Asia’s Wealth Management Ripe for M&A
Global Firms Eye Targets
Asia’s Wealth Management
Asia’s wealth management business could see a surge in M&A activity on robust regional growth, with Asia poised to overtake North America as the world’s wealthiest region in the next two years. That’s likely to draw the attention of global wealth managers eager to acquire assets in a lucrative and growing market.
Wealth Profusion to Woo Asset Managers to Asia
Asia is likely to set the pace for global wealth creation over the next two years, led by China and India. Boston Consulting Group estimates Asia, including Japan, will emerge as the world’s wealthiest region by 2019, led by Hong Kong and Singapore. North America and Western Europe ranked number one and two, respectively, in 2016, yet Asia may have overtaken the latter for second place in 2017. Citigroup seeks double-digit growth in assets under management (AUM) in 2018, and Barclays and Deutsche Bank may push to re-build their own Asia wealth businesses.
China and India led the way in 2016, with assets under management growing 13% and 11%, respectively. Japan’s AUM grew just 1.1%, mostly driven by existing assets. Private wealth assets include pension fund assets, and exclude entitlements to state pensions.
M&A Deals Could Pick Up as Competition Intensifies
Private banks and wealth managers may scurry to acquire assets under management in Asia, driven by the region’s emerging global lead in wealth creation and its booming wealth-management business. Acquisitions may be fueled by the pursuit of specific customer segments, products, or capabilities, especially in the digital space. Scale efficiencies are likely to accelerate interest in acquisitions as technology innovation gains momentum.
Chinese fintech companies, and Indonesian and Indian banks are also likely to focus on this segment, even as Singapore and Hong Kong remain in the lead in Asia’s wealth management centers. UBS, Citi and Credit Suisse continue to rank high in Asian assets under management, yet local rivals led by OCBC’s Bank of Singapore, and DBS have already launched acquisitions to build scale and gain share.
UOB Could Follow DBS, OCBC on Wealth-Asset Acquisitions
UOB could go on the M&A prowl in Asia to achieve the scale it needs in its private banking and wealth management businesses. OCBC’s acquisitions of Barclays’ and NAB’s wealth businesses, and DBS acquiring Societe Generale and ANZ’s private banking and wealth assets over past few years, could drive additional sector consolidation. Singapore’s smallest lender lags peers on revenue contribution from its wealth business at only 9% vs. 18% at DBS and 34% at OCBC in 2017.
DBS, OCBC and UOB’s solid capital positions would let them absorb smaller rivals without having to raise funds. UOB is best-positioned, with its 14.7% common equity tier-1 ratio.
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