DBS Group Holdings Limited (SGX:D05), or DBS for short, was the first of the 3 Singapore-listed banks to release its annual report for the financial year 2023 (ended 31 December) yesterday morning (06 March 2024), along with notice of its upcoming annual general meeting (or AGM for short).

For the benefit of those who do not have time to go through it, you can check out this post, where you will find key takeaways from the report which I have compiled, together with details about its upcoming AGM:

Business Highlights:

  • Total Income: S$20.2 billion, a 22% growth compared to last year; it is also the first time the bank’s total income exceeded S$20 billion.
  • Net Profit: S$10.3 billion (a new record for the bank), up by 26% from a year ago, as the bank benefitted from higher interest rates (where net interest margin expanded by 40 basis points to 2.15%), and reaped the rewards of structural shifts made to its franchise in the last decade.
  • Return on Equity: All-time high of 18.0%, which broke all previous records, as well as widened the bank’s lead over its peers.
  • Consumer Banking/Wealth Management: Total income up by 35% to a record S$8.96 billion. DBS continued its dominance as the market leader in deposits and mortgages, with Assets Under Management growing 23% to a new high of S$365 billion, underpinned by strong new money inflows and consolidation of Citi Consumer Taiwan.
  • Card Fees: S$1.04 billion (the first time the bank’s card fees crossed the S$1 billion mark), grew by 22% from last year, contributed by travel spending (which surpassed pre-pandemic levels), and consolidation from Citi Consumer Taiwan.
  • Institutional Banking: S$9.36 billion, a record for the bank, up by 22% from last year, as a result of a sharp rise in cash management income (which rose 73% from higher interest rates).
  • Non-Performing Assets: Little changed at S$5.06 billion, and non-performing loans unchanged at 1.1%.
  • Total Dividend Payout & Bonus Issue: S$1.92/share, an increase of 42 cents/share from the previous year. In Q4, the Board also proposed a 1-for-10 bonus issue, which will increase the pace of capital returns to shareholders.

Sustainability Highlights:

  • Facilitated S$18 billion in ESG bond issuances where DBS was an active bookrunner.
  • Subsidised 4.67 million meals to help Singaporeans and residents cope with the rising cost of living, and at the same time, committing up to S$1 billion over 10 years to improve lives and livelihoods of the low-income and underprivileged.
  • Awarded S$3.7m in grant funding to 24 SMEs and social surprises through the DBS Foundation Business for Impact grant award, as well as approved more than 4,400 unsecured loans totalling S$665 million to support the unmet working capital needs of micro and small businesses.
  • Engaged in more than 200,000 hours of employee volunteerism activities. Additionally, the bank’s workforce will commit over 1.5 million volunteer hours over the next decade to give back to society.
  • DBS awarded by Euromoney as World’s Best Bank for Corporate Responsibility, together with being named to the Bloomberg Gender Equality Index for the 6th consecutive year and the FTSE4Good Developed Index for the 7th consecutive year in 2023.

Updates on its Asia Franchise:

  • India: Following the integration of Lakshmi Vilas Bank, DBS now have more than 520 branches in 350+ locations, and a complete suite of products for every market segment (the biggest outside of its home country Singapore); Particularly, its consumer banking business saw a double-digit income growth (through the scaling and deepening partnerships with ecosystem players such as Bajaj Finance and Cred), customer base grew by 18%, while income and net profit rose by 15% and 30% respectively.
  • Taiwan: With the acquisition of Citigroup Inc’s consumer banking business (completed in August 2023), DBS is now the biggest foreign bank by assets in the country (where its consumer banking customers more than doubled to about 1.1 million), as well as having clear market leadership in loans, deposits, cards and investments among foreign players; the bank’s consumer business growth have accelerated by at least 10 years, and annual revenue was propelled past the S$1.3 billion mark.
  • China: Increased its stake in Shenzhen Rural Commercial Bank (SRCB), which is a ‘high-return bank’, from 13% to 16.69% in January 2024, with DBS being the largest shareholder, allowing it a good footprint in the Greater Bay Area (GBA), both in wealth management as well as in banking corporates in the electric vehicle, high-tech manufacturing, and new economy industries.

Digital Disruptions to DBS’ Banking Systems in 2023:

  • Review team identified deficiencies and gaps in 4 main areas: change management, system resiliency, incident management, and technology risk governance and oversight.
  • A comprehensive technology resiliency map has been laid out (known as the Technology Risk Management Uplift Programme, and chaired by the CEO), with work started since May 2023.
  • A new sub-committee of the Board Risk Management Committee (called BRMC Technology Risk Committee) was also formed to strengthen technology risk governance and oversight.
  • The bank also bolstered its Three Lines Model for better end-to-end risk management by enhancing executive level talent in the Technology Risk and Audit Functions.
  • To take accountability for the disruptions, the variable compensation for the CEO and other members of the Group Management Committee was was collectively reduced by 21% from the previous year.

Outlook Ahead:

  • Barring any unexpected shocks to the global economy, DBS’ ROE in 2024 will be in the guided range of 15-17%.
  • Net Interest Income expected to be maintained at around 2023 levels, as loan growth offsets the effects of a slightly lower net interest margin.
  • Fee income projected to grow at double-digit percentage terms, contributed by wealth management (due to stronger investor confidence and strong net new money inflow), card fees (from further growth in spending and travel).
  • Full-year earnings expected to be around the record levels in 2023.
  • Annualised ordinary dividend going forward will be S$2.16 per share over the enlarged share base (following the bonus issue), which represents a 24% increase from the S$1.92 per share for FY2023.
  • DBS will continue to invest in cementing its digital banking leadership, particularly in strengthening its technology resilient and investing in Artificial Intelligence/Machine Learning (AI/ML) to allow them to deliver banking that is seamless and personalised.
  • Efforts will also be stepped up to advance its sustainability agenda and executing on its net-zero commitments.

Details of DBS’ 25th Annual General Meeting

When? Thursday, 28 March 2024
Time? 2.00pm
Where? Marina Bay Sands Expo and Convention Centre (10 Bayfront Avenue, Singapore 018956), Level 4, Roselle and Simpor Ballrooms

The meeting will be held in a wholly physical format, and there are no options for shareholders to attend the meeting virtually.

No pre-registration necessary if your shares are held in a CDP account (verification of your shareholdings will be done on the spot at the venue). However, if your shares are held in a custodian account, then you will need to get in touch with the brokerage to let them know your intention to attend, so they can nominate you to attend as a proxy.

Closing Thoughts

I’m sure you can agree with me the performance by Singapore’s biggest bank is an astounding one, despite a tough year marked by ongoing military conflicts in Ukraine, as well as between Israel and Hamas, and at the same time, geopolitical tensions between 2 of the world’s superpowers (United States and China).

One thing I like in particular is that it has increased its dividend payout twice in 2023 – once when it released its 2nd quarter results (which saw its payout up by 33.3% to 48 cents), and once when it released its 4th quarter results (from 42.0 cents to 54.0 cents).

Moving forward, while the bank guided that net interest margin is likely to be lower due to the interest rate cuts by the US Federal Reserve, but I’m sure net interest income will be able keep up due to an increase in loan volume (as a result of lower interest rates spurring business growth). I’m also of the opinion that its businesses in India will continue to contribute positively for the bank.

With that, I have come to the end of my post today, where I attempted to summarise some of the key points from DBS’ latest annual report for FY2023 to take note of – which I hope you will find useful. The contents presented in this post are purely meant for educational purposes only, and do not constitute any buy or sell calls for the bank’s shares. You are strongly advised to do your own due diligence before you make any investment decisions.

P.S. Due to time constraints, I will not be attending the bank’s upcoming AGM, and hence, there will not be any summaries of it.

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

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