A major Singapore bank said in its fourth quarter 2022 earnings release that low wealth management fees had a negative impact on its earnings, resulting in lower-than-expected profits. Looking ahead to 2023, Global Data sees limited risk-on investment growth and wealth management fee income to remain subdued despite rising assets under management (AuM) .
Singapore’s largest banks DBS, OCBC and UOB all reported lower wealth management fee income in Q4 2022. This comes despite DBS and UOB recording client AUM in 2022 compared to 2021, while OCBC reported record net inflows.
Sluggish investment activity and risk-averse customers were cited as reasons for the decline. Unfortunately, this situation is expected to continue until 2023. Rising geopolitical tensions and a weak global economy will dampen investor confidence, especially in internationally connected hubs like Singapore. Individual investment balances in Singapore stocks and mutual funds are expected to register growth of 7.7% and 3.6% respectively in 2023, but this will not lead to a significant increase in fee income for wealth managers.
Additionally, increased competition from low-cost digital providers such as robo-advisors and online brokers will continue to put pressure on fee income. According to GlobalData research, as of 2022, 21% of Singapore’s HNWI investors were using robo-advisors for their investments. Investor Insights: Channel Choice Analysis.
Despite relatively healthy overall asset markets, increased competition, cautious investors and weak growth in retail equities and mutual funds mean Singapore banks will not be able to resume rapid growth in wealth management revenues in 2023. You can’t. Banks will need to be a little more patient. We will be working with our wealth management department over the next 12 months.