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DBS extends Asia private banking push with ANZ assets purchase

Singapore's biggest lender says it has agreed to buy Australia and New Zealand Banking Group's wealth and retail businesses in five Asian markets.

SINGAPORE: DBS Group said on Monday (Oct 31) that it plans to buy Australia and New Zealand Banking Group's (ANZ) wealth and retail businesses in five Asian markets - part of a big private banking push for the Singapore lender and the first significant retreat from Asia for ANZ.

The businesses in Singapore, Hong Kong, China, Taiwan and Indonesia will be sold for around S$110 million, in a deal that underscores how smaller players are being squeezed out of private banking due to lack of scale.

"Further investments do not make sense for us given our competitive position and the returns available to ANZ," Chief Executive Shayne Elliott said in a statement.

Mr Elliott also told an analysts call the bank would look to exit its retail and wealth assets in the Philippines, Vietnam, Cambodia and Laos separately.

He added that for the bank to have remained competitive, it would have had to invest further in developing its branch network and digital capacity.

The deal will help DBS build up its leading position in the region, said Ms Tan Su Shan, DBS' head of consumer banking and wealth management, noting that the Singapore lender had recently entered the top five bank rankings for the Asia-Pacific region.

DBS and local rival Oversea-Chinese Banking Corp have been aggressively bidding for the Western private banking assets for sale in Asia.

DBS, Singapore's biggest lender, is also weighing a bid for ABN AMRO's Asian private bank, sources have told Reuters.

ANZ TO FOCUS ON INSTITUTIONAL BANKING IN ASIA

The ANZ transaction is expected to be completed progressively from the second quarter of 2017, with full completion in all markets expected by early 2018.

Most of its staff currently employed in the affected units will join DBS, ANZ said, adding that it will focus on its institutional banking business in Asia instead.

ANZ, Australia's third-largest bank by market value, also said it would take a loss of A$265 million (S$280.8 million) on the sale, including write-downs, and added the sale was expected to increase its Tier 1 capital ratio by 15 to 20 basis points. The losses are set to be booked in the first half of the current financial year.

They will come on top of A$360 million in one-off charges that will be booked in the year just ended. Those earnings are due to be released in full on Thursday.

In 2009, ANZ acquired the Royal Bank of Scotland's retail, wealth and commercial businesses in Taiwan, Singapore, Indonesia and Hong Kong, as well as institutional businesses in Taiwan, the Philippines and Vietnam for US$550 million (S$766 million).

The move was part of a "super-regional strategy" led by former ANZ Chief Executive Mike Smith, who left the bank last year.

DBS Q3 PROFIT STABLE, BAD DEBT CHARGES UP

The news comes as DBS posted a slight increase in its third-quarter net profit, in line with expectations, although bad debt provisions rose sharply due to its exposure to the troubled oil and gas sector.

Singapore banks are grappling with growing risks to earnings as credit woes deepen for the offshore services sector, which has been hit hard by an almost two-year rout in oil prices that lasted until early this year.

DBS said net profit came in at S$1.071 billion in the third quarter that ended in September, versus a profit of S$1.066 billion a year earlier. That compares with an average forecast of S$1 billion from five analysts polled by Reuters.

Bad debt charges rose to S$436 million in the third quarter from S$178 million a year ago.