’RBC reviews Asia wealth business for possible sale’

HONG KONG/TORONTO: Royal Bank of Canada (RBC) has put its Asian wealth management business under review, which could lead to its sale, four people familiar with the matter told Reuters.
The Canadian bank’s move comes after several Western firms have withdrawn from private banking in Asia, hit by increasing pressure to reduce costs at home, slowing growth in the region and rising compliance costs.
The RBC review was prompted because the bank’s global head of wealth management feels the Asian business, with less than $10 billion in assets, lacks the scale to generate adequate profit, the sources added.
There is, however, no certainty that the review will result in a sale, one of the people said. RBC’s main wealth management markets in Asia are Hong Kong and Singapore.
“There will definitely be a question mark over profitability of this kind of a business that lacks scale,” said a person with knowledge of the development. “Is it a core business for RBC in Asia? The answer is, probably not.”
All the people Reuters spoke to declined to be named as the review is confidential.
RBC Chief Executive Dave McKay confirmed the business was under strategic review but said no decision had yet been made about a sale.
“We go through periodic strategic reviews. It is a normal cycle of strategy,” McKay said in an interview with Reuters.
In fiscal year 2016, RBC’s revenue from international wealth management, including Asia, was C$430 million ($330 million). The bank does not separately disclose the figures for Asia.
While some smaller Western wealth managers have left the region, Asia is emerging as a key battleground for global heavyweights such as UBS and Credit Suisse as their traditional markets show slower growth and as countries like China and India produce more millionaires.
Last year, Barclays agreed to sell its wealth and investment management business in Hong Kong and Singapore to a unit of Singapore’s Oversea-Chinese Banking Corp. (OCBC).
A crackdown on money laundering by Asia’s main private banking centers is forcing wealth managers to spend more on compliance procedures, which industry executives say may prove too onerous for smaller players.
For smaller wealth managers, the extra spending on technology and compliance can erode profit margins and distract attention from the core business of growing assets. Wealth managers with assets under management of less than $25 billion will struggle to invest in systems and people necessary to stop the flow of bad money at private banks, private bankers have said.