DBS Group Holdings Ltd., Southeast Asia’s biggest bank, said it will take over Royal Bank of Scotland Group Plc’s retail and commercial banking businesses in China.
RBS will transfer close to 25,000 clients in Shanghai, Beijing and Shenzhen to DBS China, Singapore-based DBS said in a statement today. DBS didn’t spend any money on the deal, Melvin Teo, chief executive officer of DBS China, said at a news conference in Shanghai.
DBS Chief Executive Officer Piyush Gupta, seeking to lift a stock that’s trailed rivals in 2010, said last month he plans to improve return on equity by building businesses that cater to wealthy individuals and small companies, and by expanding in China, India and Indonesia. For RBS, the deal is part of asset disposals following a government bailout and record losses.
“There’s a bit of momentum there for selling fringe assets,” said Mike Trippitt, a London-based analyst at Oriel Securities Ltd. who has a “buy” rating on RBS. The deal “is good in terms of sentiment,” he said.
Singapore-based DBS aims to generate about 40 percent of revenue from the city state in five years, down from about two-thirds now, according to a plan unveiled in February. Greater China would make up 30 percent, DBS has said. South Asia and the rest of Southeast Asia may contribute another 30 percent.
The transaction with RBS, if all accounts choose to move, will add $900 million of deposits to DBS China and lower its loan-to-deposit ratio to about 70 percent from the current 79 percent, Teo said. He said RBS wanted to exit the retail and commercial banking businesses so DBS took them over for free.
Still in China
RBS will continue to provide wholesale banking services to large companies and institutional clients in China, the Edinburgh-based firm said in a statement today. Plans to set up a brokerage in the country were approved and China remains a “core market,” it said.
DBS fell 0.9 percent to S$13.90 in Singapore trading today, extending this year’s losses to 9.7 percent. RBS dropped 0.4 percent to 41.16 pence at 9:46 a.m. in London.
China opened its banking industry to overseas companies in December 2006, sparking a rush among foreign lenders to compete for the nation’s corporate and household savings, which reached $8 trillion in September. The country’s loan growth averaged 20 percent from 2005 to 2009, according to the central bank.
The number of high net worth individuals in the nation increased 31 percent to 477,000 last year, according to a survey by Capgemini SA and Merrill Lynch Wealth Management. That has attracted the world’s top managers of assets for the rich, including UBS AG.
DBS plans to have 50 branches in China from the 16 outlets within three years, Gupta said last month. It plans to double staff in the country to 2,000 by early 2012, Chief Financial Officer Chng Sok Hui said at a press briefing in Singapore today. The lender has grown its customer base in China more than five times over the past three years, according to today’s statement.
RBS Chief Executive Officer Stephen Hester is shrinking the bank’s balance sheet after it received the world’s biggest banking bailout in 2008. It has since pared non-core assets by 90 billion pounds ($141 billion) to 174 billion pounds, the firm said in June, and plans to sell the remainder by 2013.
RBS sold its Indian commercial and consumer division to HSBC Holdings Plc in July for $95 million after disposing of units in Argentina, Kazakhstan, Pakistan and the United Arab Emirates. The firm sold its businesses in Singapore, Taiwan, Indonesia, Hong Kong, the Philippines and Vietnam to Australia & New Zealand Banking Group Ltd. for $550 million in August 2009.