DBS and, in particular, its chief executive, Piyush Gupta, are considered visionary in the digital disruption space. But it seems he overstated the case when he said, a few years ago, that in the next five to 10 years we would start to see banks failing because they had not embraced digital.
“I think that was wrong,” he says now. “Three years down the road, I’m not seeing any banks getting to the stage of failing in the short term. There’s a lot more resilience than I anticipated.”
Now, he thinks if banks are going to fail, it will be a matter of capital, not liquidity, as beating the cost of capital becomes more difficult.
Gupta says there is still plenty more disruption to do, particularly around big data, AI, partnership and blockchain. But, asked if the threat he anticipated from the likes of Ant Financial has materialized, he admits: “I expected more.”
He thinks there are two reasons. One is that as big players go outside their home markets, they face more headwinds.
“For many people in China, you could make a big difference, because the underlying payment methods are inefficient. But when you come to Singapore, people already just flash their card anyway. Outside home markets, it has not been that easy.”
The second reason is that in the last two years regulations have become more level, he says. “In the early years, for a decade, all of big tech and fintech had massive regulatory arbitrage.” That is narrowing.
“But don’t get me wrong, they are still our biggest nightmare.”
DBS, like many, is trying to weather difficult market circumstances. Its record 2018 full-year result, while impressive overall, disguised a 21% decline in full-year treasury and markets income.
Gupta says diversification has helped the bank weather difficult times in the markets. DBS’s market-making business has certainly been hit; ordinarily Gupta expects it to account for 10% to 12% of the bank’s income – it is down to 6%.
“But it used to be 20%, and I deliberately drove it down,” he says. “I wanted to halve it. But the slide from 10% to 6% is not deliberate: we are finding the market making much harder.”
Gupta says the markets business itself is more diversified than it used to be: “Earlier, I used to make $600 million on the customer franchise and $1.2 billion on the market making. Now it’s the reverse.”
Furthermore, the strengthening of cash management and trade finance provides insulation.
“In a decade, cash [cash management plus securities and fiduciary services] has gone from 10% of the bank to a third of the bank. That really moves the needle. If I can keep that engine stable, it pays for a lot of other headwinds.”
Despite weakness in wealth management in the fourth quarter – “people just froze” – and in the capital markets – “in the back half of last year there was no deal flow in Asia” – Gupta does not think the US-China trade war threat is being felt in his businesses.
“In real dollars and cents terms, there is some slowdown in trade, but it’s not huge,” he says. “And there is no material shift in supply chains that I can see.”
He says that people have been moving plants and machinery out of China into Vietnam and Indonesia, but says this has been happening for years.
“It is nothing to do with the trade war. As best as I can tell, people are willing to expand marginal new capacity outside China, but they’re not actually closing down the assembly line in China.” Technology, in particular, “is a very tightly integrated ecosystem. You can’t just move the plant without all the suppliers and the chips and so on.”
Some recent staff moves at DBS have caught the eye.
Tan Su Shan, a considerable success in running the consumer and wealth parts of the bank, was made the head of the institutional banking division, a role she began on February 1. Ten days later, Han Kwee Juan, former chief executive of Citibank Singapore, was hired to head the strategy and planning division. Shee Tse Koon, who held that role previously, is the country head for Singapore.
It looks like a cluster of potential successors being assembled.
“I’m trying to build a succession bench,” Gupta says. “I’ve got four or five candidates all plus or minus 50, who, with the right grooming, have the potential to take my job some day.
“Not soon,” he adds.
The moves came about partly because of Jeanette Wong’s retirement from the head of institutional role.
“It gave me an opportunity to reshuffle the deck,” Gupta says. “I’m a big believer in having generalists. One of the reasons I’m a good banker is I know a little bit about everything: I’ve run mortgages, I’ve done cards, consumer, corporate banking, transaction banking. So to me, getting someone [Tan] who runs consumer and wealth and have her run the corporate side of the business is helpful.”