of the Asian private bank and the birth of an Asian private bank model where we have an Asian-centric platform, Asian services and Asian insight for Asian clients.”
By December, DBS’s assets under management had grown 18 percent, to $38 billion, pushing the Singaporean bank into the top 10 banks in the Asia-Pacific region as measured by assets under management in the region.
According to a recent survey by Bloomberg Markets magazine, all three Singaporean banks — Oversea-Chinese Banking (the parent of Bank of Singapore), DBS Group Holdings and United Overseas Bank — ranked among the world’s top 10 strongest banks based on a set of metrics that include Tier I capital to risk-weighted assets and nonperforming assets to total assets.
Noor Quek, head of NQ International, which offers advisory services to family offices in Asia and the Middle East, has also noticed that some family offices in Europe and the Middle East are turning their sights to Asia.
“They may not have a full-fledged family office transferred here, but they’re definitely looking at setting up a satellite office,” Ms. Quek said. “I don’t think it’s a flight of capital, but in times of uncertainties like these people just want to diversify their assets and have some in a bank that is safe. And that’s certainly the case with our local banks. They may not invest that money straight away, but at least it’s there and they’re building the relationship with the bank.”
Singapore, in particular, is benefiting from the movement of assets to Asia. “There is a Singapore ‘trust’ because our laws and tax rates are conducive,” she said.
Wilson Aw, head of UOB Private Banking, said high-net-worth individuals had been thinking hard about their banks’ safety ever since the Lehman Brothers crisis of 2008. They are considering putting their money into safer banks, while also trying to diversify.
Ms. Tan of DBS said there was also a general appetite from non-Asian investors for the Asian product offerings that are linked to the region’s growth and in which Asian banks specialized. “Some clients might just be interested in opening a simple cash deposit in renminbi or rupee currencies,” she said.
Mr. Aw has also noticed increasing interest in real estate investments in the region in recent years. Responding to this, his bank at the end of last year started a real estate portfolio advisory service, which extends to properties across major cities around the world. He pointed out that UOB’s consumer banking activities in the region support the effort by allowing the private bank to offer mortgage loans to its private clients.
“In the last year, money has also flowed into fixed income assets in the region,” he said. “Clients continue to seek risk-adjusted yields to beat the inflationary pressure in a low interest rate environment as well as to diversify from the U.S. dollar and the euro and take advantage of the expected Asian currencies’ appreciation, like Singapore dollars.”
But Ms. Tan is quick to point out that money is flowing not just to Singaporean banks, but also to other Asian banks, especially those with high credit ratings. Clients are taking advantage of better interest rates offered by some Asian banks on U.S. dollar and euro-denominated accounts, she added.
Rob Ioannou, a managing director at HSBC Private Bank, noted that non-Asian investors were generally “underinvested when it comes to the Asian markets, and they are actively seeking to reposition their portfolios and tap into the long-term, higher growth opportunities in this region.”
Interest is also strong from clients based outside Asia and looking to diversify, he said.
“We see broad investor interest across all major asset classes as well as listed and unlisted investment opportunities,” he said. “At a basic level, clients from outside Asia are increasingly interested to diversify a portion of their assets into the Asian currency markets, such as the renminbi and Singapore dollars, given their stronger fundamentals.”