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Why DBS’s cost-income ratio is going up

DBS is all about digitization bringing costs down, but Thursday’s numbers show a reversal. It’s caused by the acquisition of ANZ’s wealth business in Asia.

Piyush-Gupta-2016-for-2018-R-600

DBS CEO Piyush Gupta

For some time now, DBS has delivered a convincing narrative: that its investments in technology and digital banking will drive the cost-income ratio down, making the bank more profitable.

Late last year, DBS calculated, and published, a methodology showing that a digitally engaged customer delivers a cost-to-income ratio fully 20 percentage points lower than traditional clients.

CEO Piyush Gupta has argued that the digital banking channel in India, digibank, ought to settle at a cost-income ratio around 30%, with Indonesia following a similar model, and that the whole bank should be heading in that direction.

Why, then, did DBS on Thursday report a fourth-quarter cost-income ratio of 44%, up from 41% in the previous quarter?

The answer is fairly simple, but it raises a bigger question.


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