By Saeed Azhar and Denny Thomas
SINGAPORE/HONG KONG (Reuters) - Singapore's DBS Group Holdings (D05.SI) and ABN AMRO are among the suitors to place final bids for Societe Generale's (GLE.PA) Asia private bank, in a $400 million deal, as smaller players exit the region's competitive private banking business.
A successful deal would make it the third major transaction in Asia's competitive private banking landscape since the global financial crisis, as smaller players struggle to generate enough revenue to support expensive bankers and rising regulatory costs.
Swiss bank Credit Suisse (CSGN.VX) is another suitor submitting a final bid, people familiar with the matter told Reuters, after Societe Generale whittled down the initial list of 10 companies to five after the first round bidding. It was unclear if the remaining two bidders submitted final bids.
Societe Generale's Asian private bank unit manages about $13 billion, below the $20 billion mark that the industry has come to see as necessary for critical mass in the region.
Economic growth has led to a surge in Asian millionaires and billionaires. Their combined wealth, at $6.6 trillion this year, is expected to overtake that of their European counterparts in 2017 and U.S. peers in 2024, according to a Wealth-X and UBS World Ultra Wealth Report.
But profit margins are thin for the industry's smaller players, especially those managing less than $20 billion, because the asset bases at the level don't generate enough revenue to support expensive bankers and cope with rising regulatory costs and technology spending.
Initial price expectations for the Societe Generale business ranged from between $300 million to $600 million, but a person with direct knowledge of the matter told Reuters the business is being valued at around $400 million.
Sources declined to be identified as they are not authorized to talk to the media.
A Societe Generale spokeswoman in Singapore declined to comment. DBS, Credit Suisse and ABN AMRO also declined to comment.
DBS, which managed $46 billion in private banking assets at the end of 2012, is seen by many as a leading contender for the unit and CEO Piysuh Gupta told an earnings briefing this month the bank would look at Asian wealth businesses.
DBS's private banking assets are slightly bigger than Bank of Singapore, the wealth unit of Oversea-Chinese Banking Corp (O39.SI) which managed $43 billion at the end of 2012.
DBS's private bank was ranked 9th and OCBC 10th in a survey on Asian wealth managers by industry publication Private Banker International. http://link.reuters.com/pap54v.
OCBC which paid $1.5 billion to acquire ING's private banking business in Asia in 2009, managed to triple its private banking assets at the time of the deal.
It has partly helped OCBC boost its fee income by five times from 2009 to 2012, the bank said.
"DBS wants to get decisively bigger," said James Antos, a Hong Kong-based analyst at Mizuho Securities Asia Ltd. "They are playing catch-up with OCBC, which moved at the right time and got the right scale of business."
He said DBS's management seems to still be in a deal-making mode despite the collapse of talks to buy Indonesia's PT Bank Danamon (BDMN.JK), which attracted them to the Asian unit of Societe Generale.
UBS (UBSN.VX), Royal Bank of Canada (RY.TO) were among bidders looking at the unit in the early stages of the sale, sources have said. Standard Chartered Plc (STAN.L) was also an early bidder but has since dropped out, sources said.
UBS, Standard Chartered declined to comment. RBC was not immediately available to comment.
Societe Generale's private bank sale follows two major transactions since the financial crisis, including the sale of ING's private bank in late 2009 to OCBC and Bank of America's (BAC.N) sale of Asian and European private banking units to Julius Baer (BAER.VX).
The industry has also seen smaller deals such as the sale of HSBC's (HSBA.L) private bank in Japan to Credit Suisse and Julius Baer taking over Macquarie Group's (MQG.AX) private banking unit in Asia.
JPMorgan (JPM.N) is advising Societe Generale on the sale, sources said. The U.S. bank declined to comment.
(Additional reporting by Katharina Bart in ZURICH; Editing by Edwina Gibbs)
- Banking & Budgeting
- Societe Generale
- Credit Suisse
- private banking
- ABN AMRO
- DBS Group Holdings