OCBC Bank said on Thursday that it has agreed to buy National Australia Bank's (NAB) private wealth business in Singapore and Hong Kong, a move which will give the Singapore bank immediate access to about 11,000 new affluent customers and add US$3.05 billion in customer deposits.
The purchase price is the book value, or net asset value, of the business at the time of completion of the transaction, which is expected to be before the end of the year, subject to regulatory approval. Based on the quarter ended March 31, 2017, the entire NAB's book value per share is A$17.98.
The Business Times understands that the purchase price of the NAB assets won't involve any premium to their book value. OCBC has said the business will be earnings accretive to the bank within the first year of completion.
As at end February 2017, NAB's business comprised a mortgage portfolio amounting to about US$1.7 billion (S$2.39 billion) worth of mainly residential mortgage loans, and a deposit portfolio made up of about US$3.05 billion (S$4.28 billion) worth of deposits of a mix of currencies.
OCBC said the addition of US$1.7 billion (S$2.39 billion) of mortgage loans will increase the overall size of OCBC Bank's mortgage portfolio by about 4 percent, based on its mortgage loans book of S$60 billion as at end March 2017.
The mortgage portfolio that OCBC Bank is acquiring is well-supported by a broad pool of mainly residential properties with a weighted average loan-to-valuation ratio of below 60 per cent. It has had a strong track record with negligible delinquencies, reflecting its high credit quality and the affluent profile of the customers.
More than half of the properties are located in Australia, the majority of which are in the major cities of Sydney, Melbourne and Brisbane. Properties in the UK, Hong Kong, New Zealand and Singapore make up the rest of the mortgage portfolio.
Ching Wei Hong, Chief Operating Officer, OCBC Bank, said the deal makes financial and strategic sense to the bank.
"A mortgage loans book of more than S$2 billion is not small. It would have taken us time and money to grow our mortgage loans organically by that amount. We are now getting an immediate boost to our mortgage loans book.
"The mortgage portfolio to be transferred to us is a high quality and well-supported one. And the customers are in the affluent segment that we have been building."
OCBC Bank will gain access to about 11,000 new customers - more than 7,000 in Singapore and about 4,000 in Hong Kong. The majority of the customers are Singapore and Hong Kong residents.
"OCBC Bank will have opportunities to deepen relationships with the affluent customers by leveraging its unique wealth management platform to provide an extensive range of wealth advisory, products and services,'' OCBC said.
On the sale of its private wealth business in Singapore and Hong Kong, Neil Parekh, General Manager, Asia (ex-Greater China), National Australia Bank, said NAB wanted a buyer that could meet its customers' growing demand for a wide range of wealth management solutions in Asia.
"OCBC is uniquely qualified to do so. We will work closely with OCBC Bank during the transition to completion to ensure a smooth process for customers..."
At 10:51 am, OCBC was trading around S$10.55 a share, up 9 Singapore cents, or 0.9 percent.
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