DBS: World's Best Yet Again
Euromoney: World's Best Bank 2021
People often say: ‘Never waste a good crisis,’” muses Piyush Gupta, chief executive of DBS. He certainly has not. DBS wins our highest award this year for not just surviving the pandemic, not just staying profitable and robust, but for using it as a spur to do things differently and better.
“The last 18 months have allowed us to demonstrate our resiliency and our difference,” says Gupta. “It’s not a great thing to say, but the crisis has been good for DBS. We have leveraged the opportunity to put more daylight between us and our competitors.”
Gupta had a long-standing role model in this. For many years he has spoken admiringly of what Jamie Dimon did at JPMorgan during the global financial crisis, using it as an opportunity to make changes that made the bank far stronger in the aftermath.
“I view this crisis as a platform to reposition the bank fundamentally,” he tells Euromoney.
“Back in the 2009 crisis, what JPMorgan was able to do allowed them to put daylight between them and everyone else. We took the opportunity to do what JPMorgan did last time: inorganic deals, which are normally not easy. But a crisis creates a good opportunity.”
Indeed, although DBS did plenty that was admirable in its existing operations, it was really the brazen new stuff that caught the eye. While others battened down the hatches and waited for the storm to pass, so far during the pandemic DBS has bought or taken stakes in two banks in potentially transformative acquisitions and launched two entirely new exchanges, one around digital assets and one around carbon markets.
No other bank has been so dynamic during the review period.
It will be intriguing to see which of these four initiatives has the greatest impact in the bank’s future; a case can be made for each of them.
The two bank purchases – amalgamating the whole of south India’s Lakshmi Vilas Bank into DBS Bank India in November 2020 and taking a 13% stake in Shenzhen Rural Commercial Bank in April 2021 – are “game changers for us,” Gupta says. “They anchor us on growth in India and growth in the Greater Bay Area.”
They’re very different plays, however. Lakshmi Vilas is classic opportunism: a bank in such a state of disrepair that DBS only had to recapitalise it and assume its bad debts – and was then permitted to amalgamate it into DBS’s wholly owned subsidiary in India.
But it’s also an illustration of Gupta and DBS’s willingness to learn. A few years ago, Gupta was boldly telling people that he could build a successful digital bank with about 40 people and no branches. But he learned that, although he could attract plenty of customers this way, he couldn’t really make any money out of them, a lesson he then applied when rolling out the same model in Indonesia to greater success.
“After three or four years of trying in India and Indonesia, we realized the pure branchless model is hard to make work,” he says now. “We eventually wound up with three million customers in five years, but two million were never going to make us any money. So what we’ve done over time is trimmed down the customer base and figured out the customers we can lend to.
“When we launched the business in Indonesia, 18 months after India, our customer profile was much better. It’s part of my learning.”
When he launched digibank, you would have had a hard time convincing Gupta that he would buy a 600-branch fading south Indian bricks-and-mortar institution, but here we are. “We used to be a wholesale-funded bank, now we’re a retail-funded bank,” Gupta explains. “It allows us to get into the mass market, retail and SME. We had a digital difference; now we can back it up with a more entrenched point-of-sale presence. That’s a big difference for us.
“One thing I realized; if you look at the growth in India, notwithstanding the whole digital foray, who is making the biggest success? HDFC, Kotak. I came to the conclusion that a pure digital bank will take too long and not get the business profile we want to build. Creating a phygital model is the sensible thing to do.
“If I can get a brick-and-mortar player in south India or the Greater Bay Area, use digital as a point of differentiation and shrink down the branches, suddenly I have two million customers of a profile I need, who can borrow from me, and I have a much better likelihood of returns.”
And what about the quality of the book he’s inherited, in a country hit harder by the pandemic than almost any in the world? “The loan book is doing fine. I’m not seeing anything I didn’t expect to see.”
Shenzhen Rural is different again. This is a minority stake – albeit the biggest minority stake – in a solid but not widely-known bank. Shenzhen Rural (ignore the name, there’s been nothing rural about Shenzhen for at least 20 years and you’d be lucky to find a tree there these days let alone a tilled field) is a well-run mid-sized institution that serves five million active retail customers and over 170,000 active corporate customers, most of them in the small and medium-sized enterprise sector.
And it is in exactly the right place – the Greater Bay Area – at the right time. “The bank is at a stage where it wants to build an international presence; with clients seeking public listings,” says Gupta. “We have an international presence with strong digital capabilities and a good capital markets team. That’s why it finds us an attractive partner.”
And even if he did nothing else for a while but sit on the investment, it would still be a smart use of money. “The bank runs at about 17% to 18% ROE [return on equity]. It is high quality and pays good dividends. Based on economic growth alone, the investment will give DBS 25% return on allocated equity even if we don’t do anything.”
DBS will do something, however. Along with the securities joint venture DBS holds, it will use it to build out in Greater China and link to their existing operations. “We took the view that China is the big play, the biggest market, as big as the US in 10 years,” Gupta says of the joint venture. “We had a chance to build a business out.”
Then there are the two new exchanges. The DBS Digital Exchange is a three-pillar idea combining crypto trading, crypto custody and (perhaps the most interesting bit) an exchange for tokenized digital assets.
The crypto side is exactly what you would expect DBS, as the world’s most digitally successful bank over the last five years, to do. But it required confronting issues about the relationship between buyers and those who facilitate their investment.
“I am a bit ginger about who we let in,” Gupta says. “It’s accredited investors right now, but there are a thousand people itching to get in.”
Does one just let them in, recognizing that a free market must allow the facility for people to lose money if that’s the way the trade turns out? “Crypto is a story asset and people will get hurt with story assets,” he says. “When that happens and people lose money they will find a way to blame the provider and I don’t want to get into the middle of that. When I have other assets like a property token, I’m happy to let retail in there, with more real, tokenized assets.
“One part of me says buyer beware: as long as someone is not misselling to you, you are responsible for your own decision. “But the fact is, as a provider do I have some model to make sure people aren’t investing blindly, throwing caution to the wind? I believe with the Digital Exchange I do.”
The custody side is safer ground, meeting a clear and obvious need that more banks should really have stepped into by now. “We provide bank-level custody,” Gupta says. “We are a great custody house and we don’t keep that function in the exchange but in the bank. Hacking is the biggest weakness of crypto because of the lack of controls and protocols about custody.”
The fourth landmark was Climate Impact X, the new exchange for carbon credits launched with Standard Chartered, Temasek and the Singapore Exchange. It combines a host of different ideas, from blockchain and machine learning to using satellite monitoring to ensure projects are being properly delivered, and the idea is to add rigour to a market that has never quite got started because not enough people have faith in it.
“The real challenge was that people don’t trust the exchange of carbon credits,” Gupta says. “The bar has been quite high. But this is what Singapore stands for: trust, integrity and it happens to be in the region of the world’s biggest supplier of nature-based solutions. We should be able to leverage this.”
It will take time to gain traction. The exchange and project marketplace should be launched by the end of 2021, with the exchange allowing multinational companies and the like to sell large-scale high-quality carbon credits to institutional investors, and the marketplace allowing a broader range of corporate issuers who want to participate in the voluntary market. Each project on the marketplace will be supported by transparent environmental impact, risk and pricing data, with an international advisory council overseeing it all.
None of this is going to be fast; it will take years before we know whether it’s going to work at scale. But “I’m quite confident this will be economically positive for us in coming years,” says Gupta.
So that’s the new stuff. But whenever one interviews DBS executives (and Euromoney met at least a dozen in deciding upon this award) one occasionally has to coax them away from bold visions of the future to discuss the dull realities of the present day. This has been a brutal environment in which to operate. Reassuringly, DBS excelled at the boring stuff too.
In financial 2020, DBS grew operating profit before allowances by 2% to a record S$8.43 billion ($6.21 billion) and kept total income stable at S$14.6 billion. For every area where revenue was lost, another business line made it back, and then some. Where institutional profit fell, treasury and markets boomed. When consumer and wealth declined, a government bond portfolio built specifically to benefit from low interest rates trebled its gains. This reflected the breadth of the franchise.
“Last year we had a complete wipeout in interest rates,” Gupta says. “The old DBS, if you look back slightly more than 10 years ago, would have been in trouble: the last time rates collapsed we suffered dramatically.
“This time around, in 2020, we held income stable, profit before allowances was up a couple of percentage points, we grew our CASA [current account saving account] book; we lost fees from credit cards, which is to be expected as people stopped travelling, but we made it up on the wealth and retail side.
“At the same time digitalization gave us the ability to shave costs. It speaks to all the end-to-end digital connectivity stuff we have done. It’s clear to me that the capacity we built over the years put us in good stead.”
Indeed, the pandemic was a testing ground for many of the things DBS has been trumpeting for years. Consistently, the bank’s executives have told us it has the best digital business anywhere in the industry. So when the pandemic changed everything about the norms of banking and eliminated so much face-to-face contact and even the ability to come to work, there was a temptation to think: right, DBS, put your money where your mouth is.
This needed to be proved at every level from transaction services to the ability of staff to work from home. And in practice across the bank the eight years DBS has spent building a digital operation did pay off. More than 90% of staff transitioned quickly to work-from-home arrangements without any loss in productivity when government lockdowns kicked in. The bank launched digital business loans for SMEs and social enterprises, and a digital relief package for almost a thousand food and beverage businesses, helping them find new income streams online during the pandemic.
It was telling that the state turned to DBS in order to distribute emergency payments to Singapore citizens. “The government came to us to do more than S$30 billion of payments,” Gupta says. “That required a massive spike in volumes. Why did the government come to DBS? Because our digital capabilities are well up to snuff. They said: ‘Can we do S$2 billion overnight?’ We were able to do it.”
There are so many stats about digital adoption through DBS that one’s eyes start to swim: 99% of applications now cloud-enabled, 18,000 employees who have completed data training, 57% of customers now considered digital (generating more than twice as much revenue per person as a traditional one at a cost-to-income ratio 30 percentage points lower), digital payments volume up 95% in Singapore and 120% in Hong Kong in 2020, customer signups for the digibank mobile app up 216% between June and August 2020. The list goes on.
But, as always, it’s principally about what is learned along the way. “There was a focus on supply chain resiliency,” Gupta says by way of example. “For a lot of companies, we found the problem was not the first level supplier but the second, third or fourth. When you digitalize, you start getting transparency on where the roadblocks are.”
To keep learning, DBS created a task force to work on two ends of the same situation: leveraging the crisis in order to build for the future and thinking about the future of work. From February 1, 2021 bank wide, employees were permitted to work from home 40% of the time. “I believe that gives us an opportunity to reimagine our workspace.
Over the next five years we could reduce 20% of our workspace.”
But contrary to what you might expect, Gupta doesn’t want an office-less world. “There are people who think the office is over. I don’t agree with them. There are important and profound reasons the big office would stay. But the nature of work is changing: reducing the footprint, creating flexibility. We are thinking hard about that.”
One example is job sharing, hard in an analogue world but achievable in a more digital world.
“In the early days of the crisis everybody was so happy to work from home. But sometimes it’s not that easy. The challenges are: how do you keep the soul of the company? How do you onboard new people joining the company? It changes the way you manage people, the way you keep spirits high.”
Then there’s blockchain. A rather useful trinity has emerged between DBS, Temasek (its largest shareholder) and JPMorgan in this area, most clearly demonstrated by a new open-industry blockchain-enabled platform called Partior aiming at transforming interbank movements for payments, trade and FX.
Our review period also saw the first fully digital end-to-end secured letter of credit by DBS through the Contour Beta Network, an approach that is now in genuine production in Australia, China, Hong Kong and Singapore.
“Blockchain’s time has come,” says Gupta. “And the idea that its time has come prompts people to allocate capital to it and create big outcomes over the next two to three years.”
Risk management has of course been essential throughout the pandemic and DBS, like all the Singaporean banks, appears to have weathered the storm with prudence. It started with heavy provisioning and Gupta takes the view that the banks that had built up the buffers to be able to deal with an environment as unexpected as this one deserve credit.
“The fact that some banks had the capacity to be able to buffer their provisions is something you need to look at, you cannot discount it,” he says. “The banks operating with low coverage levels and low capacity to be forward looking are unable to buffer up. I think that makes a difference. If JPMorgan can take $20 billion of provisions, or us $3 billion to $4 billion, and do it without compromising overall performance, that must speak to financial strength.”
In fact, non-performing loans at DBS have barely budged at all and in the bank’s first-half results provisions began to be freed up as the environment improved.
Frequently Covid prompted a combination of the good and the useful. A good example was Singapore’s migrant worker population, a constituency hit hard by Covid, confined to cramped dormitories for months at a time.
In a practical sense, they had a banking problem: there are stores below these dorms where people shop, but they didn’t have cash. DBS put ATMs in the dorms to help and also took the opportunity to convert migrant workers – who were particularly keen to send money home, having no chance to spend – to digital tools. This was a win win: a humanitarian benefit, a colossal cost saving and also a way to avoid losing money on a segment of the population DBS has taken it as an ethical obligation to serve, stemming from DBS’s government prompted acquisition of Post Office Savings Bank and its customers back in 1998.
This brings us to sustainability, which Gupta talks about today with the same enthusiasm he previously reserved for digital subjects.
He speaks of three pillars for a sustainable future: responsible banking, responsible business practices and creating social impact. The first of these includes lending practices targeted towards less carbon intensive borrowers: the “carbon finance taxonomy,” as he calls it. The bank has already stopped onboarding customers who get more than 50% of their revenue from coal. Meanwhile, more is being committed to solar, with DBS committed to zero carbon in its own operations by the end of next year.
Among other things, DBS has built a transition finance framework to guide customers; increased its commitment to sustainable financing to S$50 billion by 2024 and to zero coal exposure by 2039; and has used its Portraits of Purpose platform to reach out into the community. Through the pandemic this programme reached 120,000 healthcare workers and over 60,000 beneficiaries through the provision of care packs, meals and personal protective equipment.
DBS Foundation is one of the more well-resourced and effective philanthropic arms in the region.
And in gender diversity DBS is already a leader in representation at senior levels, at least by the dismal standards of the banking industry. It is routine to find oneself speaking to a very senior woman when dealing with the top ranks at DBS – including head of institutional Tan Su Shan, head of capital markets Eng-Kwok Seat Moey, head of SMEs Joyce Tee and CFO Chng Sok Hui – and there are very few financial institutions where this is the case.
DBS, like everyone else, still faces a challenging operating environment.
“We don’t think the short end of the curve is going up in the next two to three years, so we need to re-architect for a world with low interest rates for longer,” says Gupta. “Despite the fact that the pandemic has consequences, I am a big bull on Asia’s secular long-term growth.”
But the truth is DBS is emerging from the pandemic in better shape than it entered it, and that is no small achievement.
“Nobody else has been able to demonstrate the ability to use this crisis as an opportunity,” says Gupta. “We have had the capacity to work through it and see the opportunities. That’s the standout.”
The Banker: Global Bank of the Year 2021
Even in a region with a global reputation for the greatest levels of innovation and forward-thinking banking services, DBS shines as it leads the way with fresh thinking and market-leading technology services.
DBS has taken the award for Global Bank of the Year after demonstrating how it was not simply exploring the most modern technology in banking, but is actively at the cutting-edge of its implementation, leaving other banks around the world in its wake.
Since the bank last won the global award in 2018, there have been multiple business challenges to contend with, not least the Covid-19 pandemic. But what DBS demonstrates is its unflinching dedication to providing best-in-class products and services, regardless of the obstacles that stand in its way.
Where other banks are still adapting to digitisation, DBS has developed services on the blockchain. The bank established the DBS Digital Exchange (DDEx), which allows both institutions and accredited investors to access a fully integrated tokenisation, trading and custody space for digital assets. Held as a private exchange, the system has strong governance in place, providing peace of mind to investors.
Working in collaboration with JPMorgan and Temasek, DBS developed Partior, an open platform for cross-border payments. Hosted on the blockchain, transactions can be executed immediately at any time of day. The platform has been designed to be interoperable with external blockchain networks, creating opportunities to expand into other forms of fund transfer. Working with Contour, trade finance services on the blockchain were introduced, supporting cross-border letters of credit. In addition, in partnership with AntChain, DBS has introduced a trade platform focused on supporting small and medium-sized enterprises in international trade.
Through utilising artificial intelligence (AI), the bank has created the DBS Nav Planner, providing customers with detailed insights into their financial positions. Utilising more than 100 AI models, the Nav Planner gives customers a personalised balance sheet, with a full overview of their financial position across multiple banks, covering products including savings, insurance plans and pension funds. The platform will track a customer’s financial health to advise whether they need to increase their savings or insurance coverage, and give advice on how to achieve these goals.
Further functions include Map Your Money, an interactive dashboard to simplify retirement planning, and Make Your Money Work Harder, to help customers understand investing, determine their investment profile and ensure they meet regulatory requirements. To date, more than two million customers have signed up to Nav Planner, with 400,000 of them becoming net savers.
Additionally, the bank partnered with Singapore Exchange, Standard Chartered and Temasek to establish a global exchange and marketplace for carbon credits called Climate Impact X. And, again working with Temasek, DBS launched EvolutionX Debt Capital, a $500m debt financing platform for growth-stage tech-enabled companies across Asia.
Piyush Gupta, CEO at DBS, says: “Winning Global Bank of the Year from The Banker tops off another year of outstanding global accolades for us. Throughout this challenging year, we were able to strongly support customers, employees and the wider community, while maintaining a solid financial position. Over the past 12 months, as part of our efforts to further reposition ourselves fundamentally as a bank of the future, we took stakes in banks in India and China to cement our position in Asia.”
He continues: “We also identified several big business ideas that would define the post-pandemic world – hyper-digitalisation, supply chain shifts and an increased focus on sustainability – launching several key initiatives on the back of this: digital and carbon exchanges, a blockchain payments joint venture, and our AI digital advisor Nav Planner. Looking ahead, we will continue to leverage game-changing new technologies, such as blockchain and AI, and remain at the forefront of innovation to serve our customers better.”
DBS has scooped the award for Bank of the Year Singapore again, as the bank continues to show its strength in offering cutting-edge technology alongside strong banking services.
The bank looks to explore the opportunities that new technology offers by creating a next generation suite of banking services for its customers. The bank launched the DBS Digital Exchange (DDEx), a private exchange built on the blockchain that allows both institutional and accredited investors to easily access the ecosystem. The platform has robust governance in place for investors’ peace of mind.
DBS also looked at bringing about the digitisation of trade finance using blockchain, in conjunction with Contour and AntChain. DBS joined Contour’s blockchain in May 2020 and completed its first letter of credit (LC) transaction within two months. Following this development, the bank was able to start offering digital LCs to customers in China, Hong Kong, Australia and Singapore. Through the partnership, DBS provides an end-to-end process that helps to reduce paperwork and settlement time, reducing the time to process an LC by up to 90%.
Further, DBS was the first Asian bank to join AntChain’s blockchain trade platform, Trusple, for distributors and suppliers to access real-time digital trade financing services. It is hoped that the service will help to encourage greater adoption of digital trade services, especially among small and medium-sized enterprises (SMEs), which often face difficulties when attempting to complete cross-border trades. Within six months, DBS had undertaken its first trade financing transaction on Trusple, valued at $40,000, on behalf of Singaporean SME iQuartz.
Customers of all ages were given a boost with the implementation of DSB NAV Planner. Integrated into the bank’s existing app, the service leverages big data and artificial intelligence to give customers oversight of their finances, and make informed decisions on how to make best use of their funds. Services include a simplified retirement plan and investment advisory to help people to successfully navigate the markets and minimise risk.
Euromoney: World's Best Digital Bank 2021
In digital terms, DBS can feel like ‘the Terminator’, in that it absolutely will not stop. The Singapore lender simply never lets up: it never stops innovating or finding creative digital solutions to problems. It is as integral to its customers’ digital journey as any bank on the planet and has been for the best part of a decade.
Other banks were considered for an award that was, as ever, fiercely contested, including Bank of America, Citi, Santander and last year’s winner, Ping An Bank. But in the end there was only one – very clear – winner.
One of the decisions DBS made long ago was to avoid having a single head of digital banking. That makes sense in a world where pretty much everything is digital. From chief executive Piyush Gupta, on down through chief information officer Jimmy Ng and chief planning and strategy officer Kwee Juan Han, it’s a team effort.
Every year offers a new chance for the bank to renew itself and pull further ahead of the pack. Covid offered a different kind of challenge. It shone a harsh light on the yawning gap between digital adopters and laggards – a gap that became a chasm when the pandemic tested banks’ digital capabilities.
Yet throughout Covid, DBS never stopped unveiling new products, from artificial intelligence to machine learning, blockchain to distributed-ledger technology. It reckons 99% of applications are now cloud enabled and investment in its Mobile First strategy ensured 90% of staff could easily transit to working from home.
In Covid’s early days non-customers flocked to DBS, attracted by its stability and its digital reputation. Between March and July 2020, the number of digital banking customers rose by more than 200,000. That included a threefold rise in digital customers over the age of 62.
“While we have been transforming ourselves digitally over the years, we decided early on to use the crisis as a platform to further reposition ourselves fundamentally as a bank of the future,” says Gupta. “This involved identifying key trends, which we believe will reshape the post pandemic world; trends such as hyper-digitalization, supply chain shifts and an increased ESG [environmental, social and governance] focus.”
A number of notable new partnerships stand out. In April 2021 DBS joined forces with JPMorgan and Temasek, Singapore’s sovereign wealth vehicle, to create a blockchain-based joint venture for payments, trade and settlement, called Partior.
In September 2020 it was the first Asian bank to join AntChain’s blockchain trade platform, Trusple, with a view to deliver cost-effective digital trade services to firms of all sizes, including small and medium-sized enterprises and micro-enterprises.
To be great at digital is no mean feat. Clever solutions often reveal new problems or opportunities to be addressed or seized. So success is secured in part by keeping things simple – evidenced by the bank’s three-point plan: being digital to the core; embedding itself in the customer journey; and always thinking and acting like a startup.
Unlike its peers, DBS treats this as an ideology rather than a marketing slogan. Take its NAV Planner, a digital advisory platform that leverages big data to help customers make better financial decisions. Launched in April 2020, it helped more than 400,000 people become net savers in the first eight months.
In Singapore, it was the first bank to deliver contactless digital trade finance services to corporates. For the first time, firms could upload trade finance applications and documents via its corporate banking platform, Ideal. That led to a 500% year on-year rise in suppliers being onboarded digitally in 2020.
Another recent development is DBS Digital Exchange, a regulated platform for the issuance and trading of digital tokens, backed by assets not already found on public markets – such as shares in unlisted companies.
That was in December 2020. Five months later, DBS priced an S$15 million ($11.05 million) digital bond, marking the new exchange’s first security token offering. And in August its brokerage arm, DBS Vickers, secured in-principle approval from the Monetary Authority of Singapore to offer trading services for digital payment tokens.
In May 2021 DBS joined forces with Temasek and Standard Chartered to launch a global carbon exchange and marketplace called Climate Impact X (CIX).
Based on the principles of the Taskforce on Scaling Voluntary Carbon Markets, launched by former Bank of England governor Mark Carney, the aim of CIX is to use satellite technology to track projects and to use machine learning and blockchain to ensure the transparency and integrity of carbon credits.
Gupta says the digital and carbon exchanges as well as Partior are three of the “seven or eight” big business ideas the bank tested when Covid struck. “The pandemic also helped us recognize that gaps still remained in several of our last-mile processes, which we doubled down on in refining to better serve our customers,” he notes.
That’s the kind of big picture thinking for which the bank has become famous. For DBS, digital isn’t a slogan or a means to an end but a way of life.
Euromoney: Asia's Best Bank 2021
DBS retains the award for Asia’s best bank for its outstanding response to the Covid-19 crisis.
Many banks demonstrated admirable resilience to the pandemic and generally the strongest got stronger. Several used it as a spur for digital acceleration. DBS did all that and then used the moment to acquire stakes in two banks and launch two brand new digital exchanges. It just never sits still.
It’s true that DBS was helped by the fact that its traditional international competitors for this award, HSBC and Citi, both announced new strategies that we need to see implemented before rewarding them again. Citi announced plans to move out of 13 Asian, European , Middle Eastern and African retail markets. But in any year and any competitive environment, DBS’s performance would stand out.
“I think the last 12 to 18 months allowed us to demonstrate our resilience and our difference,” says chief executive Piyush Gupta. “People often say: never waste a good crisis. We leveraged the opportunity to put more daylight between us and our competitors.”
The DBS of a decade ago would have been wiped out by the low interest rate environment. This time around, total income stayed steady and full-year operating profit before allowances actually rose 2% to a record S$8.43 billion ($6.37 billon) for financial 2020.
It managed this for two reasons. One was a far broader base of businesses than was previously the case. Consumer banking had a tough year, but it was counterbalanced by growth in wealth management. In that division, assets under management grew 7% to S$264 billion and the flagship DBS CIO Barbell Strategy Portfolio outperformed benchmarks, attracting S$1.9 billion of discretionary assets to it.
Similarly, where institutional banking obviously struggled with low rates, the treasury and markets business stepped up, growing revenues by 54%. DBS had built a proprietary government bond portfolio specifically for a scenario in which interest rates fell precipitously; gains from that portfolio tripled. SME banking and transaction services provided other diversified engines.
The other reason – and stop us if you’ve heard this before – was digital. Covid was something of a proving ground for DBS: after five years of talking the strongest tech game in banking, this, surely, was the moment to see if it worked. DBS is 99% cloud-enabled and has 18,000 employees who have completed comprehensive data training. So would it all work?
It did. DBS found there were elements of ‘last-mile’ tech that needed to be built in or refined, but it did that swiftly. When the onslaught of digital demand came, the bank was ready. Digital payments volume grew 95% in Singapore and 120% in Hong Kong. Digital collections were up 130% in both. Customer sign-ups for the DBS digibank mobile app rose 216% year on year between June and August 2020. Corporate transactions by DBS customers through PayNow rose six fold between January and October 2020 compared with the previous year.
There are a hundred other data points you could look at, but the key ones were that the cost-to-income ratio of the digital segment was 30 percentage points below the traditional segment and the ROE differential 11 percentage points better. This digital movement, unlikely ever to reverse, is very good for the bank.
To a point, this is what one would have expected. What we might not have foreseen is that the bank, having fortified and digitized, would use the moment as a launch pad for so much that was new. Gupta has long admired Jamie Dimon’s vision at JPMorgan through the global financial crisis and how the bank elevated itself at a time when others were just trying to stay afloat. Not wishing to waste the moment, Gupta set up two task forces, one to consider the future of work and another to build for the future.
Part of that effort was reflected in the launch of two new exchanges: one for digital assets, the other (although outside the review period) around carbon.
Also, by November DBS had amalgamated Lakshmi Vilas Bank, a troubled Indian lender, effectively creating a rare wholly-owned subsidiary for a foreign bank in India, one with 560 branches in five south Indian states in a deal that more or less happened for free, goodwill notwithstanding. One wouldn’t previously have imagined seeing Gupta so happy about gaining a vast bricks and mortar presence in India or anywhere else, but his thinking has evolved and he now believes this will give him retail funding in order to penetrate the mass market through the existing digital bank.
Then, although the deal didn’t formally get announced until two weeks after the review period ended, DBS bought 13% of Shenzhen Rural Commercial Bank, an institution running so well it will probably give Gupta a 25% return on allocated equity even if he never does anything else with it. It, like the newly-confirmed securities joint venture in China, speak of an assembly of mass in China and it will be interesting to see how it is developed.
None of this visionary stuff would matter much if DBS had found itself wiped out by poor risk assessment in its consumer and corporate customer base. But here DBS proved itself every bit as well managed as its local peers OCBC and UOB, neither of which has seen the slightest significant movement in their non-performing loan ratios and both of which are now considering when to release their generous provisions back into the bank.
In fact, the Singapore government turned to DBS and its tech in order to make S$31 billion of state payouts to stressed families and businesses through the pandemic. It turned to it again to lead the vital Singapore Airlines rights issue.
The bank made 10,000 collateral-free loans worth over S$5 billion to small businesses, extending 3,300 loan moratoriums in that group and relief worth S$11 billion for companies in Singapore and Hong Kong in 2020, plus S$5.2 billion of mortgage relief. It was a responsible bank and it will come out of the crisis stronger than it entered it.
Euromoney: Asia's Best Digital Bank 2021
DBS’s digital capability was tested to the core by Covid, and it not only stepped up but turned the situation to its advantage. From consumer to institutional, DBS used the opportunity to convert clients to digital channels, benefiting from improved economics as it did so. Before long the government was counting on the bank to disburse emergency payments to those under stress.
Amid all this, DBS still found the time to do striking new things. The most impressive was the launch of the DBS Digital Exchange, the first instance worldwide of a major bank creating a new platform on this scale.
While the headlines go to the fact that a big bank is allowing accredited investors to trade crypto – and offering them proper digital custody services when they do – in the long run the greater significance of the new exchange will be as a vehicle for trading digital tokens. In due course this should translate into investment in unlisted companies, Series B or C funding rounds, bonds and private equity funds. It should be an extremely useful area to have a first-mover advantage.
Although outside our review period, DBS also launched a carbon exchange with Standard Chartered, Temasek and SGX. If it works as planned, this could revitalize the whole idea of carbon markets.
Returning to what happened during the review year, three other developments stand out. DBS completed the first fully digital end-to-end secured letter of credit (LC) transaction via the Contour Beta Network in May 2020; by the start of 2021 it had moved streamlined digital LC transactions to the production network for customers in Australia, China, Hong Kong and Singapore.
DBS became the first Asian bank on AntChain’s blockchain trade platform, Trusple, in September 2020 and has already closed its first trade financing transaction on the platform for a Singapore SME called iQuartz. And with JPMorgan and Temasek, DBS announced a new open industry platform called Partior in order to transform cross-border payments.
DBS also needed to deliver digitally in the here and now, to prove that its tech savvy could translate into positive practical outcomes at a time of great strain. And it did, whether through the digital relief package it rolled out to about a thousand food and beverage businesses; or the use of its API platform to support liquidity needs of small businesses; or launching a digital financing facility with Haier to distributors.
On the wealth side, the DBS NAV Planner was an important part of the bank’s vision to democratize wealth and increase financial literacy. In eight months, it has delivered more than 30 million personalized financial planning insights to customers and, it says, helped 400,000 customers become net savers.
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