DBS Group Holdings has cleared the $30 level emphatically. Part of the reason is likely to be additional value that some of its digital assets including DBS Remit and the businesses under DBS Finnovation could bring to DBS’s shareholders.

During a results briefing on Nov 5, DBS indicated that the “holding company” owns DBS Finnovation, which in turn has stakes in Partior, DBS Digital Exchange, Climate Impact X and new innovations which have not yet happened.

“The structure will allow us to create partnerships, joint ventures or even our own bespoke activities and keep them at arm’s length from the bank,” group CEO Piyush Gupta had said on Nov 5. DBS Group Holdings, the listed holding company, and DBS Bank are currently managed under a common governance mechanism. “If and when it becomes appropriate, we could move Finnovation directly under the holding company alongside the bank,” Gupta says.

In most countries, including Singapore and the US, bank holding companies are regulated in the same way as banks. DBS’s announcement of DBS Finnovation comes after Siam Commercial Bank (SCB) restructured into a holding company, SCBX, which holds SCB, the bank. SCBX will also hold its digital platform businesses with around 15 entities, and more in the pipeline. According to The Bangkok Post, SCB plans to spin off — and perhaps list — some subsidiaries and business units.

“It will be interesting to see what Bank of Thailand chooses to do,” says Gupta, referring to how the Thai regulator approaches a bank’s digital growth businesses. “We will review our options over the course of the coming year. We believe there are opportunities to monetise the several technology stacks we are building, to create value transparency when the time is right.”

He adds that monetising DBS Remit is certainly going to be looked at. “But we haven’t lined up all our ducks at this time yet,” Gupta added. DBS Remit is a remittance business that could be given a boost when PayNow and India’s instant payment platform United Payments Interface (UPI) link up in July 2022.

“In terms of unlocking value, apart from price visibility, there is the opportunity to increase customers using some of the capabilities we have built by going through intermediating banks’ customer bases. As banks are generally circumspect about using another bank’s tools to interact with their clients, it may be helpful to spin out and unbundle the business from DBS. If you spin out an entity that has multiple-party ownership, where you keep a stake, then you can start accessing much larger customer numbers. Our plan for these businesses is B2B2C,” Gupta explains.

“Unlocking a business will depend on the incremental value that would be created, and on how integral it is to core banking activities in terms of regulatory and other requirements. For example, a deposit franchise or deposit-linked business is much harder to unbundle because of depositor protection requirements, while asset-led businesses tend to be easier,” he says.

Another reason DBS has rallied in recent days could be the relative decline in the price of Sea. In 3Q2021 ended Sept 30, despite Sea’s revenue more than doubling, net loss rose by 34%. Remarkably, Sea reported negative Ebitda in 3QFY2021. The company that has a higher market cap of US$173 billion ($186 billion) than our three local banks combined ($184.3 billion), reported negative Ebitda for its ecommerce segment and its digital financial services sector.

Sea’s results are in stark contrast to DBS’s in the same quarter with DBS reporting a net profit of $1.7 billion. Even then Sea’s share price is up 60% this year. Since its high of around US$370 on Oct 19 though, prices are down some 15%. Whether this is the beginning of the end of Sea’s threeyear upclimb remains to be seen.

Meanwhile, investors are starting to rerate DBS against Sea. Interestingly, Sea was awarded a Digital Full Bank licence by the Monetary Authority of Singapore. That may give Sea bulls a chance to pause because being a regulated bank is a sea change from being an unregulated tech start-up or FinTech.

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