Consumer and SME business a priority for DBS
(22 November 2017 – Singapore) DBS Group’s CEO has said that the bank’s consumer and small and medium-sized enterprise (SME) banking business may contribute around half of its income in the next five years.
Speaking to about analysts and investors from around the world about DBS' digital strategy, DBS’ CEO Piyush Gupta said that over the last two years, this business unit has posted a compound annual growth rate of 11 percent, compared to the overall four percent growth recorded across the whole bank. Meanwhile, the unit’s cost-to-income ratio has fallen from 49 percent to 43 percent over the same period, while return on equity (ROE) has risen from 22 percent to 24 percent.
Income for the business, which reached S$5.1 billion (A$4.9 billion) this year, will likely continue to grow at a double-digit pace and has the potential to make up 50 percent of the bank's total income within the next five years, up from 44 percent today, Gupta said.
He noted that a major factor driving this growth has been the bank’s digital transformation since 2014, which included using data analytics to increase customer acquisition through wider distribution, eliminate paper and drive "sticky" customer behaviour by cross-selling products through contextual marketing.
While the bank’s strategy in the consumer and SME banking markets in Singapore and Hong Kong, was aimed at pre-empting startups, it targeted growth regions such Indonesia and India as a disrupter, launching a fully digital bank in both markets.
Those digital banks are still in a small and loss-making, Gupta said, however are the bank’s “bet on the future". Income growth from this new unit is likely to be over 20 percent in future, with the potential to contribute about 10 percent of the bank's income in five years.
"Our digital transformation is pervasive, encompassing technology, customer journey and a start-up culture. This is difficult to replicate and creates competitive advantage," he said.
"The early results of our efforts are encouraging. Digitalisation has accelerated income growth and lowered structural costs, boosting operating leverage. The opportunity space is significant."
Digital customers in DBS' consumer and SME banking businesses in Singapore and Hong Kong make up only 39 percent of the total, but contribute 60 percent of income and 68 percent of profit before allowances according to the bank.
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