Advertisement

The world’s mega-rich have found a new home

Switzerland can no longer claim to be the home of the world's mega-rich. Lars Henriksson explains why the big bucks are heading east.

14-6-9-DBS-bank
Singapore's banks should benefit from the influx of the world's rich

Switzerland has always been good to rich people. It has exclusive resorts, fine cities and of course, a tradition of discreet private banking.

Switzerland built this reputation for centuries, but now, things are starting to change. As cash-strapped governments in Europe and the US panic, the country has been forced to loosen its bank secrecy laws, resulting in many clients voting with their feet. And they're overwhelmingly going to one place Singapore.

Advertisement - Article continues below

The consultancy firm PricewaterhouseCoopers forecasts that Singapore could dislodge Switzerland as the world's wealth capital as early as 2015. The country's low tax rate and stable currency are important factors, but it's the growth in Southeast Asia that's really driving the whole enterprise.

Singapore's banks are well placed to take advantage of this growth. Today, I want to tell you about three which are worth a look.

More wealth equals more banks

Of course, as with anything in Asia, China will play a large role in this region-wide growth. According to financial services provide Swift, the Chinese currency, renminbi, has become the second most widely used currency in trade finance.

The government is currently re-jigging its financial sector and has announced a two-year timetable to modernise the sector. There are also reform plans to tackle failed banks and allow the establishment of privately owned banks to provide finance to private companies.

Advertisement
Advertisement - Article continues below

That's precisely where Singapore's banks come in.

Three 'wealth capital' banks

DBS Group Holdings (DBS), Oversea-Chinese Banking Corporation (OCBC)

Advertisement - Article continues below

United Overseas Bank (UOB)

Based on a recent study by UOB Kay Hian, earnings contribution from overseas have registered a ten-year annual growth rate of 7.4% for DBS, 20% for OCBC and 12.2% for UOB.

In 2003, profit before tax from international operations accounted for 19.6% for OCBC and 24.5% for UOB. Last year that had grown to 41.3% for OCBC and 39.1% for UOB.

Let's see what they've got planned for the future.

DBS already has 50 branches in Hong Kong, 29 branches in China and 43 branches in Taiwan. Net profit from this three Chinese markets have grown at a three-year compounded annual growth rate of 14.6%.

OCBC is in a pretty good position too. The company has 16 branches in major cities in China and a 20% stake in Bank of Ningbo.

The pending acquisition of the Hong Kong-based Wing Hang Bank will support retail and small and medium enterprises in Hong Kong and expanding its network in China to 31 branches. Profit before tax grew by a three-year compound annual growth rate (CAGR) of 44.8% from Greater China.

Finally, UOB plans to double its corporate loans to Hong Kong and Chinese companies looking for growth in Southeast Asia over the next three years. This will see an increase in overseas wholesale banking from 43% in 2013 to 50% in 2015; regional wealth management from 30% in 2013 to 50% by 2015.

The bank also set up a dedicated foreign direct investment advisory unit to assist Chinese companies to expand into Southeast Asia.

This is a story I'm going to be watching with interest.

Advertisement
Advertisement

Recommended

Visit/investments/stockmarkets/600688/bullish-investors-return-to-emerging-markets
Stockmarkets

Bullish investors return to emerging markets

The ink had barely dried on the US-China trade deal before the bulls began pouring into emerging markets.
27 Jan 2020
Visit/investments/stocks-and-shares/share-tips/600641/share-tips-of-the-week
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
17 Jan 2020
Visit/519913/share-tips-8-stocks-for-robust-returns
Share tips

Share tips: eight stocks that should deliver robust returns

Ryan Ermey of US publication Kiplinger’s Personal Finance chooses his favourite stocks for the next decade, which should be able to grow for years.
28 Dec 2019
Visit/519872/beware-the-hidden-risks-when-investing-in-emerging-markets
Investment strategy

Beware the hidden risks when investing in emerging markets

Emerging markets look cheap compared with developed countries, but earnings may be less trustworthy.
23 Dec 2019

Most Popular

Visit/economy/uk-economy/601427/covid-bounce-back-loans-and-inflation
UK Economy

What bounce back loans can tell us about how we’ll pay for all this

The government will guarantee emergency "bounce back loans" for small businesses hit by Covid-19. Inevitably, many businesses will default. And there'…
1 Jun 2020
Visit/economy/global-economy/601420/james-ferguson-the-virus-the-lockdown-and-what-comes-next
Global Economy

The MoneyWeek Podcast: James Ferguson on the virus, the lockdown, and what comes next

Merryn talks to MoneyWeek regular James Ferguson of Macrostrategy Partnership about what's happened so far with the virus; whether the lockdown was th…
28 May 2020
Visit/investments/stockmarkets/601423/as-full-lockdown-ends-what-are-the-risks-for-investors
Stockmarkets

As full lockdown ends, what are the risks for investors?

In the UK and elsewhere, people are gradually being let off the leash as the lockdown begins to end. John Stepek looks at what risks remain for invest…
29 May 2020