OCBC - DBS Research 2016-04-07: Acquires Barclays Bank’s wealth business in Singapore and Hong Kong

OVERSEA-CHINESE BANKING CORP OCBC O39.SI

OCBC - Acquires Barclays Bank’s wealth business in Singapore and Hong Kong

Acquires Barclay’s wealth business for US$320m/ S$430m (1.75% P/AUM) with US$18.3bn AUM; raising current AUM of BoS by 33% to US$77.3bn.
Positive to OCBC; continues to build on its wealth management income momentum; expected to be EPS and ROE accretive after first year.

OCBC has acquired the wealth and investment business of Barclays Bank in Singapore and Hong Kong. The total consideration amounts to US$320m/S$430m and will be funded by internal cash from Bank of Singapore (BoS), OCBC's subsidiary. The transaction is expected to be completed by end-2016.
The acquisition adds US$18.3bn to OCBC'S current assets under management (AUM) of US$55bn (as at end-Dec 2015), an increase of 33% to US$73.3bn.
The acquisition also comes with an additional 1,800 customers.
The acquisition price is equivalent to 1.75% of price-to-assets under management (P/AUM) which is a similar multiple DBS paid for the wealth assets of SocGen (AUM acquired was US$12.6bn for US$220m/S$279m) in Mar 2014.
DBS' total AUM which includes its Treasures, Treasures Private Client and Private Bank base stood at S$146bn as at end-Dec 2015.
Note that this is a wider definition when compared to OCBC's AUM of US$73.3bn. Note also that in 2009, OCBC paid a multiple of 3.4% P/AUM for the acquisition of the wealth management assets in Asia of ING Private Bank.
The AUM acquired then was US$15.8bn.

We view this transaction as positive for OCBC as it will continue to raise the bank's wealth management income momentum.
Since the acquisition of ING Private Bank Asia (renamed BoS), OCBC has successfully seen its wealth management income rise sequentially. This acquisition will further seal its wealth management business franchise.
The acquisition is expected to be accretive to OCBC Bank’s earnings per share and return on equity after the first year.

OCBC is a Buy and our preferred pick for the Singapore banks.
Our TP is at S$9.40. The potential reach of its differentiated non-interest income franchise should support valuations.

LIM Sue Lin DBS Vickers | http://www.dbsvickers.com/ 2016-04-07

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