Analysis, Pages 8 (1833 words)
DBS, or the Development Bank of Singapore, is a bank that is prominent all around the world. It was established in July 1968 and is honoured as the biggest bank in the world with a wealth of S$518 billion.
The bank was initially established to take over the financial roles played by the Economic Development Board.
The bank is well-known for its international leadership. It has won many honourable awards and also recognised as the “Best Bank in the World” by Global Finance.
Moreover, DBS has been getting the “Safest Bank in Asia” award by Global Finance continuously for the past ten years from 2009 to 2018.
Nature of business
DBS provides a wide range of services in consumer, SME and corporate banking. DBS has its foundations strong in the Asian market causing it to be well cautioned of the way of handling business in Southeast Asia’s most vital markets.
It takes honour in leading the industry in the provision of banking and development, mortgage, leasing and hire-purchase financing, corporate advisory services, stock broking, a primary dealership in Singapore government securities, merchant banking, factoring and credit card services.
DBS plays a dominant role in the Asian market. It has over 280 branches across 18 markets. The headquarters is located in Singapore. DBS has a thriving presence in the three key Asian axes of growth: Greater China, Southeast Asia and South Asia.
Range and complexity of products and services
The bank’s operating segments include Consumer Banking/Wealth Management; Institutional Banking; Treasury, and Others.
Consumer Banking/Wealth Management: This wing serves to provide individual customers with a wide array of banking and associated financial services.
Institutional Banking: This wing serves to provide financial services and products to institutional clients, including bank and non-bank financial institutions, government-linked companies, corporates, and small and medium-sized enterprises.
Treasury: This wing serves to provide treasury services to corporations, institutional and private investors, financial institutions and other market participants.
Others: This includes an extensive spread of activities from corporate decisions.
The bank is at the forefront of leveraging digital technology to shape the future of banking, having been named “World’s Best Digital Bank” by Euromoney.
The changes were mostly kick-started in 2014 following a spate of industrial visits to several leading tech giants. Following the visits, the bank decided to start acting less like a bank and more like a tech company. It incorporated journey thinking, culture change, and a measurement methodology that is able to evaluate the impact of their digital transformation.
As a customer-centric bank, DBS prioritizes convenience and accessibility. This is why it embraces the proliferation of the usage of smartphones and created the platform for every phone to function as a bank.
DBS holds the forte in being the frontrunners in embracing technology. The bank pioneered efforts to increase convenience for its customers by introducing steps like signature-less and contactless payments. They also introduced paperless banking through their green efforts to switch to i-banking and make bank passbooks obsolete.
It suffices to say that DBS is truly moving way ahead of the rest in incorporating new-age technology with every move they make.
DBS is the largest bank which earns a high revenue annually of about $427.7m. Being a topmost bank, it inevitably has high chances of facing a lot of competition. There are a number of banks competing against DBS bank.
Examples: OCBC bank, Standard Chartered Bank and many more.
The threats faced by the bank has been triggered by big shifts in technology like mobile, big data, artificial intelligence and many more. Moreover, from payments to lending money to capital markets are getting attacked by the Fintech companies. This is causing a very big change desperately in the banking sector.
Reasons that cause this challenge
The presence of smartphones everywhere at the same time
The usage of mobile has changed how banking is done and the identity of it. It has reduced the number of customers going to the bank or an ATM a lot. Smartphones have made banking not to be a stand-alone activity.
Rise of the social economy
The capability of companies to join each other by APIs and to team up have surpassed a group action of capacity and creation. It has no more choice on a scale.
Explosion of Big Data
90% data in the world was made in the last two years itself and the volume of cross-border data flows has increased a lot by 45x from 2005. An acute drop in data storage costs and the huge computing capacity able to inspect this data, and it’s clear that a massive part of the battle for the customer will be fought along data lines.
Artificial Intelligence and Cognitive Learning
A game of human playing chess was defeated by a computer 20 years ago. Six years ago, a human playing Jeopardy was defeated by the computer again. Recently, a human playing Pokemon Go was again defeated by a computer. Computers have started to learn like us and think like us and also improving at every stage.
Trends and development
As the name Digital, DBS has come up with convenient ways for banking and transactions. DBS is a bank in Singapore but also worldwide around Southeast Asia
Example: India, Hong Kong, Taiwan and many more.
Deeper, Broader, Smarter
As the slogan above DBS has divided their developments into three parts:
DBS Paylah: An application introduced in mobile phones for transactions of cash quick and easy anywhere anytime
DBS iWealth: An application for our luxury management customers to track their banking transactions, pace their investment portfolio and exchanges. Moreover, it is the first time to launch an app like this.
POSB Smart Buddy: It is the first wearable technology for savings and payments.
Digibank India and Digibank Indonesia: A mobile application introduced in India and slowly was introduced in Indonesia in 12 months.
Tally Partnership for SME Banking: DBS India’s e-banking platform corresponds with, a popular SME accounting software to improve customers’ ability to access ?nancial information and manage cash ?ow.
On Boarding through WeChat: Customers in China can enjoy 24/7 banking services by just completing three easy steps on WeChat.
Internet Banking : They introduced the IB Token to access banking accounts and for money transactions to take place easily through online by having to generate a one-time password which is safe against malware.
Ideal Rapid: Helps to check again customers payments and claims immediately.
@live app : An app for the huge number of employees in DBS to get their feedback quickly regarding their performance, get appreciations from their coequal and bid for shifts as there was high absenteeism.
Cycle : It is a tool for the wealth management relationship managers to have a complete aspect of a customers stages of life, how and the way they invest and about their lifestyle desires in fingertips.
Analysis of annual report
For Earnings Per Share, the number of shares have increases from 2,517,281 in 20161905019050 to 2,549,597 in 2017. The growth in EPS says that DBS is generating a significant dividend for investors.
PRICE EARNING RATIO has increased from 10.4 in 2016 to 14.7 in 2017. From this, we can infer that investors can expect higher earnings in the future.
Dividend Yield increased from 3.46% in 2016 to 5.75% in 2017. This tells that investors can buy a stock since the dividend yield is between 4 to 6% from 2016 to 2017.
Computed financial figures
Earnings per share = Net income / no. of ordinary shares outstanding
4188000 / 2,517,281 = 1.66 (Year 2016)
4296000 / 2,549,597 = 1.69 (Year 2017)
Price earning ratio = Market price per share / Earnings per share
10.4 (Year 2016)
14.7 (Year 2017)
Dividend yields = Annual cash dividends per share / Market price per share
3.46% (Year 2016)
5.75% (Year 2017)
Book value per ordinary share = Shareholders ‘equity applicable to ordinary shares / Number of ordinary shares outstanding
1772.10 SGD (Year 2016)
1855.50 SGD (Year 2017)
Top of Digital Class – maximizing digitalisation in banking.
Strong Dealer Society – More than just promoting company’s products the dealers also put in money to train the sales team to provide information on the benefits of the products.
Substantial Brand Portfolio – over time DBS has invested a large amount of money in developing its brand portfolio which will be very fruitful when it wants to enlarge into new product division.
DBS has greatly skilled manpower through consistent training and workshop programs. Moreover, DBS invest in a large number of resources into the development of its staff thus resulting in not only having a highly skilled workforce but also motivated staffs who are willing to achieve more in their work.
Best recorded performance in innovative new products.
Great performance in New Markets – DBS is proficient in getting into new markets and making achievements in them. This has helped DBS to make new revenues and expand its economic cycle risk in the market.
There are gaps in the product range sold by the company. This will cause a lack of choice which the company has not been able to manage the challenges came by the new competitors in the segment and has lost a small market share in the niche categories.
DBS has to build an internal feedback mechanism directly from the sales team on the ground to overcome these challenges.
Narrow achievement beyond the business, DBS has encountered risks in going forward to new product sector with its current culture although it is one of the top organisations in its monopoly.
DBS daily inventory is higher as compared to its competitors – this result the company in making more capital to invest in the channel which can affect the long term development of DBS.
Expenditure in Research and Development is below the rapid growing competitors in the monopoly. DBS has been able to fight with prominent competitors especially in innovation although its spending is above the industry average on Research and Development. DBS is a mature business firm which is looking into bringing out products of which features have been testified in the market.
The products that are left over are intended to be sold with good marketing. The placement and the individuality sales proposition is not clearly stated which can follow the competitors in attacking this sector.
Adjacent Product segments are bounded to development as the organizational structure is only adaptable with the current business pattern.
At the last traded share price of 24.840, it is recommended to BUY the stocks as of 28 February 2019. This is based on the expected future Net Interest Margin expansion and the cost efficiencies which are a result of the bank’s digitisation.
Despite the momentary decline in the share value at present, the forecast is promising. There is more Net Interest Margin widening as the loans reprice. Keeping current trends and developments, the growth momentum is highly likely to continue. There is a stable and sustainable outlook for dividends.