DBS Group Holdings Ltd expects to achieve earnings of more than S$10 billion (RM34.19 billion) in the medium term, driven by a strong balance sheet and an ongoing digital transformation.
Return-on-equity is expected to be in a range of 15% to 17%, South-East Asia’s biggest lender said in an investor day presentation on May 22, referring to a time frame of three to five years. Its profit goal would be more than a 20% increase from last year’s performance, and close to that of Japan’s largest lender Mitsubishi UFJ Financial Group Inc.
To achieve its goals, the Singapore lender is seeking faster growth in capital-light, high-return businesses like wealth management, global transaction services and treas- ury market sales. Led by CEO Piyush Gupta, DBS also sees room for higher distributions to shareholders through dividends or share buybacks.
The stock was little changed on May 22, in line with the Bloomberg Asia-Pacific Banks Index. DBS shares have lost more than 7% this year compared to a nearly 4% gain in the index.
The lender has poured billions of dollars in investments in technology, including digitalisation of banking services that has lowered
costs for client acquisitions and boosted efficiency. Yearly net income has risen at a compounded average rate of 9% since 2015, after Gupta embarked on transforming the bank via technology that includes cloud and data.
A series of digital banking disruptions over the past few years, which saw customers lose access to banking services via its mobile apps and website, have however hit the bank’s reputation.
The city-state’s financial regulator called the glitches this year “unacceptable” and boosted the bank’s capital requirements for the second time in over a year, with DBS’s required capital rising by S$1.6 billion in total.
The two incidents this year happened in a matter of weeks, though the most recent one early this month was resolved within an hour. In 2021, the bank suffered one of its worst digital disruptions in the past decade.
Going forward, DBS said it sees “high potential opportunities” in its growth markets of India, Indonesia, and Taiwan.
The bank is targeting areas like transaction banking, wealth management, lending to small businesses as well as unsecured retail lending in these places. — Bloomberg
- This article first appeared in The Malaysian Reserve weekly print edition