2022 overview

2022 saw many unexpected challenges including headwinds from geopolitical tensions, deflationary forces giving way to strong inflation, coupled with high volatility in global markets and commodity prices. We also saw large and rapid interest rate rises from rock-bottom rates.

Despite this, the Institutional Banking Group (IBG) business executed to strategy and deepened client relationships. It reported solid financial performance, boosted by higher net interest margin, as well as higher loan growth from increased client activities and demand. Through credit vigilance and consistent proactive monitoring of our portfolio, allowances remained low. The digital acceleration at the start of the pandemic in 2020 continued, and our pervasive digital transformation yielded stickier and deeper customer relationships as we embedded our solutions into customer and industry ecosystems.

Robust financials despite macro challenges

IBG's total income rose 28% to a record SGD 7.69 billion. Net interest income grew 39% from improved net interest margin as interest rates rose, as well as from increased client activities and loan demand.

Non-interest income grew 7% to a record high of SGD 2.12 billion. Our focus on cementing our position as customers’ primary operating bank, coupled with cash mandates won, resulted in strong cash management performance. Growth in fees from cash management and loan-related activities offset declines in investment banking income. Treasury customer income rose 15% as customers took advantage of market volatility opportunities.

Allowances fell below pre-pandemic levels to a net writeback of SGD 204 million. Profit before tax grew 50% to SGD 5.64 billion, driven by a higher interest rate environment, increased productivity and a lower cost-income ratio of 29% compared to 35% in FY2021.

Broad-based growth across industries and markets

There was broad-based growth across industry segments from our focus around Energy Renewables and Infrastructure (ERI), Financial Institutions (FI), Real Estate and Telecoms, Media and Technology.

The ERI industry group saw growth momentum in the renewables sector with investments in energy security and diversification into alternative energy sources driving advisory and financing opportunities. Demonstrating our leadership position in the APAC renewables arena, DBS was sole financial advisor to Taiya Renewable Energy, in forming a joint venture with EDF Renewables to bid for the development of a 440 megawatt offshore wind farm in Taiwan.

We grew our FI key accounts and participated in their increased deal flows in Asia. Revenues from the FI group grew 45% with deposit income strengthened by new cash application programming interface (API) mandates, as we capitalised on the private capital flows to Asia.

We continued to execute well across our various key markets. Our business in India saw good momentum as revenues grew 22%. This was bolstered by our expanded network across India with the integration of Lakshmi Vilas Bank which gave us the foundation to expand and deepen relationships with corporate customers. In Southeast Asia, Vietnam led the growth in our international markets with a 64% increase in revenue.

In Greater China, customers saw the value of our cash management and treasury and market solutions. Our Greater Bay Area strategy continued to capture business flows, resulting in a 24% increase in income.

Harnessing digital capabilities to deliver on ecosystem strategy and Global Transaction Services

Our Global Transaction Services (GTS) business continues to be a strategic priority and a strong contributor to IBG, delivering over 40% of wholesale banking revenue. Our Trade & Supply Chain business continued to deliver strong asset growth, particularly with an increase of 13% in supply chain finance assets. GTS also saw a 28% increase in payment volumes and over 800 new Cash Management mandate wins.

We executed on key ecosystem partnerships, embedding sustainability and supply chain financing solutions into our clients’ ecosystems. As a result, our Open Account Trade revenues rose to new highs, growing 15%. Through our innovative partnerships with customers like Cainiao, we leveraged alternative data and API connectivity to create seamless financing journeys for our small and medium enterprise (SME) customers, while also fulfilling working capital needs. Across the various ecosystem partnerships, we saw a 30% increase in customers.

Our API calls more than tripled year-on-year, as customers put our digital solutions to business use.

Deepening engagement of mid-cap clients through industry expertise; rolling out AI/ ML solutions at scale for small enterprises

We applied our industry expertise across different sectors to deepen engagement and support for our mid-sized corporate clients. This proved successful as revenues from the segment increased by 27%, with non-interest income growing at a robust 15%.

Revenues from SME banking grew a record 48%. Our leading digital capabilities enabled us to serve micro and small SME customers with speed and scale, while emerging technologies were used to help micro and small enterprises manage their credit risk.

To help SMEs navigate the inflationary environment and rising interest rates, we rolled out ‘DBS Quick Finance’ in Singapore, enabling almost instant access to financing of up to SGD 300,000. Through artificial intelligence (AI), machine learning (ML) and data analytics, the lending process has been reduced to just a minute to apply, a second to approve and in some instances, instant disbursement.

DBS has been proactively engaging SMEs identified by our AI/ ML models at the earliest signs of trouble. Over 80% of identified at-risk borrowers averted risk.

Overall, digital engagement with SME clients tripled year-on-year.

All this earned the SME Banking business two global accolades - "World's Best Bank for SMEs" by Euromoney and "Best SME Bank" by Global Finance.

Leading the industry in sustainable financing and solutions

DBS is the first bank in Southeast Asia to announce sectoral targets that are aligned with science-based decarbonisation glidepaths in our report – “Our Path to Net Zero – Supporting Asia’s Transition to a Low-carbon Economy”.

DBS’ commitment is one of the most comprehensive among global banks and our solutions span products and services, from loans, trade financing, capital markets to strategic advisory. Transition financing and structured solutions to help our clients execute their decarbonisation plans form key parts of what we have to offer.

We introduced green renovation loans to support SMEs looking to retrofit their commercial or industrial premises to more energy efficient fittings; rolled out campaigns and special pricing packages to finance commercial electric vehicle fleets; and worked with DBS Foundation on the SME Kickstarter Grant to promote sustsainable business practices.

Our sustainability portfolio grew to SGD 61 billion, exceeding our SGD 50 billion target well ahead of 2024.

Leading Asian bond and equity markets

To facilitate the development of Asian bond markets at a faster and more cost-efficient pace, DBS continued to gain momentum on its fully digital and automated fixed income execution platform, FIX Marketplace. It was awarded "Global Financial Innovation of the Year 2022" by Euromoney. DBS also continued to dominate the SGD bond market in pole position with more than 30% market share.

As the leading equity house in the region, we took pride in spearheading the market development and introduction of the Special Purpose Acquisition Company (SPACs) framework in the Singapore market.

During the consideration period, DBS listed Singapore’s first SPAC backed by Temasek - Vertex Technology Acquisition Corporation Ltd. It also managed the Novo Tellus Alpha Acquisition initial public offering listing on the Singapore Stock Exchange.

New way of working: Managing through Journeys

In recent years, the comprehensive digitalisation of workflows has given us the opportunity to dial up client centricity efforts. We started using design thinking, analytics, AI/ ML and agile practices to introduce a new way of working called ‘Managing through Journeys’ (MtJs). Through MtJs, we are redesigning our processes, constantly experimenting and working horizontally with subject matter competencies to deepen client engagement and produce better business outcomes.

We have seen success in the form of increased foreign exchange transaction volumes, total product holdings per client and customer satisfaction scores.

Looking ahead

We enter the coming year with leverage from rising interest rates and good business momentum. We plan to build on our leadership in sustainability and redirect capital towards more sustainable outcomes.

We will also capitalise on more supply chain resiliency investments as we see outbound investments looking towards alternative supply sources and production bases in South and Southeast Asia.

We are optimistic that these initiatives will bode well for our business and will continue to focus on serving clients through our regional connectivity capabilities and industry expertise.

Whilst there will be continued geopolitical and inflationary risks leading to volatile markets, we plan to mitigate these through combining the use of predictive analytic tools with robust processes, to continue being proactive and vigilant in our risk management.