Phillip Securities to buy RHB's Singapore stockbroking business

IN CONTINUED consolidation within the stockbroking industry, Phillip Securities is buying RHB Investment Bank Berhad's (RHBIB) Singapore stockbroking business in RHB Securities Singapore (RHBSS) for an undisclosed sum.

The consideration will be calculated "based on the net tangible assets of RHB Securities Singapore", RHB Bank said in a filing to the Bursa Malaysia stock exchange.

RHBIB is a wholly-owned unit of RHB Banking Group in Malaysia, while RHBSS is wholly owned by RHBIB. Both sides have signed a conditional share purchase agreement.

In its rationale, RHB Bank said: "The increasingly competitive broking environment has made it no longer viable for RHB Securities Singapore to continue its stockbroking business."

Financial statements obtained by The Business Times showed that RHBSS was bleeding losses after tax of S$8.05 million for its FY19 ended Dec 31, 2019, albeit an improvement from losses of S$16.06 million in FY18 and S$13.95 million in FY17. This was despite revenue remaining within S$23 million to S$25 million for each of the three years.

The financial statements also listed RHBSS's total assets and total liabilities at S$126.6 million and S$55.7 million, respectively, as at end-2019.

Prior to the completion of this disposal, RHBSS will also undertake a corporate exercise to transfer some businesses units and assets to the Singapore branch of RHB Bank, including the client coverage team, research and corporate advisory services, equity capital markets and institutional equities sales, as well as certain share margin accounts.

Khairussaleh Ramli, group managing director of RHB Banking Group, said this will integrate the bank's capital markets services with its corporate banking and global markets services under RHB Bank Singapore. This would enable the RHB Banking Group to offer a more holistic customer experience to its corporate and institutional clients in Singapore and the region through its wholesale banking solutions.

With the acquisition of RHBSS's stockbroking business, all of its clients, house dealers, remisiers and trading representatives will move over to Phillip Securities. A team has been assembled from both sides to ensure a smooth integration of RHBSS customers affected by the proposed acquisition, in particular customers who are holding trading or margin financing accounts.

The acquisition will improve Phillip Securities' competitive position and distribution scale in Singapore and Asia, the firm said. Even before the acquisition, Phillip Securities was already the largest non-bank-backed retail broker in Singapore. Phillip Securities has a team of more than 550 trading representatives. RHBSS, when contacted, declined to disclose the number of dealers, remisiers and trading representatives that it has.

Phillip Securities said the move will allow new customers to enjoy greater access to trade a broad range of more than 40,000 global investment products on its online trading platform Poems, as well as financial planning services such as wealth advisory to help them reach their financial goals.

It added that with a larger customer scale, it will be able to fast-track its digital strategy and launch innovative technology solutions on Poems to customise products for its customers.

The proposed transaction is subject to the approvals of relevant regulatory authorities in Singapore, and is expected to be completed in the third quarter of 2020.

Late last year, DBS Vickers had also agreed to transfer its offline retail securities brokerage business to UOB Kay Hian. With this, more than 100 remisiers will move to UOB Kay Hian, making it the largest securities brokerage in Singapore, with over 800 dealers and remisiers.

Singapore's traditional retail broking business, which uses self-employed remisiers, is declining as more retail customers shift to self-directed online trading.

Brokerages here have a history of growing through mergers and acquisitions to gain scale and lower overheads.

 

Lee Meixian