15 Oct 2009
Oct. 15 (Bloomberg) -- Oversea-Chinese Banking Corp., Singapore's third-largest lender, agreed to buy ING Groep NV's private banking assets in Asia for $1.46 billion in cash after beating out HSBC Holdings Plc.The price includes the unit's estimated surplus capital of about $550 million, Oversea-Chinese said in a statement to the Singapore stock exchange today. It will add to earnings per share in 2010, according to the release.
Oversea-Chinese said the deal will more than triple its private banking assets to $23 billion, as competition heats up in a region forecast to outperform Europe and the U.S. in wealth accumulation. Amsterdam-based ING last week sold its Swiss wealth management business to Julius Baer Group Ltd. as it seeks to raise as much as 8 billion euros ($12 billion).
"Private banking assets are scarce and difficult to get hold of," said Trevor Kalcic, the head of Southeast Asia equity research at Royal Bank of Scotland Plc, before the announcement. "For the private banking offering of OCBC, it would put it on a firmer footing to compete. OCBC can afford this relatively easily."
The deal will generate an estimated 300 million euros in profit for ING, the Dutch company said in a separate statement. The transaction, subject to a number of regulatory approvals, is expected to be completed around year-end and will free up about 370 million euros of capital, it said.
Other Bidders
The purchase price is equivalent to 5.8 percent of the ING unit's assets under management after adjusting for surplus capital, Oversea-Chinese said. Julius Baer's 520 million Swiss franc ($513 million) purchase of ING's Swiss private bank amounted to 2.3 percent of assets by that measure.
Other bidders for the ING assets in Asia included London- based HSBC, Europe's largest bank, and Singapore's DBS Group Holdings Ltd., Southeast Asia's biggest bank, according to two people with knowledge of the matter.
"With the global financial crisis having reshaped the competitive landscape, OCBC Bank is taking advantage of its strong balance sheet and capital position" to buy the assets, Oversea-Chinese said in the statement.
The total wealth among millionaires in Asia Pacific will grow faster than the global average as the region's economies outperform, according to a survey published this week by Cap Gemini SA and Merrill Lynch Wealth Management.
China's Wealth
China's number of so-called high net worth individuals, those with at least $1 million of assets to invest, surpassed that of the U.K. last year to become the world's fourth-highest, according to the 2009 World Wealth Report by the two firms.
ING's Asian private banking division, led by Renato de Guzman, manages assets for more than 5,000 clients from offices in Singapore, Hong Kong and the Philippines. With 150 relationship managers, it has assets under management of $15.8 billion. Oversea-Chinese said in today's statement it plans to increase the hiring of relationship managers.
Hou Wey Foo, the division's chief investment officer, was previously head of global equities at Lion Capital Management Ltd., the asset management arm of Oversea-Chinese.
"The acquisition may be positive, but OCBC still has to work to keep the customers," said Tay Chin Seng, a Singapore- based analyst at Macquarie Capital Securities, who rates Oversea-Chinese shares "neutral." "This is the style of our local banks, to buy bits and pieces, and go small because they don't want negative surprises." The analyst spoke before the release.
Higher Earnings
Oversea-Chinese in August posted a better-than-estimated 9.6 percent gain in second-quarter net income on trading income and higher earnings from its insurance unit. Fees from wealth management fell 64 percent from a year earlier to S$29 million ($21 million).
ING, led by Chief Executive Officer Jan Hommen, is selling assets after receiving a 10 billion-euro lifeline last October. The company's second-quarter net income slumped 96 percent, more than analysts estimated, as it set aside money for risky loans and reduced the value of its real-estate holdings.
