When Piyush Gupta joined DBS Group Holdings as its CEO in November 2009, DBS reported net earnings of $2.06 billion in FY2009 ended Dec 31, 2009, unchanged y-o-y. The bank’s ROE fell to 8.44% from 10.1%, while its total capital adequacy ratio (CAR) and common equity tier 1 (CET-1) ratio stood at 16.7% and 13.1%, respectively. The bank’s full-year dividend payout was just 56 cents.
Investors were still shell-shocked by the Global Financial Crisis then, and banks, as a whole, were not particularly popular investments. Gupta noted that the “team has done well” while pointing out that 2009 was a “tough year by any measure”.
“We were able to take advantage of the global financial shakeup to gain market share in areas such as equity and debt fundraising, lending and trade finance. We grew deposits and a healthy pipeline of mortgages in Singapore, Hong Kong and Taiwan,” he said.
Some 15 years later, Gupta is leaving on a high note. After the coming AGM on March 28, he will pass the baton to his deputy Tan Su Shan, who promised to stay both “humble and hungry” while reiterating that she wears different shoes from her predecessor.
But first, at his 61st and last results briefing on Feb 10, Gupta delivered another sterling report card for DBS shareholders. For FY2024 ended Dec 31, 2024, the bank reported net earnings of $11.4 billion, 11% higher y-o-y, marking yet another new record. Since FY2017, except for FY2020, the bank has consistently recorded new highs in net profits.
The earnings growth was thanks to higher total income as the bank’s commercial book net interest margin (NIM) expanded. New highs were also chalked up in fee income and treasury customer sales, as well as a rebound in trading income. The bank’s ROE reached 18% while the total CAR stood at 16.2%. CET-1 ratio as at Dec 31, 2024, was 17%, while the fully-phased CET-1 ratio stood at 15.1%.
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The bank’s share price, following the results, hit a new high of $46.157 on Feb 10 before easing to $44.96 as of the close of Feb 12. When Gupta took over back in November 2009, DBS shares were at $13.06 unadjusted, giving it a market value of just $29.8 billion.
If investors had invested in the bank when Gupta first took over as CEO, they would have gained 277.8% in price returns alone, going by DBS’s closing share price of $44.85 as at Feb 11. With dividends reinvested, investors would have gained a total of 624.8% or a 13.8% CAGR over the period.
The bank’s market capitalisation of $127.7 billion puts it a distant first among the Singapore-listed universe, with second-ranked Oversea-Chinese Banking Corporation (OCBC) at just $77.78 billion.
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Besides the capital gains since 2009, DBS is showering shareholders with dividends and dangling prospects of even higher payouts in the coming year. The final dividend of 60 cents per share for 4QFY2024 will raise the full-year payout by 27% y-o-y to $2.22 per share.
With its fully-phased CET-1 of 15.1%, DBS has some $8 billion of excess capital. It has announced $3 billion for share buybacks, which leaves another $5 billion available to distribute, part of which will be in the form of 15 cents per share in additional dividends per quarter this year. All in, the bank is seen to give a yield of more than 5%.
Following the results, various bullish analysts have raised their respective target prices to above $50. Maybank Securities’ Thilan Wickramasinghe, for example, raised his target price to $51.37 from $46.91. “DBS is giving significant visibility on capital returns,” says Wickramasinghe. RHB Bank Singapore similarly increased its estimate to $51.20 from $44.70. OCBC Investment Research (OIR)’s Carmen Lee has upped her target price estimate to $50 from $43.60.
Grooming the internal slate
As Gupta prepares to hand over the reins, he seeks to assure shareholders that the bank will be in Tan’s good hands. “I feel good about where the bank is and am confident it will reach further heights under Su Shan’s leadership,” he says in the bank’s results statement dated Feb 10.
As Tan prepares to take over, she has already made several changes to the management bench. In December 2024, Han Kwee Juan, previously country head for Singapore, took over as group head of institutional banking from Tan. Lim Him Chuan, the bank’s group head of strategy, transformation, analytics & research (GSTAR), was appointed as the new Singapore country head.
On Feb 12, DBS announced that Derrick Goh will assume the newly created role of group COO, while Koh Kar Siong will take over as group head of audit. Goh, a member of parliament for the Nee Soon GRC since 2020, will also join DBS’s group executive committee.
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“We’ve been grooming our internal slate of succession quite thoughtfully over the last 10 to 15 years. So when we make these announcements, [it] shouldn’t really be any surprise to anyone internally, and we should keep the stability of the management and the way we manage in our operating process,” says Tan during the FY2024 results briefing.
As CEO, Tan said she wants to be a leader who is “conscious of the macro movement”, be “risk aware” and “be ahead of the curve and serve our clients better and continue to grow”.
However, Tan might find it tougher to repeat yet another record year. For this current FY2025, DBS expects pre-tax profit to be unchanged y-o-y, although net profit is likely to be lower than FY2024’s due to the global minimum tax of 15%. The impact of the new regulation, compared to DBS’s effective rate of 12%, is around $400 million.
On the other hand, the bank now expects two rate cuts to take place in the second half of this year, down from its earlier projection of four. As such, the bank expects its net interest income (NII) to remain above 2024’s NII, although it still expects group NIM to decline to around 2.10 basis points (bps), depending on the asymmetry of its trading book. DBS also expects specific provisions (SP) to normalise within 17 bps to 20 bps, although it is “comfortable but not complacent”.
The new Trump administration has created a non-stop barrage of new policies and orders, forcing countries and businesses to react. Tan assures that the bank is “on top” of things and continues to stress test its portfolio “very, very regularly”. Depending on what might pan out for the rest of the year, there could be some potential for general provision (GP) writebacks as well. “If the external conditions remain stable, we might be able to reduce it. If it deteriorates sharply, and SPs exceed the normalised range of 17 to 20 basis points, then there could be a shift from the model GPs to SPs,” she says.
As the bank tries to navigate Trump’s second term in office, DBS will focus on better intra-regional trade with the Regional Comprehensive Economic Partnership (RCEP). It will also explore trade opportunities between Asean, North Asia and Europe. “Some of the Western MNCs from Europe and the Asian MNCs are looking to do more within Asia as a result of this. So I think we just focus on where we see some growth opportunities,” says Tan.
“We can’t manage our business day by day [depending on Trump’s tweets]. We have to take a view and then be guided by longer-term trends. We still believe that, whilst there will be reactions around some of the tariffs, at least for our markets in Asia, especially in China and Southeast Asia, the countries here are looking to be more resilient internally and to look at more intra-regional trade,” she adds.
The bank will also have to brace for the possibility of inflationary pressures re-emerging, which may keep rates higher for longer. Should that happen, DBS will have to be “ahead of” and be “risk aware” of potential stresses in the SME book or in the consumer book, and also specific sectors such as real estate and even metals and mining, says Tan.
Gupta noted that Trump’s first administration didn’t impact global trade particularly and that the total amount of global trade, excluding the US, continued to grow. “There is enough tailwind around connectivity and interactivity around other countries in the world that give us an opportunity,” he says. “In Trump 1.0, we also found … that the shift from China to China+1 is quite helpful to us.”
Gupta also doesn’t see much cause for worry about Trump’s call for bank deregulations, noting that it wouldn’t make a dramatic difference to a bank like DBS. Should capital requirements become stricter, Gupta sees that as an open question as to whether the banks in Asia will follow that. “I do think that a certain level of capital is not a bad thing to have. Outside of that, a large part of the regulation tends to be around disclosure and reporting requirements. And if that obviously starts getting cleaned up, it will be helpful,” he continues.
As the go-to adviser to help launch IPOs, especially that of REITs, Gupta says that the pipeline is “solid”, although the markets were not supportive enough in the last two years to take these listings live yet.
Meanwhile, the bank is in the news for other growth prospects. DBS is reportedly in talks to acquire a stake in Malaysia’s Alliance Bank. If true, this will help the bank build a presence in the neighbouring market where the two local competitors, United Overseas Bank and OCBC, are already deeply entrenched.
Gupta is also tempering expectations that if DBS makes a move, it will be a very digestible one.“From both capital and profit and loss (P&L) perspectives, any acquisition would not be that material in the short term. It could add $70 million to $80 million to the P&L. The capital surplus of $8 billion we mentioned has already factored in several hundred million for M&A, so we have enough firepower to do both,” he says. — with additional reporting by Thiveyen Kathirrasan
