SINGAPORE – OCBC plans to double the number of wealth advisers in Indonesia, part of a broader expansion after the Singapore lender agreed to buy HSBC Holdings’ assets in the country.
Relationship manager staffing will jump to 400 by the end of the year through hiring and internal transfers, the head of OCBC Indonesia Parwati Surjaudaja said in an interview from Jakarta. Client assets in the country have risen about 11 per cent to 127 trillion rupiah (S$9.2 billion) from a year ago, she said.
OCBC’s plans for the wealth business underscore the bank’s ambitions for Indonesia following the move to buy HSBC’s retail and wealth assets in May. Chief executive officer Tan Teck Long, who started in his role on Jan 1, has touted the opportunity to bank the country’s rich as one of his key growth areas.
While Indonesia’s wealthy are known for moving money to offshore centres including Singapore and Switzerland, the lower tax rates that apply to onshore financial assets may prompt investors to park more assets at home, Parwati said. For several years already, lenders in Singapore have been obliged to share information on clients’ financial assets with Indonesian tax authorities, making it more difficult for the rich to hide overseas investments.
After the HSBC deal, an investor had asked Parwati why OCBC bought the UK bank’s assets there given that the rich tend to move money offshore.
“That is not true,” Parwati said in the interview, adding most Indonesians, except for some of the ultra-rich, prefer to keep assets in their home country. Clients who keep financial assets in Indonesia will be taxed up to 20 per cent for their investment returns including capital gains, while the rates are as high as 35 per cent for those kept offshore, she said.
“Wherever you put the money, it will be reflected back to the authorities here,” said Parwati, who has spent more than 35 years in Indonesian banking. She joined her family firm Bank NISP in 1990, and OCBC increased its shareholding in the country’s fourth-oldest bank over the course of the following decade.
Indonesia has seen fund outflows related to political instability before. The country ran tax amnesty programs that offer citizens the chance to come clean on hidden funds, resulting in billions of dollars of previously undeclared assets. Singapore was the top origin of repatriated assets in the 2022 round.
Singapore’s second-largest bank is eying two types of clients for its wealth business: those who can park 1 billion rupiah or more with the bank, as well as US dollar millionaires – those with at least 20 billion rupiah in assets, she said.
For less wealthy customers, OCBC is looking to use digital channels, given the growing popularity of buying financial assets such as bonds and mutual funds online.
To support its business, OCBC backs Indonesia’s plans to adopt a full universal banking model, Parwati said. Under the current system, banks must have separate legal entities for each business line, such as investment banking and insurance.
Earlier this year, Indonesia’s Financial Services Authority said it was deliberating a shift to universal banking, which is common in most countries. The timeline for any change isn’t clear.
While optimistic on the wealth business, OCBC’s outlook for other banking services including corporate lending isn’t as bright. Indonesia’s currency has plunged to a record low this year, while the stock market is among the world’s worst performers thanks to oil shocks and government policy uncertainties. The rupiah plunge prompted the central bank to deliver an off-cycle rate hike in June, before it tightened policy again for a third time in about a month.
The economic headwinds and accelerating inflation are hitting the bank’s corporate clients, especially small and medium-sized companies. OCBC will spread out increases on loan rates to lessen the impact on customers, she said.
“The macro environment is not good,” she said. “We also want to make sure that our borrowers also stay healthy.” BLOOMBERG
