Bankers warn on Singapore shake-up

Wealth managers fear consolidation; signs of strain in Singapore sector

Office buildings light up the financial skyline. Nicky Loh/Getty Images

Office buildings light up the financial skyline. Nicky Loh/Getty Images

 



Intense competition, a tendency for wealthy Asians to use multiple private bankers and high staff costs are likely to force consolidation in the wealth-management business in Singapore and could push operators out of business, top private bankers have warned.

Signs of competitive strain in one of Asia’s biggest wealth management hubs stand in contrast to an image of rising wealth as the number of multimillionaires grows faster in the region than elsewhere.

Bankers say that even as assets under management are growing fast in Singapore, that is not translating into profits for many banks that have rushed to Singapore to tap growing wealth.

“Many foreign banks came in without giving enough thought about the sustainability of the business, the regulatory environment and competitiveness from established players as well as local banks aspiring to be top-end wealth managers,” said Deepak Sharma, chairman of Citi Private bank and co-chair of the Singapore Private Banking Industry Group.

Private bankers say cost/ income ratio in Singapore is higher than in Europe, as an influx of banks chasing business has collided with a shortage of qualified “relationship managers” to woo clients.

Assets under management grew 17 per cent in Asia last year, double the rate for North America or western Europe, according to consultancy McKinsey but profit margins among private banks in Asia were the lowest of any region except for India.

With Europe in the doldrums, Singapore and Hong Kong offer wealth managers one of few growth avenues, as the number of multimillionaires created outstrips other regions. Yet bankers say margins are being squeezed as products and services are priced keenly to buy market share. – Copyright The Financial Times Limited 2013