Singapore's banking giant DBS is coming of age
The author is a Reuters Breakingviews columnist. The opinions expressed are his own. Updates to add graphic.
By Anshuman Daga
SINGAPORE, Nov 12 (Reuters Breakingviews) -Singapore's biggest bank DBS Group DBSM.SI is ready to give back. The $92 billion lender backed by the city-state's sovereign investor Temasek is embarking on its first major stock repurchase plan in its 56-year history. It's a sensible use of excess capital. Incoming CEO Tan Su Shan will retain enough firepower to pursue ambitious deals, however.
The Asian bank announced its decision last week to return some $2.3 billion of capital to shareholders at the same time that it laid out its usual stellar earnings; it reported a 15% year-on-year rise in net profit to S$3 billion ($2.26 billion) and a 18.7% return on equity for the three months through September. The result pushed the stock to a record high, and it is up 42% this year.
DBS is awash with capital following a boom in demand for its wealth management services. Itsadjusted common equity Tier 1 ratio stands at 15.2%, well above its13% target and above the 13.9% reported at end-2020. Net new inflows into the bank surged through the Covid pandemic, burnishing Singapore's status as a preferred safe haven for Asia's rich. Buybacks will shore up DBS' superior shareholder returns; these amount to an annualised 19% since 2020, easily outstripping most global peers including HSBC HSBA.L and Standard Chartered STAN.L.
Though the repurchases signal a level of maturity, DBS will retain nearly $4 billion of excess capital. That amount grants Tan, an insider who takes charge early next year, enough flexibility should she desire to continue the bold dealmaking led by outgoing CEO Piyush Gupta.
She could double down in China, for example. Lifting the bank's stake from almost 17% to 50% in Shenzhen Rural Commercial Bank would cost roughly $2.5 billion if DBS paid the same valuation the duo laid out in a December. Or there would be room for another Taiwan deal; DBS agreed in 2022 to spend about $1.6 billion to acquire Citi's consumer arm, becoming the largest foreign bank by assets on the island.
Of course, likely policy changes from U.S. president-elect Donald Trump's administration towards China would merit DBS taking a more cautious approach in its Asian backyard. Deals closer to home in Southeast Asia may be more sensible: DBS is exploring expanding in Malaysia, Reuters reports, citing sources. That would be less in the firing line of a second Sino-American trade war. Either way, Singapore's top bank is locked and loaded.
Follow @anshumandaga on X
CONTEXT NEWS
DBS, Singapore' biggest bank, on Nov. 7 reported record quarterly net profit of S$3 billion ($2.25 billion) in the three months to the end of September, beating estimates and up 15% from a year earlier. Annualised return on equity rose to 18.7%.
The lender announced a share buyback program of $2.3 billion. It would mark the first time that repurchased shares are cancelled. DBS stock hit a record high on Nov. 11.
Graphic: DBS stock outperforms global peers https://reut.rs/4hMEHhI
Editing by Una Galani and Ujjaini Dutta
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
