Update: 05 Apr 2021 14:24 STI
By Lee Kah Whye
Singapore, April 5, 2021 (ANI): The Singaporean bank DBS, which acquired India’s Lakshmi Vilas Bank (LVB) last November, plans to step up its activity by doubling its shares in the growing markets of India and China.
DBS Group CEO Piyush Gupta said this during an investor, analyst and media briefing at his virtual annual general meeting (AGM) last week.
Despite the health crisis and economic chaos caused by the COVID-19 pandemic, Southeast Asia’s largest lender in terms of total assets achieved highest operating profit on record, at SGD 8 , 4 billion (6.3 billion USD). This is an increase of 2% over the previous year. Total income remained stable at SGD 14.6 billion ($ 10.9 billion), which is roughly the same as in 2019.
Breaking down its performance, the bank said net interest income had been affected by falling interest rates, but this was offset by growth in loans, deposits and wealth management fees, investment gains and strong cash performance.
Total revenue from Treasury markets for the whole year increased 33% to SGD 2.9 billion. This was facilitated by improved digital pricing capabilities, improved processes and application resiliency. The bank was able to take advantage of the trading opportunities created by last year’s market volatility to increase trading income by 54%.
With economic and trade uncertainties weighing heavily last year, the bank tightened fiscal controls and managed to cut spending by 2%. General expenses such as travel and advertising declined. Staff costs have benefited from government subsidies.
The bank has experienced a low rate of defaults on the part of borrowers and loan moratoriums have declined significantly from their peaks.
However, he warned that the low interest rate environment will continue to be a challenge.
Going forward, he says he will continue to invest in improving its digital capabilities in both retail wealth management and supply chain digitization. He plans to launch a digital exchange leveraging blockchain to improve the efficiency of wholesale payments and develop capital solutions.
It will also double in the growing markets of India and China.
In China, DBS chief Gupta outlined three key focus areas namely its future joint venture (JV), the consumer credit market and the Greater Bay Area of China.
The new JV in China that was announced last September should be ready to go to market in the coming weeks. He added, “We are confident that China’s opening up in the capital account will present huge opportunities. We are already seeing some benefits of this, as Chinese institutional investors move out and international investors move to China. this is hopefully a great area of growth for us. “
Known as DBS Securities (China), JV will provide onshore products and services to domestic and international clients. Activities in which DBS Securities will engage include brokerage, investment advice in securities, underwriting and sponsorship of securities, as well as proprietary trading. DBS owns a 51 percent stake in the JV and has four Chinese investment and asset management companies as partners.
DBS, which currently has a consumer credit joint venture with the Postal Savings Bank of China, is set to launch a wholly-owned consumer business in China.
When it comes to the Big Bay area, DBS continues to be optimistic about the region and is looking to use its presence in Hong Kong to integrate itself more deeply into the market. The Great Bay region consists of nine cities and two special administrative regions in southern China, including the cities of Hong Kong, Macau and Guangzhou.
As for its projects in India, the bank plans to leverage its acquisition of Lakshmi Vilas Bank (LVB) to expand its franchise in India. It seeks to overlay DBS’s digital capabilities with LVB’s customer base and network to accelerate its business. For SMEs (small and medium-sized enterprises), it plans to expand asset-backed enterprises.
For retail, it aims to increase personal savings and checking accounts, expand its personal loan portfolio and develop its wealth management proposition, as well as meet the needs of niche non-resident Indians. .
Amid market speculation surrounding its takeover of LVB, Gupta assured shareholders that this was not a “forced marriage”. The cash-strapped LVB merged with DBS Bank India to accelerate the group’s digital banking push in South India. “The reason we raised our hands was because we knew it would give us the opportunity to grow both organically and inorganically,” he said.
The deal significantly increased DBS India’s retail customer base from 23 percent pre-merger to 48 percent, adding two million retail customers and 125,000 corporate customers.
Gupta said: “This is very important because to grow in a country like India we need a good source of retail sticky deposits and LVB is able to achieve that. When we overlay our digital capabilities to this base that we have merged, we think the prospects for us are very good. “
DBS had recorded merger costs of SGD 33 million and general provisions of SGD 87 million for LVB, with provisional goodwill of SGD 153 million.
Responding to a shareholder’s concerns about financial losses and the impact of the merger on DBS’s profitability, Gupta said the goodwill was a “very reasonable cost” to acquire a franchise of 600 branches and 1,000 ATMs in five cities in southern India.
For the acquisition of LVB, the non-performing loan (NPA) assets transferred to DBS amounted to SGD 212 million. It is fully guaranteed by general provisions at a conservative rate of 9.5% of performing loans or SGD 183 million. NPA coverage was 76 percent, which is considered aggressive.
“At this time, we don’t think we should bear an additional cost of credit on LVB’s portfolio. We think we’ve anticipated everything we might have expected to see in this year,” Gupta said. . DBS expects the merged entity to achieve profitability within the next 12-24 months. (ANI)