One of the companies in my long-term portfolio, DBS Group Holdings (SGX:D05), released their annual report 2019 for the most recent financial year that ended 31 December 2019 on 09 March 2019.

As a shareholder, I look forward to reading its annual report to learn more about its latest set of financial results, along with challenges and tasks in the year ahead.

I have since gone through the report and in my post today, I’d be sharing a quick summary of it (for the benefit of those of you who do not have the time to go through the report.)

Letter from Chairman & Chief Executive Officer

  • Notwithstanding slowing global growth and widespread monetary easing, which impacted loan growth and net interest margin, the bank’s total income still managed to hit a new high of S$1.45 billion (due to growth in loans and fee income.) Its net profit increased by 14.0% (on a year-on-year basis) to a record S$6.39 billion, and its return on equity reached an all-time high of 13.2%.
  • The board has proposed a final dividend payout of 33.0 cents/share, pending approval at the coming annual general meeting (AGM) on 31 March 2020, bringing the full-year ordinary dividend to S$1.23/share.
  • Baring unforeseen circumstances, the board also announced that the bank’s annualised dividend going forward will be S$1.32/share.
  • Looking at the outlook ahead, the bank noted that will be a challenging one given continued macroeconomic and geopolitical headwinds, coupled with the Covid-19 situation. However, it added that there were a couple of positives to take note of, including the remarkably resilient US market, along with the signing of Phase 1 of the trade deal (between US and China) in January 2020.
  • In the year ahead, the bank will remain focused on digital transformation, and pursuing the sustainability agenda. Another thing to note is that, even though it had a head start where reinventing themselves digitally is concerned, they highlighted the need to remain unrelenting in harnessing areas like Big Data, Artificial Intelligence/machine learning, and blockchain to deliver a differentiated experience to their customers.

A Look into Some of the Bank’s Key Performance Figures (FY2018 vs. FY2019)

FY2018FY2019% Difference
Net Interest
Income (S$’mil)
Net Fee &
Commission Income
Other Non-Interest
Income (S$’mil)
Total Income

Net Interest Income: The growth was due to net interest margin improving by 4 basis points on a year-on-year basis to 1.89% (from 1.85% in FY2018). Also, in constant currency terms, gross loans grew by 4% to S$362 billion (as a result of a 6% increase in non-trade corporate loans to Singapore and Greater China customers, a 3% growth in trade loans, and a 2% increase in customer loans.)

Net Fee & Commissions Income: The improvement was due to a 13% increase in wealth management fees from higher unit trust products and investment product sales, a 11% increase in card fees, and a 66% spike in investment banking fees.

Other Non-Interest Income: The 29% improvement was attributed to growth in the bank’s trading income, along with gains on investment securities.

Impact of Singapore’s New Digital Banks on DBS

One of the concerns I’m sure investors of the bank have at the back of their minds is how the 5 new digital banks will impact DBS’ businesses.

Regarding this, CEO of the bank, Mr Piyush Gupta, has this to say, and I quote:

New entrants into any market increase competitive intensity, and the five new virtual banks who will be awarded licences this year are no exception to the rule. In addition, it is likely that the new competitors will be free from the burden of legacy, and have access to large resources. Therefore, they will quite possibly be able to disrupt the market in interesting ways, and are not to be underestimated.

However, I do not believe that it will be easy for new entrants to be successful in the short or medium term. There are a few factors to consider:

a) The Singapore banking market is not a large market, and banking penetration is high, at over 98%. There are really no obvious underserved segments; to the extent they exist, the revenue pools are likely to be small.

b) The incumbents – including DBS – have made credible strides in their own digital offerings over the past few years. The new players will not find it easy to create very differentiated offerings.

c) Once the players reach a certain minimum size, the capital requirements are sizeable, and the onus for regulatory compliance will create challenges. On the back of the Uber and WeWork IPOs, it is unlikely that investors will have appetite for continued unlimited cash burn without a line of sight to EBITDA and returns.

d) While competitors are likely to drive price competition, it is a healthy sign that the regulators are unwilling to support predatory pricing. In industries like e-commerce and ride hailing, deep discounting with a “winner take all” mentality has led to industry instability. Such instability in financial services may be unwise.

We have been preparing for this new form of competition for the past six years by seeking to disrupt ourselves before someone else can! I believe that we have built sufficient organisational capability and muscle in our technology, our products and our people to be able to compete effectively.

Our digital platforms enable 3.3 million customers to carry out everyday banking transactions from payments to investments. PayLah!, our digital wallet, is now routinely used for shopping, dining and transport in addition to peer-to-peer transfers. We have the lion’s share of overseas remittances with 7.4 million transactions to almost 50 countries amounting to SGD 13.4 billion annually. Our new comprehensive digital financial planning tool has already reached 1.8 million customers with more than 300,000 actively using the tool monthly; 33,000 customers have turned from being cashflow negative to being net savers. We have created digital marketplaces for customers to buy and sell properties and cars, make travel arrangements and switch utility providers.

In short, while any new competition must be taken seriously, I am confident that the incumbent players will hold our own. With the Singapore banking market already well served by more than 200 players, the additional competition from five new digital banks is likely to be manageable.

Source: DBS Group Holdings’ Annual Report 2019

Notice of the Upcoming Annual General Meeting

The bank will be holding its AGM on Tuesday, 31 March 2020, at the Marina Bay Sands Expo and Convention Centre, Level 5, Sands Grand Ballroom, at 2.00pm.

In Conclusion

I am happy with the most recent set of financial results reported by the bank.

However, the continued reduction of interest rates by Fed, along with the worsening of Covid-19 globally does not bode well for the economy, and hence the bank may experience some weakening in its results in the near-term. That said, in my personal opinion, I feel that all these is just something temporary.

Under CEO Mr Piyush Gupta’s leadership, I remain confident of the bank’s ability to deal with the headwinds ahead, and that in the longer-term, it will continue to report improving performances, and a gradually increasing dividend payout to us shareholders (the bank has a habit of rewarding their shareholders accordingly whenever they record improving performances.)

Finally, regarding its upcoming AGM at the end of the month, I may or may not attend depending on the Covid-19 situation in the country. If I am attending the meeting, I will be taking notes and provide a summary here in “The Singaporean Investor” as soon as I am done with the drafting.

Download Links for DBS’ Annual Report 2019

If you are interested to read the annual report, letter to shareholders, and the bank’s notice of AGM, you can download digital copies of them via the respective links below:

1. Annual Report 2019

2. Letter to Shareholders

3. Notice of AGM

Disclaimer: At the time of writing, I am a shareholder of DBS Group Holdings.

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building your REIT-irement portfolio by Lim Jun Yuan - Official Book Launch on 26 September 2023

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