Singapore’s second-biggest bank says Brexit is not all bad news for UK financial services even as the sector braces for a mass exodus of foreign banks.
Bank of Singapore is considering setting up a private bank in the UK, its chief executive Bahren Shaari told the Financial Times, because costs there have fallen thanks to the pound’s sharp drop since Britain voted to leave the EU.
The bank, Asia’s second-biggest homegrown private bank and a unit of OCBC, the city-state’s second-largest lender by assets, has been growing strongly overseas, doubling assets under management in the Middle East in the past three years.
Bank of Singapore has committed to opening a branch in Dubai’s International Financial Centre early next year, and London could be next.
“London has always been expensive as a place to do business. Now it has become 20 per cent cheaper,” Mr Shaari said, adding that a presence in London would allow the Singaporean bank to get closer to Middle Eastern clients who frequent the UK capital. “London has history, legal certainty,” he added.
He declined to give a timeframe on when the London operation could be set up.
Bank of Singapore’s view on London is at odds with that of most of the foreign banks already operating there.
Experts expect between 70,000 and 100,000 financial jobs to leave the UK as banks and other financial services groups move operations to the continent. Those businesses are moving largely because they rely on London as an entry point to the EU. The Bank of Singapore business would deal with foreign clients in London.
London has always been expensive as a place to do business. Now it has become 20 per cent cheaper. London has history, legal certainty
Mr Shaari said the Middle East was his number two priority after China, where the bank earlier this year disclosed that it was also exploring launching an onshore private bank.
The plans come as a number of foreign banks retreat from wealth management in Asia, underlining the difficulties faced by smaller players lacking scale.
Most recently, ABN Amro agreed this month to sell its Asian and Middle Eastern private banking business, which has about $20bn under management, to LGT. Last month, Bank of Singapore completed the acquisition of Barclays’ wealth businesses in Singapore and Hong Kong, bringing its total AUM to $75bn.
While that is a fraction of the $2.2tn UBS has or Credit Suisse’s $720bn AUM, Mr Shaari sees it as an advantage, questioning whether private banking can be a cost-effective global business for banks with trillions of assets under management.
“The cost to income ratio: the big banks are still running at the high 70s, in some cases 80s. Why is it that a large operation doesn’t give you efficiency?” he said. “My view is it’s the complexity of the business — you cannot industrialise it, you cannot centralise to the point that it’s controlled by central location. You still need a strong on the ground presence, we are keeping [the cost to income ratio] at 65 which is much lower.”
The alleged corruption and money-laundering scandal linked to Malaysia’s state investment fund, 1MDB, has also rippled through the private banking industry in Singapore, prompting greater caution amid intense regulatory scrutiny, Mr Shaari noted.
“You need senior management to meet up with the client, sense whether this guy is legitimate . . . That means you cannot scale up the business so much; [it depends on] to what extent your management can meet up with all these guys.”
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