Awards for Excellence 2019
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DBS regains the best bank in Asia award it first won three years ago, for showing how innovation, digital vision and creative thinking can not only sound good but also translate into record profits and resilient margins.
The Singapore-based bank has long been a role model for banks seeking to undertake a digital transformation, and has attempted it on a scale rarely seen at an international bank, with root-and-branch disruption from the front office through the plumbing to the data centres, and at every level from the branch teller to the chief executive.
But DBS’s particular skill has been to undertake such a journey while remaining consistently profitable, losing no momentum while reinventing itself. The 2018 full year brought a 28% increase in net profit to a record high of S$5.63 billion ($4.12 billion), with a decade-high return on equity of 12.1%.
ROE is one of the visible metrics for the improvements that digital innovation has made to the bottom line. DBS can go further – it articulates precisely the difference in return from a digital-savvy as opposed to a more traditional customer – but the mechanics of it are pretty simple: digitalization drops the cost-to-income ratio (currently 44%, but chief executive Piyush Gupta is aiming much lower) while making it easier to acquire new customers, which boosts the top line even if margins fall in a digitalized business.
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| Piyush Gupta |
Digital work continues, with a focus recently on making technology infrastructure cloud-native: now over 80% of DBS’s open systems are cloud-ready, and there are over 60 cloud-native applications.
The bank has published over 350 application interfaces enabling 90 external partners to integrate the bank’s technologies, it has trained over 10,000 staff on a data-driven curriculum, and has increased its release cadence of new applications (basically the speed of new launches) 10 times over, looking more and more like the tech companies that Gupta so admires.
But there is more to DBS than just digital. It is a strong bank across the board, with no obvious weak point. Consumer and wealth management income rose 21% to a record high of S$5.65 billion last year, with growth across wealth, deposits, secured and unsecured loans, insurance and cards. With the integration of retail and wealth businesses from ANZ in five countries now complete, DBS runs one of the best high net-worth-to-mass-wealth businesses in the region.
Transaction services under John Laurens is going from strength to strength: cash management income rose 55% to S$171 billion last year. It’s one of the businesses that most obviously benefits from the bank’s disruptive, tech-adept nature.
Elsewhere, institutional banking was up 9% in a challenging year, while a difficult fourth quarter in treasury and markets was easily absorbed.
Often forgotten, the bank has a powerful investment banking engine too, active across all areas of the capital markets and advisory.
The bank’s regional expansion has been interesting. The most attention is given to its experimental digital banks in India and Indonesia; the first gained a lot of customers but not, yet, any profit, while the second learned from the lessons of the first and already looks to be on a clearer path to swift earnings. But beyond digital, the bank’s presence in Taiwan retail and wealth, in Hong Kong and the Greater Bay Area, is important. A long-term plan will elevate the positioning of the high-population markets relative to the hubs of Singapore and Hong Kong, making DBS well-placed for continued growth.
With succession planning clearly in place across the group, and a level of senior gender diversity uncommon in Asia Pacific banking, DBS looks like most banks should want to look.
