DBS Group Holdings, Southeast Asia’s largest bank and the Singapore Exchange ’s largest company by market capitalisation, was overall sector winner across three sectors — Banking & Investment Services, Insurance, and Fintech & Infrastructure — in The Edge Singapore’s Billion Dollar Club (BDC) awards. DBS also ranked first in the profit after tax (PAT) segment, which measures the growth in PAT over three years.
For its long-term shareholders, DBS has done much more than provide the best returns over three years. Shareholders of DBS have benefited from returns over the past 13 years. With its trailing 12 months net profit of $9.84 billion up to June 30, and its FY2022 net profit of $8.2 billion, DBS is Singapore’s largest company by net profits in absolute terms.
DBS’s growth is a result of its commitment to innovation and delivering stakeholder value. Group CEO Piyush Gupta took the long view when he was appointed CEO back in 2009. Through the past 10 years, DBS has been able to deliver high single-digit topline growth and often double-digit bottomline growth, through a combination of judicious credit and risk management with the help of digitalisation, efficiency from digitalisation, and taking advantage of the stability of wealth management and transaction banking.
By the same token, DBS has given back to society through the DBS Foundation and helping customers transition to a low-carbon economy.
In a recent interview, Gupta says DBS will “continue to be powered by doubling down on some of the businesses that have helped us in the previous decade”. These are likely to be its wealth management business, transaction banking franchise, and treasury markets business enabled by digitalisation.
Gupta has said that DBS will remain Asia-centric. Its main markets outside of Singapore are Hong Kong, China, India, Indonesia and Taiwan. DBS is now the largest foreign bank in Taiwan following the completion of the acquisition of Citi Consumer Taiwan in August. DBS acquired Lakshmi Vilas Bank in 2021, expanding its branch network on the sub-continent.
One of the big differences in DBS today, compared to 10 years ago, is risk management and its ability to manage credit. This is accomplished with the help of digital technologies — especially through the use of AI, data analytics and predictive tools across the bank.
Over the years, DBS has introduced data-driven ways of working and further integrating AI into its businesses. The consumer and SME businesses have been digitalised. Digitalisation is pervading other businesses including private banking, global transaction services, treasury & markets and risk management. DBS is the first local bank to capture its digital value creation metric.
“We were able to bifurcate between a digital segment and a traditional segment, and to accelerate the adoption of digital behaviour. We were able to show that digital customers had two times higher income per customer compared to a traditional customer.
“We were able to demonstrate that the digital segment had a cost-to-income-ratio that was about 34%, 20 percentage points lower compared to the traditional segment of 54%,” Chng Sok Hui, group CFO, said in an earlier interview.
The key is to be able to translate the digitalisation into operational metrics. For fintechs and neo banks, the rate of growth of their digital customers are monitored using data such as conversion rates, income per customer, net promotion scores, cost to serve etc.
According to group CFO Chng, these operational metrics translate into positive jaws and lower cost-to-income ratio trends. In 3Q2023, DBS’s cost-to-income ratio was 39.3%, down from 40.6% in 3Q2022.
For DBS, the focus on digitalisation enables the bank to better serve customers, and forge stronger relationships with them as the banking partner of choice. Recognising that customer needs are changing, DBS has been developing new solutions in recent years. In December 2020, DBS announced the setting up of the DBS Digital Exchange which allows institutional investors and accredited investors to tap into a fully integrated tokenisation, trading and custody ecosystem for digital assets.
In May 2021, DBS, alongside Standard Chartered Bank, Temasek and Singapore Exchange launched Climate Impact X (CIX), a global marketplace, auction house and exchange for trusted carbon credits. As at September this year, CIX has crossed the one million tonne milestone in traded and cleared credits within its CIX Exchange offering.
In June 2021, DBS introduced the DBS Fixed Income Execution (FIX) Marketplace, Asia’s first fully digital and automated fixed income execution platform, where issuers can directly connect with investors on the platform at their discretion. FIX Marketplace is an efficient and timely way for investors and issuers to access capital. It also helps in the development of the Asian bond markets; and creates inclusive and accessible markets for issuers and investors.
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Banking for a better world
In August this year, DBS announced it will commit up to $1 billion over the next 10 years to improve lives and livelihoods of the low-income and underprivileged, and foster a more inclusive society. The bank will commit $100 million each year in Singapore and its other key markets with effect from 2024. This commitment augments existing community initiatives by the bank and DBS Foundation.
Funds will primarily go towards programmes that aim to support this vulnerable segment in the community, such as helping the vulnerable cope with immediate daily needs, such as food and housing; giving people in the community the opportunity to break out of the poverty cycle through education; equipping them with important life skills such as digital and financial literacy; and strengthening their emotional and mental resilience.
Over the next few months, the bank will be identifying key organisations and programmes to partner and support. In Singapore, DBS will work with the Ministry of Social and Family Development to support lower-income families and households who need additional help.
In 2022, when inflation took hold, DBS was the first bank in Singapore to launch initiatives to help them to inflation-proof their finances and boost their savings. In August this year, DBS committed another $40 million to ease cost-of-living pressures.
As a small gesture of encouragement to the community, the bank also launched DBS 5 Million Hawker Meals, an initiative to subsidise five million hawker meals over 12 months.
On the sustainability front, DBS was the first bank in Singapore to sign up to the Net-Zero Banking Alliance, and the first in Southeast Asia to publish a concrete and comprehensive set of targets for Scope 3 financed emissions.
Decarbonisation targets have been set for seven sectors: power, oil & gas, automotive, aviation, shipping, steel and real estate.
Data coverage targets have also been set for the food & agribusiness sector and chemicals, paving the way for future emission reduction targets. The seven decarbonisation targets were developed based on internationally recognised and industry-accepted glidepaths such as The International Energy Agency’s Net Zero Emissions by 2050 Scenario.
In 2021, DBS launched LiveBetter, embedded in digibank, which allows users to track their carbon footprint and offset it. DBS is leading by example. Its DBS Newton Green is a net-zero building with its self-powered solar air-conditioning, and bamboo facade which shades the building along with an intelligent lighting and air-conditioning system.
In September 2022, DBS announced plans to develop DBS BetterWorld, an interactive metaverse experience to demonstrate how the metaverse can be leveraged as a force for good. DBS BetterWorld’s first concept was unveiled in August 2023, highlighting the global food waste challenge through gamified elements in a fantastical setting. It will also spotlight how Businesses for Impact supported by the DBS Foundation are tackling food waste through their own innovative methods.
In September this year, DBS and Keppel announced that they have signed a memorandum of understanding (MOU) to jointly scale up sustainable urbanisation and digitalisation solutions in Asia, with a focus on India, which is one of DBS’s six core markets.
More recently, in October, DBS and Univers, a decarbonisation software company, signed an MOU to accelerate the adoption of affordable digital solutions to improve carbon measurement and tracking in order to drive Asia’s energy transition. The data tracking is likely to be particularly helpful for SMEs.
DBS’s organisational structure is now horizontal instead of vertical as part of the change over the past 10 years. “We call it managing through journeys,” Gupta says. “We use controlled trials and data-driven operating models. We have built the muscle for experimentation and A/B testing. As we take things to market, we are heavily AI-driven in all the products that we create. We are increasingly using workflow engines, so work flows horizontally but remains completely transparent.”
DBS recorded a net profit of $2.63 billion excluding a one-time cost of $40 million, up 18% y-o-y, but down 2% q-o-q in 3QFY2023, for the three months to end-September. For the nine months, net profit grew 35% to a new high of $7.89 billion with ROE at a record 18.6%. Net interest margins (NIM) rose 3 bps q-o-q but 29 bps y-o-y to 2.19%.
Fee income was the bright spot, having rebounded. Wealth management may also be making a comeback, Gupta indicated. Wealth management fees increased 22% y-o-y in 3QFY2023. Card fees grew 21% y-o-y in the same period while loan-related fees rose 12%.
In 2024, Gupta is looking at double-digit growth in fee income and overall non-interest income. “Momentum is good for wealth management and cards. If capital markets are constructive, we should get some pick-up in investment banking,” Gupta said during the results briefing.