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No other Asia-domiciled house has made a more forceful attempt to be a regional player than Singapore’s DBS. It has been this way for more than a decade, as one CEO after another has come to fulfil a vision of a bank from Asia, covering Asia. The incumbent CEO, Piyush Gupta, describes it as "the Asian bank of choice for the new Asia".
DBS got its pan-regional ambitions under way with the acquisition of Dao Heng in Hong Kong in 2001 and has been steadily adding pieces and bedding down businesses since.
Today, Gupta aims for a DBS with a 40:30:30 split of earnings in Singapore/Greater China/South and southeast Asia, chiefly India, respectively. In this, it differs from CIMB, the closest comparable player in the region, which aspires only to be a powerhouse in the countries of Asean.
Where does investment banking fit into this? In truth, it’s not the sharpest part of Gupta’s vision; he told Euromoney in September 2010 that "we are really a good commercial bank, a good universal bank". He said that did not cut out investment banking, but "there is a recognition that this will not be our forte, to go out against the bulge-bracket banks in high-end capital market transactions. It’s not our principal area of strength."
Be that as it may, DBS is a powerful presence in investment banking in Singapore and is exporting that into other markets. "We originate out of Asia and distribute globally," says Clifford Lee, head of fixed income at DBS. "From an origination standpoint, we are very much focused in Asia – this is where our expertise lies, when we are investing to add more value to the market."
|Piyush Gupta, CEO DBS Bank: aiming to have 60% of his business outside Singapore|
Asia’s occasional opacity is an asset for DBS, he says, explaining: "The most valuable commodity in the market now is information. Certain markets are more opaque, onshore and offshore areas of control make things a little less transparent than we would like, and credit information is less available. We hope to be able to navigate through these issues in a more informed manner, considering this is our backyard."
It is a leader in all areas of investment banking at home – it has turned up on landmark IPOs, from SingTel’s S$4 billion ($3.1 billion) offering in 1993 through to Singapore’s largest IPO with HPH Trust, which raised $5.5 billion in March. It was instrumental in launching the real estate investment trust or Reit market – and business trusts, of which HPH was the biggest example – and has handled a greater volume of underwriting on these than anybody else.
It is a clear leader with the debt and equity needs of SMEs. It has helped to build one of the greatest duration curves in any local-currency debt capital market, beyond 40 years. And it appears on most M&A deals involving a large Singaporean institution.
This success has given the bank a sense of what can be achieved in other markets too. It has been involved on cross-jurisdiction equity deals for years: examples are Adaro Energy in Jakarta, San Miguel Brewery in Manila, Astro All Asia Networks in Kuala Lumpur and Australand in Sydney.
And generally, the newer frontiers are making a steadily bigger contribution: China, India, Taiwan and Indonesia contributed 17% of group revenues in the third quarter, with earnings up 35% from a year earlier.
"We were born in this region, we’ve invested in it for a long time. The competition is harsh but we just have to psych ourselves accordingly to take them on"
Clifford Lee, DBS
It is perhaps on the debt side where regional strength with a local feel is most valuable. "In the immediate future, we intend to stay relevant and competitive in the G3 space, which is crowded in Asia," says Lee. "But it is in local currencies in the region that we really hope to continue to grow. The faster the markets open up, the faster we will be able to make headway."
DBS dominates Singapore-dollar league tables on the debt side but is also starting to appear more frequently on CNH, or offshore renminbi bonds. DBS was a bookrunner on the Rmb3.6 billion ($571 million) CNH bond from Baosteel in November – the largest corporate CNH bond to date.
It has appeared on several others as well. "CNH feels more like a credit market than the bank space, which is more of an interest-rate play," says Lee, suiting DBS’s strengths. He says he will "continue to monitor" Indonesia for opportunity, focusing, for now, on the high-yield market – where it has worked on deals for Indosat and Adaro, among others – and has built a rupee capability in India.
China is an example of a business where investment banking does make a key contribution. Gupta has said corporate and investment banking in China, which drives that business, has been growing at 40% to 50% a year, at least in the run-up to China’s slowdown. This is arguably the great advantage of Dao Heng: the fact it creates a way into China rather than starting from scratch. Half of DBS’s customers in China are from Hong Kong, while red chips are responsible for the biggest growth in the Hong Kong business.
Going regional is not straightforward. "The difficulties of maintaining a multi-regional, multi-country strategy or platform for an investment bank are not only that you must be very good in your home market; you must also take on the best of the local market players in each of the other countries you set your sights on," says Lee. "That’s becoming difficult as domestic banks are improving, increasing in sophistication, and are able to provide more basic investment banking needs."
Yet going regional is a key part of the DBS plan. "We were born in this region, we’ve invested in it for a long time, and we invest on a much longer-term basis and have ridden the storms," Lee says. "The competition is harsh but we just have to psych ourselves accordingly to take them on."