DBS aims to grow in China and India, cut reliance on Singapore

February 7, 2010
Singapore Democrats

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Joyce Koh

DBS Group Holdings Ltd., Southeast Asia’s biggest bank, will focus on growing its operations in China and India without pursuing acquisitions as the lender seeks to reduce dependence on its Singapore home market.

DBS aims for Singapore to account for 40 percent of revenue in five years, from about two-thirds now, Chief Executive Officer Piyush Gupta said yesterday. Greater China and south and Southeast Asia would each account for 30 percent, he said.

Gupta, 50, speaking in his first media briefing since becoming CEO in November, said boosting earnings in Asia outside Singapore will be challenging. DBS yesterday posted quarterly profit that exceeded analysts’ estimates as investment-banking fees and lending income advanced.

“The strategy is largely unchanged over the last 10 years,” said Matthew Wilson, a Singapore-based analyst at Morgan Stanley. “Execution will be critical, and this will be interesting given we have essentially the same senior management team in place.” He rates DBS shares “underweight/in-line.”

DBS fell 1 percent to S$14.06 in Singapore yesterday. The stock has climbed 3.8 percent in the past 5 years, underperforming rivals United Overseas Bank Ltd. and Oversea- Chinese Banking Corp. UOB gained 30 percent in the period and OCBC rose 42 percent, according to data compiled by Bloomberg.

Fourth-quarter net income at DBS climbed 67 percent to S$493 million ($347 million), the biggest increase in quarterly profit in three years, beating the S$464 million average estimate of seven analysts surveyed by Bloomberg.

China, India

DBS plans to focus on corporate and affluent customers in China and India, Gupta said. Regulatory restrictions in those two countries make it difficult for the bank to grow through acquisitions, he said.

The Singapore-based lender has doubled Indian revenue since 2007, and grown its customer base in China more than fourfold since incorporating in the nation in 2007. Still, Singapore accounted for more than 60 percent of total income in 2009, DBS said yesterday.

“We really want to build an Asian franchise with an Asian footprint,” said Gupta. “We have enough to do in our backyard and that is where we hope to focus.”

Gupta also said he aims to expand the lender’s consumer banking operations in Taiwan and Indonesia.

In Hong Kong, where the bank bought Dao Heng Bank Group for $5.4 billion in 2001, DBS plans to invest in rebuilding its brand there to improve profitability, according to Gupta.

The bank has a market share in Hong Kong, its second- largest market after Singapore, of about between three and five percent, and operates more than 50 branches in the territory.

“Thinking through and developing a far better refined segmented strategy for our Hong Kong businesses will be a priority,” said Gupta.