DBS was Euromoney’s best bank in the world this year, principally for turning the pandemic crisis to its advantage better than any other bank did.
As the pandemic eases, as travel begins to return to its home base of Singapore and moratoria are gradually eased in other key markets such as India and Indonesia, it becomes easier to see how the bank is emerging.
In credit terms, very well.
Chief executive Piyush Gupta never expected problems among the bank’s bigger customers, but needed clarity on the small and medium-sized enterprise and consumer books when government support unwound.
“The short story is that I think the worst is behind us and I’m not expecting any cliffs,” he says. “I do think that, like everybody, we’re over-reserved. Net-net this year we will show almost zero cost of credit. My outlook for next year looks pretty similar.”
Non-performing assets declined 1% through the third quarter as new NPA formation was more than offset by repayments; nine-month net profit, up 46% to S$5.41 billion ($3.96 billion), was a record, as loans grew 9% and both fee income and treasury markets income hit all-time highs.
If we can accept, then, that the crisis is over in terms of its impact on banks, how is DBS positioned compared with how it went in to Covid?
It has a far bigger footprint in India for the Lakshmi Vilas acquisition; it has a promising stake in Shenzhen Rural; and it has two new exchanges, for digital assets and for carbon credits, to develop.
It also has an investment banking joint venture in China – and perhaps this is the most interesting new direction.
“We don’t have an investment banking operation of any size or scale outside Singapore,” Gupta says. “This idea of trying to build an investment banking franchise in China is a different strategy for us to anything we’ve ever done.
“The reason we figured it was a worthwhile thing to do is just because it’s China. And I’m convinced that China’s participation in the capital markets is going to be as much a game changer as their ascension was to WTO in 2002.”
The JV, with an arm of the Shanghai government, has done two deals so far.
It is now appropriate to start investing for growth, given our outlook on the region and the platforms we’ve created
Piyush Gupta
Alongside that, DBS’s investment in digital, already among the most effective in the world, will be stepped up further, Gupta says, ready for the competition that will come with Singapore’s new digital banks in 2022.
In 2020 the bank set up a unit called DBS Finnovation to hold businesses adjacent to core banking activities; it includes the digital asset exchange, the 23% stake in Climate Impact X and a 33% stake in the blockchain-based payments business Partior.
Each of those underlying businesses has great potential, but, as always, digital innovation permeates the entire bank.
The Covid lockdowns tested whether or not DBS was as good on tech as it always claimed to be. It was.
And, back in the ordinary world of people and desks, DBS added 250 to 300 people to its headcount in the third quarter.
“We think it is now appropriate to start investing for growth, given our outlook on the region and the platforms we’ve created,” says Gupta.
