(Aug 14): By late 2018, the tax authorities of about 100 countries will be receiving information on offshore accounts held by their residents without having to specifically ask for it. In effect, it will further reduce the usefulness of companies registered in the Cayman Islands, or numbered accounts in Switzerland, to hide assets and avoid paying taxes. Some experts say this could fragment the flow of funds to offshore financial centres and result in more wealth being kept onshore.

In Southeast Asia, home to a growing proportion of the world’s wealthiest people, this trend could help rather than hinder Singapore’s three local banks — DBS Group Holdings, Oversea-Chinese Banking Corp and United Overseas Bank. All three of them have expanded regionally over the last couple of decades, putting them in a stronger position to gather onshore assets for their private banking and wealth management businesses. DBS and OCBC have also been acquiring the regional wealth management businesses of some exiting foreign players, enabling them to quickly attain scale in this field.

In fact, earnings from the private banking and wealth management businesses of the three local banks have been soaring, which some analysts say will drive up their return on equity (ROE) ratios and justify higher price-to-book valuations for their stocks. However, this comes after shares in the three banks have climbed strongly over the past year, on what could turn out to be misplaced optimism of an expansion in net interest margins (NIMs) and a plateauing of non-performing loans (NPLs). Can the wealth management theme keep the local bank stocks on an upward trajectory in the months ahead?

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