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Singapore banks have reported falling wealth management fees despite posting record inflows of money and earnings, as a recent influx of wealthy individuals including Chinese family offices hold back from investing in capital markets.
Income from managing billions of dollars owned by rich clients has fallen among Singapore’s biggest lenders DBS, OCBC and UOB in the past year. While wealth management fees have fallen, the banks have posted higher than expected profits off the back of rising interest rates.
OCBC, the city’s second-biggest lender, reported on Wednesday that non-interest income was down 11 per cent year on year to S$1bn ($753mn) owing to a drop in wealth management fees. That was even as the bank reported a 39 per cent rise in net profit year on year to deliver a record first quarter result of S$1.88bn.
Singapore, known for its stability and low taxes, has been a haven for the ultra-wealthy during rising global geopolitical and financial uncertainty. Individuals from mainland China and Hong Kong and Taiwan have contributed to record capital inflows into the city-state in the past two years.
“The wealthy Chinese and others that have come to Singapore since the pandemic are spending their money on Rolls-Royces or a luxury waterfront apartment — not with us,” said one investment manager based in the city-state.
Fund managers, private banks and other money managers say the boom in family offices and growth in the number of wealthy individuals parking their cash in Singapore have not translated into investment activity in private equity, hedge funds and equities.
“A lot of wealth management fees come through trades that clients place with banks. In times of volatility they are a lot more cautious. Many are not increasing leverage and are instead paying down the amount they borrowed,” said Pramod Shenoi, head of financial research for Asia Pacific at CreditSights.
“There was initially an expectation of double-digit fee income growth led by wealth management . . . But a lot of the money coming in is not going to the banks. Many family offices have their own infrastructure and hire their own investment advisers,” he added.
UOB, one of Singapore’s top three banks, said in April that net fee and commission income slipped 4 per cent to S$552mn compared with a year earlier as a result of softer loan-related and wealth management fees.
DBS last week said its wealth management fees, the largest component of fee income, plunged 11 per cent in the first three months of year.
DBS also posted a record first-quarter profit of S$2.6bn thanks to high interest rates. Chief executive Piyush Gupta said there had been strong inflows of new money.
“We delivered a record performance and benefited from safe-haven deposit inflows during a quarter marked by increased market volatility,” he said in a statement last week.
UOB reported a record S$1.6bn in core net profit for the first quarter of 2023, an increase of 74 per cent over the same period.
Both DBS and UOB said at their results presentation in April that wealth management fees were starting to rebound as investor sentiment improved.
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