By Marius Zaharia and Anshuman Daga
SINGAPORE (Reuters) - Singapore lender DBS Group is expanding its wealth management business and expects the segment will account for as much as a fifth of its revenues in a few years as it capitalizes on a trend of Asia growing richer, its CEO Piyush Gupta said.
Southeast Asia's largest bank by assets, which has broken into the ranks of the top-five private banks in Asia helped by medium-sized acquisitions, will look for more "bolt-on" purchases to grow its wealth business, Gupta told Reuters in an interview, ahead of a Reuters Newsmaker on Thursday.
DBS's wealth management business has doubled in the last five years and is now around 15 percent of its revenue. "Our ambition in the next few years is to get it to 20 percent of the bank," Gupta said.
DBS Group's emphasis on wealth management comes as Asia Pacific has become the fastest growing wealth region in the world in recent years, with nearly 5 million individuals estimated to have $1 million in liquid assets.
But it is also a very competitive business in Asia, led by global players such as UBS and Citigroup (NYSE:C). Several smaller Western players have retreated, or are in the process of pulling back, from Asian markets due to the poor economies of scale, creating opportunities for DBS and smaller rival Oversea-Chinese Banking Corp to scoop up assets.
DBS, in which state investor Temasek Holdings (TEM.UL) owns a nearly 30 percent stake, will look at opportunities for such "bolt-on" acquisitions, as assets in the $10 billion to $20 billion range are coming to the market, Gupta said.
The DBS CEO, however, said he did not expect any of the big players to leave the market any time soon.
Income from DBS' wealth management unit jumped 19 percent to S$1.7 billion ($1.2 billion) in 2016. The bank's high net-worth assets under management (AUM) will grow to $85 billion and total wealth AUM to $137 billion after it consolidates assets bought from Australia and New Zealand Banking Group last year.
Under Gupta, 57, who took over the reins in 2009, DBS has more than doubled its group profits and turned around its underperforming Hong Kong unit.
But while DBS has diversified its business franchise to focus more on transactional banking and wealth management, the bank still earned about 70 percent to 80 percent of its profits from Singapore in recent years, highlighting its dependency on its home market.
At the Reuters Newsmaker event, Gupta said his goal is for Singapore's share to fall to 50 percent over the next decade as the city-state's economy grows at subdued rates of 2-3 percent. His ambition is to grow DBS' presence in China, India and Indonesia, he said.
DBS's core strategy is to grow organically and digitalize, he said, adding he does not believe acquisitions "at scale" are the way to go for the bank. "Trying to acquire a large bank might be playing yesterday's game as opposed to playing tomorrow's game," Gupta said.
IN THE SADDLE
Gupta said the downturn in the oil and gas industry was showing signs of stalling and the impact to Singapore banks would be less.
"In the short-term, I think for most of the banking sector, the worst was seen in 2016. I am beginning to see some level of activity pick up that should put some more life into this industry," he said, adding that renewed investments were helping the sector.
Earlier this month, DBS reported a 9 percent fall in quarterly profit and booked higher provisions for bad loans, hobbled by debt payment woes in the city state's oil services sector. OCBC said parts of its portfolio would remain stressed due to the struggling industry.
In terms of succession planning at DBS, Gupta said a slate of internal candidates have been identified but he had no plan to move on.
"In Singapore, the official retirement age is 62. And as you know, the government encourages people to stay till 67 so I have a reasonable runway," Gupta said.