“With every crisis comes silver linings and we will continue to look for new revenue streams and avenues of growth to create long-term value for our customers and stakeholders.”
Tan Su Shan
The year started full of promise with healthy business volumes before the weight of Covid-19 bore down upon us. Despite the pandemic and a challenging business environment underpinned by low interest rates, IBG navigated the year with resilience and closed it with strong business momentum in the fourth quarter. We delivered total income of SGD 5.75 billion.
Compared to 2019, net profit before tax fell 39% to SGD 2.27 billion, primarily due to allowances increasing three-fold. 30% of this amount was conservatively set aside as general allowances to fortify the balance sheet while 70% was for specific allowances for exposures recognised as non-performing arising from the volatile economic backdrop. Net interest income fell 7% to SGD 4 billion amid operating headwinds. Cost-income ratio was little changed at 34%.
Our early investments in digitalisation paid dividends as we were able to promulgate digital end-to-end solutions that helped customers transact and get access to financing from the comfort of their home offices. It enabled us to book revenue while providing full support to customers as the ways of doing business and working evolved.
Accelerating the rate of digital adoption for businesses
We fast-tracked key digital initiatives to help clients leverage digital channels for their day-to-day business operations. This included investments to revamp our corporate online banking platform (DBS IDEAL), digitalising customer onboarding and account provisioning (DBS DigiOnboarding), delivering QR point-of-sale and last-mile collections (DBS MAX), and deploying digital document submissions solutions (DBS DigiDocs).
We revamped SME digital onboarding processes in our six core markets, along with digital loan application functions in Singapore, Hong Kong, China, India and Taiwan. We also compressed the timeframe to bridge gaps in last-mile processes and expedited the introduction of “contact-free” digital capabilities for trade financing solutions. We were the first bank to launch real-time online tracking of cross-border collections in Asia, giving more than 240,000 businesses in Singapore and Hong Kong visibility to incoming cashﬂow to optimise their working capital management.
The business registered strong growth in digital adoption across our customer segments, with digital onboarding volumes for suppliers increasing more than six times, and volume of traditional customers migrating to DBS’ digital banking channels tripling year-on- year (YoY). Our customers also put our digital solutions to business use as reﬂected by our API calls increasing more than five-fold YoY.
Powering ahead with large corporates
Our IBG 1&2 franchise which services large corporates and MNCs saw steady loans growth. Technology, e-commerce and logistics sectors did well, registering 2% income growth.
With the impending discontinuation of interest rate benchmarks such as the London Inter-bank Offered Rate (LIBOR) and Swap Offer Rate (SOR), DBS is committed to partnering our clients to achieve a smooth and seamless transition to the alternative Risk Free Benchmark Rates (RFRs). We closed more than SGD 1 billion in loans referencing the RFRs in 2020 and along the way, we broke new grounds with our clients such as the first Singapore Overnight Rate Average (SORA) club loan coupled with a cross currency swap and Singapore’s first business property mortgage loan referencing SORA.
Our WMNC business was also productive and registered a 13% increase in income led by customers from the UK and Europe. The account receivables financing business grew over 40% YoY on the back of a broad mix of new and existing programmes in markets like China, Hong Kong and India.
Supporting SMEs through hard times
For the SME Business, China and India registered approximately 25% YoY increase in revenues as well as deposit growth in excess of 40% YoY.
Through the pandemic, DBS remained a trusted partner to SMEs and extended the financial support needed to weather the crisis. We partnered with governments and industry associations to avail critical working capital support to SMEs. In Singapore, DBS approved over SGD 5 billion in collateral-free loans to SMEs, with over 90% of total SME loans approved since March, for micro, small and medium-sized businesses.
With digital banks entering the market, we expect increased competition but we are confident that we have what it takes to compete effectively.
Steady momentum in core markets
We executed well on our country strategies and grew revenues from India by 30% YoY driven by strong business momentum from multinational corporates. We remained focused on sharpening our Greater Bay Area strategy to capture business ﬂows from new industries, while balancing growth with risk considerations. We gained business momentum by deeply integrating our trade and financial solutions into supply chains as well as helping Chinese companies expand overseas.
Re-energising our Treasury Markets focus
We refreshed our Treasury Markets business and grew revenues by 11% YoY. As a result, this contributed 2% more to IBG’s revenues in 2020. Two new FX pricing engines in major FX hubs in London and Tokyo were also launched, enabling our clients to gain faster access to multiple liquidity pools.
Redefining the future of capital markets
Accelerating the growth of Singapore’s digital assets ecosystem, DBS announced what we believe was a world first – The DBS Digital Exchange, enabling institutional clients to tap into a fully integrated tokenisation, trading and custody ecosystem for digital assets.
We continued to be in pole position in Singapore’s equity space, advising and lead managing the largest number and value of equity deals on the SGX, accounting for 88.3% of the total equity proceeds from the Singapore market. We continued to play a dominant role in growing Singapore as an international financial centre for REITs and Business Trusts, contributing to 87.4% of the total equity proceeds raised from the REIT market.
DBS remained the top SGD bond house with close to SGD 5.85 billion in issuances and around 34% market share. We made headway in Asia ex-Japan G3 bond markets with issuances of close to USD 9 billion, up 8% from last year.
Upping the ante on Sustainability Financing
DBS also launched the world’s first Sustainable and Transition Finance Framework and Taxonomy, by a bank, which helps clients to adapt and build resilience in the face of climate change and resource scarcity. Since 2018, DBS has closed more than 100 sustainable financing deals worth over SGD 18 billion. We ranked first in Bloomberg’s Asia (ex Japan) league tables for green loans for our role as Mandated Lead Arranger (MLA) for the full year 2020.
Landmark sustainable and green financing transactions include the USD 1.11 billion dual-tranche green project bond by Star Energy Geothermal, PSA Marine’s three-year EUR 30 million equivalent sustainability-linked loan and the EUR 500 million Korea Housing Finance Corporation Covid-19 social bond.
Exploring new engines of growth
Our initial digital investments are paving the way for new opportunities of growth.
One area of focus is the development of hyper-connected ecosystems. This enabled us to support the financial needs of large anchor companies as well as their suppliers, distributors and customers at different stages of the value chain, ensuring they had access to financing throughout the pandemic. Through our digital financing programmes with Haier, Huawei and JD Logistics, we were able to provide their ecosystem of suppliers and distributors access to trade financing digitally, enhancing their financial resiliency amid the crisis. We also made steady progress with other strategic partners and customers with DBS being the first Asian bank partner on AntChain’s blockchain trade platform, Trusple, and was the first Singapore bank to join Contour’s global ecosystem of banks and partners to drive greater efficiencies in trade. DBS together with JP Morgan and Temasek Holdings have also agreed to launch an initiative leveraging blockchain to enhance the efficiency of wholesale payments.
While our SME business in India recorded good topline revenue and deposit growth, we believe that the amalgamation of Lakshmi Vilas Bank with DBS India will also help us scale and open up new profit pools for our SME business.
Staying the course in 2021
Even as markets recover at different speeds, latest economic data point to a strong economic rebound in 2021. In addition, I’m also optimistic that asset quality will improve over the course of the year. To augment the impending recovery, we will execute on new initiatives to grow new revenue streams, particularly fee income. To protect our franchise, we continue to strengthen compliance processes, as well as embed a robust risk agenda in our business. We remain focused on differentiating DBS as a leader in sustainability financing, innovating green products and structures for IBG clients and will continue to work closely with clients on their digital transformation journeys.
With every crisis comes silver linings and we will continue to look for new revenue streams and avenues of growth to create long-term value for our customers and stakeholders.
Tan Su Shan
DBS Group Holdings
2021 Focus Areas
Integrate environmental, social and corporate governance (ESG) considerations into a wider range of products and services, with a focus on transition finance
Grow new revenue streams with new initiatives and a focus on fee income
Scale and drive productivity with new digital tools internally and externally by harnessing digital tools and data analytic capabilities
Dial up market coverage around new growth areas like digital platforms, start-up and growth companies
Ensure a smooth IBOR transition for clients