DBS Group Holdings faced a service outage in its digital platforms on March 29, 2023. For the full year, the bank’s net profit surged by 26% to reach SG$10.3 billion, in contrast to SG$8.19 billion in 2022. The largest bank in Southeast Asia recorded a fourth-quarter net profit of SG$2.39 billion, marking a 2% increase compared to the previous year. Analysts had expected a net profit of SG$2.37 billion in that quarter, according to data from LSEG. Being the first of the three major Singapore banks to report fourth-quarter earnings, DBS maintained its full-year net income interest forecast for 2024 at the same level as the previous year. Piyush Gupta, CEO of DBS, stated, “While interest rates are expected to soften and geopolitical tensions persist, our franchise strengths will put us in good stead to sustain our performance in the coming year.” In an exclusive interview with CNBC, Gupta emphasized the bank’s long-term perspective on the Chinese economy, stating, “For us at DBS, we take the long view, we don’t make investments based on what’s going to happen over the next four quarters or the next couple of years, because we’re here to stay, and so we look through cycles.” He also mentioned that the bank has a “constructive” long-term view of the Chinese economy. Regarding DBS’s overall exposure to China, particularly in the property sector, Gupta explained that the majority of the bank’s activities were “outbound,” supporting operations outside of China rather than within the mainland. He also disclosed that the bank’s total exposure to Chinese real estate companies, including Singapore and Hong Kong companies operating in China, was previously guided at about SG$14 billion ($10.4 billion), but clarified that the majority of this activity is outside of China. DBS benefited from higher interest rates in 2023, but the bank’s profits could slow down in the second half of the year as central banks globally begin to pivot towards cutting interest rates. A higher interest rate environment typically boosts net interest income for banks. The net interest margin, a crucial measure for lending profitability, was 2.13% in the fourth quarter, slightly higher than the 2.05% in the same quarter a year ago. The U.S. Federal Reserve shifted to a more dovish stance in December, with markets now pricing in rate cuts by summer. The CME FedWatch tool suggested the first 25-basis-point rate cut in 2024 could occur as early as May. The first Fed meeting in January this year ended with the central bank maintaining its benchmark borrowing rate within a range between 5.25%-5.5%. The bank proposed a final dividend of 54 cents per share, bringing its total dividends distributed in 2023 to SG$1.92, marking a 28% increase from the SG$1.50 distributed in the prior year. DBS also proposed a 1-for-10 bonus share issue. The bonus shares will qualify for dividend payments from the first interim dividend of the financial year ending Dec. 31, 2024. Going forward, the ordinary dividend will be SG$2.16 per share for the enlarged share base in 2024, representing a 24% increase over the 2023 figure, resulting in a 7.5% dividend yield, based on the stock’s closing price on Feb. 6. Regarding the reduced compensation for its senior management, the bank stated that their variable pay was collectively reduced by 21% from the previous year to account for a series of digital disruptions during the year. Jun Rong Yeap, market strategist at online trading platform IG, stated that the cut in compensation may be well-received by investors, adding, “The cuts may also help to offset some of the higher compliance costs, higher operational costs and costs set aside to enhance system resiliency and limit its overall impact on their earnings.” Following this announcement, DBS’s share price rose by as much as 3% on the day, reaching its highest level in almost one month. In March 2023, DBS experienced a 10-hour disruption in its digital services during which users could not access online banking services or make trades via its brokerage. The Monetary Authority of Singapore later described the outage as “unacceptable” and stated that the bank had “fallen short of expectations.” Another outage occurred in October. — CNBC’s Lim Hui Jie contributed to this report.Clarification: This story has been updated to clarify that DBS cut the variable compensation for the CEO and senior management as a result of digital disruptions.
