DBS Group Holdings (SGX:D05) held its virtual annual general meeting for the financial year 2019 ended 31 December 2019 on Thursday, 30 April 2020, at 2.30pm.

Due to the Covid-19 outbreak in Singapore, and also the “circuit breaker” measures implemented by the Singapore government between 07 April and 01 June (both dates inclusive), all shareholders had to attend the bank’s annual general meeting online.

In this post, you’ll find a summary of the meeting – compiled from the notes I have taken, along with my personal thoughts about it:

Presentation by DBS Group Holdings’ CEO, Mr Piyush Gupta

There are three parts to Mr Gupta’s presentation, namely (i) how the bank is going about navigating the ongoing Covid-19 crisis, (ii) a look back on the bank’s performance in FY2019, as well as (iii) an outlook for the financial year ahead:

(i) Navigating the Ongoing Covid-19 Crisis:

Mr Gupta stressed that during this difficult period, the bank will play a role in providing support to all its customers, as well as its employees.

Among the support provided to the bank’s retail customers include the deferment of interest payments on loans outstanding, free Covid-19 insurance for its customers and their families, and allowing their Singapore consumers to convert their credit card and cash line outstanding to term loans at reduced interest rates. For its corporate customers, Mr Gupta shared that the bank had provided loan moratoriums for corporate facilities, made available S$3.2b in loan facilities to SMEs in Singapore under the government relief program, as well as prudent lending to large corporates to help them ease liquidity needs. He also added that the bank will continue to work on providing relief to all their customers as quickly as they can.

For the bank’s employees, Mr Gupta promised there will be no retrenchments and pay cuts through the course of pandemic. The bank will continue to hire judiciously, and that they will continue their internship and graduate programs. In addition, to help boost their employees’ morale during this period, the bank launched a TOGETHER Campaign, which include virtual get-togethers, games, online teaching and learning. Mr Gupta also added that employees of the bank were able to continue with most of their normal operations with no loss in productivity despite a huge majority of their staffs working from home – to share, he added that in April, the bank had conducted over 1.2 million virtual meetings, and more than 100 online training courses (benefitting over 15,000 staffs.)

Finally, not forgetting the community in times of crisis, Mr Gupta shared that the bank had launched a S$10.5m DBS Stronger Together Fund to support people in the region affected by Covid-19, along with special land and grants for social enterprises supported by DBS Foundation.

(ii) Look Back on the Bank’s Performance in FY2019:

Mr Gupta shared that 2019 was a record breaking year for the bank – where the bank broke a number of records, namely:

• A 10% year-on-year increase in its total income to S$14,544m, a record for the bank,
• As expenses increased by a smaller percentage (8% on a year-on-year basis) compared to its total income, the bank’s operating profit before allowances saw a 12% year-on-year increase to S$8,286m, which is another record for the bank,
• Net profit for the bank too, increased by 14% year-on-year to S$6,391m, another record for the bank,
• and finally, the bank’s return on equity for FY2019, at 13.2%, is another record.

(iii) Outlook for 2020 Ahead:

First Quarter Results:

DBS Group Holdings released its first quarter results for financial year 2020 in the morning (of 30 April 2020), with the bank’s total income increasing by 13% (to S$4,026m), and their profit before allowances increasing by 20% (to S$2,470m) compared to the previous year (i.e. first quarter of 2019). Mr Gupta shared that the bank had a strong start to the year in January and February, before slowing down from March.

Outlook for the Remaining Months of 2020 Ahead:

Continuing on, Mr Gupta provided an update on the bank’s outlook for the remaining months of the year 2020 ahead, where he expected the bank’s total income to be flat for the year, with expenses to be comparable to last year’s level as well. As such, the bank’s profit before allowances should be similar to the previous year, which he added that a result like this is a satisfactory one for the bank, given the uncertainties, and also considering the fact that the previous year was a record breaking one.

Interest Rate Cuts on the Bank’s Earnings:

Mr Gupta shared that one pressure point for the bank’s earnings will be interest rates – he shared that interest rates remained constant in the first quarter as rate cuts only came in March. Going forward, he added that the impact on interest rate cut will be felt from the second quarter onwards, and the impact could be between S$500 and S$600m.

DBS’ Business Volumes in the Year Ahead:

That said, however, he shared that the bank’s business volume continues to be holding up, with loan growth remaining resilient (where non-trade loan volume was up by 10% in the first quarter of 2020.) While trade loans will be slow for the year (where trade volume has been down by 10% in the year so far), but he added that as the trade margins are quite thin, it will not affect the bank too much.

On the consumer side, Mr Gupta shared that he expect home loan volumes to half due to the enhanced social distancing measures implemented by the Singapore government in a bid to curb the community spread of Covid-19, and that credit card volumes will be slow for the year. In terms of consumer deposits, Mr Gupta shared that the bank recorded a S$30 billion deposit in the first quarter of the year, which is a record for the bank. He attributed this to people’s trust with DBS as a bank, along with digital banking capabilities of the bank. However, he shared that the deposit inflows for the remaining months of the year will be slow.

Finally, on the bank’s other non-interest income growth in the remaining months of the year ahead, Mr Gupta added that it is holding up, as because of the choppiness of the market, customers tend to favour active hedging. Also, he shared that the bank had a large pool of investment securities, all of which will support the growth in the business segment.

Credit Outlook in the Year Ahead:

Mr Gupta shared that the bank’s current loan composition is as follows – with corporate loans at S$221b (or 59% of its total loans), consumer loans at S$114b (or 30% of its total loans), and SME loans at S$39b (or 10% of its total loans), with the latter two being more vulnerable, but manageable.

Looking ahead, he added that the bank expects credit costs to rise between S$3b and S$5b cumulatively over the 2 years. He shared that the bank derived the estimates based on two scenarios:

(i) Base scenario, where lockdowns in major economies continue till mid-2020, with gradual recover in the second half of 2020, muted growth in 2021, and a financial market correction of 20% in 2020, and

(ii) Stress scenario, where lockdowns in major economies continue till the end of the third quarter of calendar year 2020, gradual recovery starting from the end of the year 2020, economic activity in 2021 still materially below 2019 levels, and a financial market correction of 50% in 2020.

Dividend Payouts for Shareholders, and Bonuses to Employees of the Bank in the Year Ahead:

Mr Gupta assured shareholders of the bank that it will continue to pay out 33 Singapore cents/share every quarter if the credit situation continues stay the way they have forecasted. However, he added that the management will be taking stock on the bank’s capital, funding, and liquidity every quarter and if there is a need to re-visit the bank’s dividend policy, they will do so.

Finally, in terms of bonuses to employees of the bank, Mr Gupta shared that it will be tied to the bank’s earnings for the year.

My Personal Thoughts

It is really re-assuring as a shareholder to hear that the bank have come out to re-assure shareholders that it will be continuing to pay out a dividend of 33 cents/share every quarter – This is on the minds of many shareholders and I’m very glad to hear the bank’s CEO, Mr Gupta, coming out to address this issue.

Above and beyond, as a shareholder, I am also very happy to hear of the bank taking proactive steps to take care of not just their customers, but also their employees and the community.

I am totally convinced of Mr Gupta’s stewardship of the bank, and just like I have mentioned before, I am very confident in his abilities to navigate the bank out of the current Covid-19 crisis, and bring the bank to greater heights thereafter.

Finally, as today is Labour’s Day public holiday, I’d like to wish all of you a happy Labour’s Day and a great weekend ahead! 😊

Related Documents

The following are documents related to the bank’s annual general meeting you can download and read in full:

• Responses to Substantial & Relevant Questions from Shareholders
• Outcome of the AGM, along with Presentation Slides

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

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