Group Annual Reports | Investor Relations | DBS Bank DBS AR17 full
Financial Reports
126 Financial statements 189 Directors’ statement 193 Independent auditor’s report 200 Five-year summary
Annexure
201 Further information on Board of Directors 206 Further information on Group Management Committee 209 Main subsidiaries and associated companies 210 International banking offices 212 Awards and accolades won
Shareholder Information
214 Share price 215 Financial calendar 216 Shareholding statistics 218 Notice of Annual General Meeting
Proxy form
2 DBS Annual Report 2017
Who we are
DBS is a commercial bank headquartered and listed
Total Assets (SGD)
in Singapore. As one of Asia’s leading banks, we understand the intricacies of the region’s markets, and
518 billion
provide a full range of services in consumer banking, wealth management and institutional banking. To
Income (SGD)
continue staying at the forefront of the industry, we are reimagining banking. We are using digital technology and
11.9 billion
innovation to extend our reach, enhance our efficiencies and create tomorrow’s solutions. We are proud to be
Net Profit (SGD)
recognised not only as Asia’s Safest and Best Bank, but also Asia’s Best Digital Bank.
4.39 billion
Present in 18 markets globally,
Over
including six priority markets in Asia
Institutional Banking customers Over
8.8 million
Consumer Banking Wealth Management customers
Mainland
China
Over
Taiwan
India
Hong Kong
Employees
Group Income
Singapore Greater China South, Southeast Asia
Who we are 3 3
Top of the
Asia’s Safest, Asia’s Best
Digital Class
Asia’s Best Digital Bank
Euromoney 2017
“DBS is perhaps the only bank that does a good job of quantifying
what tech means for profitability. It can dissect to a minute degree the
Best Bank
performance of digital versus traditional customers, on return on equity,
in Asia Pacific
income, frequency of transaction, cost to service and a host of other metrics.” Euromoney IDC Financial Insights 2017
“DBS presented one of the most comprehensive digital strategies
of any bank in the world, let alone Asia.” Citi
Safest Bank in Asia
Global Finance 2017
“DBS is rapidly evolving into flagbearer of digital initiatives in ASEAN,
where we believe the bank has been ahead of the curve.” JP Morgan
Most Valuable Bank
“For investors who feel banks need a strong grasp of technology, DBS
Brand in ASEAN
shows edge.” Bernstein
Brand Finance 2018
“This could be one of the first banks to develop a methodology in
measuring digital value creation.” Deutsche Bank
4 DBS Annual Report 2017
Board of Directors 5
Board of Directors
Peter Seah
Piyush Gupta
Bart Broadman
Euleen Goh
Ho Tian Yee
Nihal Kaviratne
Olivier Lim
Ow Foong Pheng
Andre Sekulic
Danny Teoh
The Board is committed to helping the bank achieve long-term success. The Board provides direction to management by setting the Group’s strategy and
Best Managed
Deep banking knowledge
Board
Gender
overseeing its implementation. It ensures risks and
Board
and experience
independence
diversity
rewards are appropriately balanced.
Singapore Corporate
More than two-thirds of the
A majority of our directors
Two of ten directors
Awards 2017
Board are seasoned bankers,
including the Chairman
are female.
while the rest have extensive
are non-executive and independent
industry experience ranging from
directors.
consumer goods to accounting.
6 DBS Annual Report 2017
Group Management Committee 7
Group The Group Management Committee executes the
Management
stategy and long-term goals of the Group. It drives business performance and organisational synergies. It
Committee
Average years of
About one-third of our
is also responsible for protecting and enhancing our
experience of the
Group Management
brand and reputation.
Group Management
Committee members
Committee.
are women.
Piyush Gupta
Jerry Chen
Chng Sok Hui
Eng-Kwok Seat Moey
Philip Fernandez
Neil Ge
David Gledhill
Derrick Goh
Chief Exective Officer
Taiwan
Finance
Capital Markets
Corporate Treasury
China
Technology Operations
Audit
Lam Chee Kin
Lee Yan Hong
Sim S Lim
Andrew Ng
Jimmy Ng
Karen Ngui
Sebastian Paredes
Elbert Pattijn
Legal, Compliance Secretariat
Human Resources
Singapore
Treasury Markets
Audit
Strategic Marketing Communications
Hong Kong
Risk Management
Those marked by are also in the Group Executive Committee.
Those marked by are new members of the Group Management Committee in 2018.
Jimmy stepped down from the Group Management Committee at end 2017 following an appointment to a new role.
Pearlyn Phau
Consumer Banking
Shee Tse Koon
Surojit Shome
Paulus Sutisna
Tan Su Shan
Tan Teck Long
Jeanette Wong
Read more about the Group
Wealth Management
Strategy Planning
India
Indonesia
Consumer Banking Wealth Management
Institutional Banking
Institutional Banking
Management Committee on
Letter from the Chairman and CEO
A strong, resilient franchise
2017 was a great year for DBS’ business franchise. However, it was not without challenges. Low crude oil prices stretched into
a third year, exerting significant stress on a number of our customers in the oil and gas sector. With technology continuing to disrupt the business of banking, the need to stay on top of the digital agenda was keenly felt.
Notwithstanding these pressures, DBS turned in a strong performance. Total income reached a new high of SGD 11.9 billion, while net profit increased 4 to a record SGD 4.39 billion. This is despite an 8 increase in net allowances to SGD 1.54 billion as we accelerated the recognition of residual weak oil and gas support service exposures as non-performing assets.
Our market shares remained robust. In Singapore, our share of housing loans rose from 29 to 31, and our share of credit card receivables increased from 20 to 25.
We continued to do well in wealth management. Wealth income grew 25 to SGD 2.11 billion, while assets under management rose by 24 to SGD 206 billion. In the institutional banking space, SME income increased by 11 to SGD 1.71 billion.
Cash management income grew 32 to SGD 1.11 billion while trade loans rose 25 to SGD 45 billion.
In addition, we had some franchise- enhancing developments:
• Completed the integration of ANZ’s retail
and wealth franchise across five markets. The effort spanned Singapore, Hong Kong, China, Indonesia and Taiwan, and took
15 months, in accordance with schedule. In last year’s letter, we shared that the acquisition was expected to be return on equity (ROE) and earnings accretive one year after completion. In fact, we now project that ANZ will contribute net profit in 2018 that is more than initial projections.
• Received approval to establish a wholly-
owned subsidiary (WOS) in India. Today, DBS is the largest Singapore bank in India with 12 branches, and the country’s fifth- largest foreign bank by assets. However, to bank certain segments of the economy, such as SMEs, a larger physical presence is required. With WOS status, we will be able to accelerate DBS India’s growth and expand its footprint, to serve a larger customer base.
• Launched digibank, a mobile-only bank, in
Indonesia. The groundbreaking proposition is aimed at the large digitally-savvy
population in Asia’s third-most populous nation. It follows the introduction of digibank in India in April 2016, which has enabled us to penetrate India’s retail banking market with over 1.8 million new customers acquired.
We also had a watershed year in our digital transformation.
Transformation 2.0: making good progress
In last year’s letter, we touched on the importance of digital in delivering simple, fast and contextual banking to customers. This is all-important in our next phase of growth, and involves being digital to the core, embedding ourselves in the customer’s journey and creating a start-up mindset. Good progress has been made on all three fronts.
Being digital to the core
Being truly digital involves a complete transformation of the bank, from front to back end. To be successful, we have to invest in people and skills differently, re-architect our technology infrastructure in the back end to be cloud-native, have systems and ways of working that shorten the release times
11.9
SGD billion
4.39 SGD billion
93 cents
50 cents
+
Letter from the Chairman and CEO
Total income
Total income reached a new high, bolstered by growth in loans and fee income.
Net profit
Net profit increased 4 to a record SGD 4.39 billion from broad-based growth in business volumes.
Dividend
We proposed a final dividend of 60 cents per share, bringing the full-year ordinary dividend to 93 cents per share, up 55.
Special dividend
A 50-cent special dividend has been proposed.
“2017 was a great
year for DBS’ business franchise and digital transformation.”
Chairman Peter Seah
of new applications, and enable scalability through ecosystem partnerships.
2017 was a breakthrough year in each of these areas. In 2009, our technology, hardware, data centres, network management and app development were fundamentally outsourced. At the end of 2017, we were 85 insourced. The shift is important because in order to be more digital, it is imperative that we own the technology resources.
At the same time, we moved from legacy technology – big mainframes in large data centres – to cloud-native technology. By the end of 2017, 66 of our applications were cloud-ready. This, coupled with increased usage of microservices and open- source applications, has enabled us to reduce structural infrastructure costs, and at the same time improve resiliency and nimbleness.
Through increased automation, we have been able to increase our release cadence of new applications in the market by close to
10 times, enabling us to constantly learn, test and iterate, the same way big tech does. In addition, we now have a common platform of services and application programming interfaces (APIs) enabling us to integrate best-in-breed technologies and move faster
on the front end. In 2017, we launched the world’s largest API platform for a bank. We now have over 180 APIs for Singapore, with more than 60 partners.
Embedding ourselves in the customer’s journey
To become more customer-centric, we have continued to embed ourselves in the customer’s journey. In so doing, we have overturned our approach to customer service by starting from their perspective, rather than the logic and limitations imposed by our systems and processes.
A case in point is the DBS Car Marketplace, which we introduced following the Monetary Authority of Singapore’s proposal to allow banks to operate adjacency businesses. Launched in partnership with sgCarMart and Carro, it is not only Singapore’s largest direct seller-to-buyer car marketplace, but also Singapore’s first online consumer marketplace helmed by a bank.
At launch, the marketplace had some 3,500 direct-owner car listings. An on-site car budget calculator provides the estimated loan amount the buyer is eligible for, and then serves them a list of cars based on their budget. The initiative exemplifies how we are
reimagining banking, using digital technology and innovation to seamlessly integrate banking in the lives of customers.
Another example is POSB Smart Buddy, the world’s first in-school wearable tech savings and payments programme. In developing the initiative, we took input from parents who indicated that they wanted to teach their children the value of saving, but did not want the hassle of handling cash. The result was a groundbreaking solution that creates
a contactless payments ecosystem within schools, enabling young students to cultivate sensible savings and spending habits in an engaging manner. An accompanying mobile app allows parents to remotely manage their children’s spending and savings, while empowering students to monitor their own finances. Since its official launch in August 2017, more than 30 schools in Singapore have signed up for it.
DBS Annual Report 2017
8 9
Creating a start-up mindset
To create a start-up culture and mindset, we have found that learning by doing and learning by partnering are key. We have facilitated this by creating immersion programmes such as sprints, scrums and hackathons. We have also collaborated with schools, universities and start-ups through incubator and accelerator programmes. In the last couple of years, we have conducted over 1,000 experiments in the bank and now have over 15,000 people engaged in innovation programmes.
We have also refurbished our workspaces to encourage collaboration and fresh perspectives, created dedicated areas for design and experimentation, and fostered new project management systems to shorten the trial cycle for new ideas. We have hired user experience professionals and anthropologists, and co-located technology specialists and traditional bankers for better collaboration. Progress has been palpable. Ideas and initiatives are springing up spontaneously from the ground up, generating productivity gains and improving customer experience.
Deeper, Broader and Smarter
Having invested time and resources in digitalising the bank, we have seen visible results in a number of areas:
• Deepened wallet share in the consumer
and SME business in our core markets. In Singapore and Hong Kong, where we are a major player, becoming more digital has been key in helping us gain market share and create new income streams. In Singapore, for example, we are the
leader in mortgages, auto loans, cards and bancassurance. Our digital strategy has enabled us to grow income from this segment from SGD 4.14 billion in 2015 to SGD 5.22 billion today.
• Broadened our reach in growth markets.
In these large geographies, digital has enabled the creation of new distribution models which reduce dependency on expensive brick and mortar outlets. While our consumer and SME franchise in these markets is still nascent, there is good traction in digital customer acquisition with our investments being a bet on the future.
• Improved efficiency of traditionally more
high-touch businesses such as large corporate banking and private banking. Digitalisation has helped our teams work smarter, reducing manual processes and increasing productivity. This has enabled us to support higher business volumes, without a commensurate increase in resources.
Sustainability
Sustainability has been at the core of our purpose-driven DNA. From the time of DBS’ and POSB’s founding as the Development Bank of Singapore and “People’s Bank” respectively, we have believed in the importance of good citizenship.
This involves providing responsible banking, creating social impact by giving back to the community through the bank and DBS Foundation, as well as doing our part for the environment and combating climate change.
In September 2015, the United Nations announced a set of 17 Sustainable Development Goals (SDGs) to end poverty, protect the planet and ensure that all people enjoy peace and prosperity as part of a new sustainable development agenda. DBS has chosen to focus on four of the 17 goals:
• SDG 7 – Affordable and Clean Energy • SDG 8 – Decent Work and Economic
Growth • SDG 12 – Responsible Consumption and
Production • SDG 13 – Climate Action
While we contribute towards the other SDGs, these four have been prioritised because they are where we can make the most positive impact given our heritage, client base, markets, ability to innovate and the strategic business opportunities that are increasingly emerging.
In support of the sustainability agenda, DBS was one of the first Singapore companies to launch a green bond in 2017. In addition, DBS was the first Singapore bank to be included as an index constituent of the FTSE4Good Global Index, a global sustainability index. We were also the first Asian bank and Singapore company to join global renewable energy initiative RE100, and to commit to using 100 renewable energy for our Singapore operations by 2030. The DBS Foundation, which champions social enterprises (SEs) and social innovation, also had an active year. In 2017, the Foundation reached out to more than 4,800 SEs.
10 DBS Annual Report 2017
Letter from the Chairman and CEO
Images from left to right: (1) Refurbished our workspaces to encourage
collaboration and fresh perspectives (2) Launched digibank, a mobile-only bank,
in Indonesia (3) In 2017, we launched the world’s largest
Dividend
The recent finalisation of the Basel III capital reforms has provided clarity on future regulatory requirements. They have a benign impact on DBS, enabling our capital requirements to be rationalised. In view of this, the Board suspended the scrip dividend with immediate effect. It also determined that the ordinary dividend can be sustained at higher levels and affirmed the policy of increasing it over time in line with earnings growth.
The Board has proposed a final dividend of 60 cents per share for approval at the forthcoming annual general meeting. This will bring the full-year ordinary dividend to 93 cents per share, which represents an increase of 55 over the previous year. In addition, a special dividend of 50 cents per share has been proposed as a one-time return of the capital buffers that had been built up and to mark the 50th anniversary of DBS.
Acknowledgements
We would like to express our gratitude to Bart Broadman, who is stepping down as board member in April 2018, for his invaluable contributions over the years. At the same time, we would like to thank our shareholders and customers for their continued support, and to acknowledge our employees and the Board for their hard work throughout the year.
“Having invested
time and resources in digitalising the bank, we have seen visible results.”
CEO Piyush Gupta
Peter Seah Lim Huat Chairman
DBS Group Holdings
Piyush Gupta CEO
DBS Group Holdings
Going forward
Having focused on digital transformation over the last three years, we showcased this work to the investor community in November 2017. We also shared a methodology we developed on measuring digital’s contribution to our income and profitability. The reception to this was highly favourable, with some analysts acknowledging that DBS’ digital strategy is one of the most comprehensive in the world. Our market capitalisation rose 44 in 2017, making DBS the most valuable company in Southeast Asia.
We dare not rest on our laurels. While the global economy is stronger than it has been for a number of years, there are a number of stress points that bear watching. They include continuing geopolitical uncertainty as well as growing trade friction.
In addition, the pace of change in our industry remains relentless, and it is imperative that we continue to further our digital agenda in the coming year. We have good momentum.
2018 is DBS’ 50th anniversary. As the former Development Bank of Singapore, we have always been a different kind of bank. From the early days, our people have been trailblazers and path-breakers. With DBS’ mandate to finance Singapore’s industrialisation, we also had a mission that was bigger than ourselves. Today, that DNA – to break boundaries and innovate, as well as be purpose-driven in all that we do – continues to be very much a part of us. The Development Bank of Singapore is increasingly making our presence felt as the
11
12 DBS Annual Report 2017
Digital Bank of Singapore: Deeper. Broader. Smarter. 13
Deeper. Broader. Smarter.
Consumer Banking Wealth Management
World’s largest financial services application programming interface (API) platform
With over 180 APIs across more than
20 categories such as funds transfers, rewards, DBS PayLah! and real-time
DBS PayLah! payments, DBS’ API platform counts
as the world’s largest in the financial industry. Household names such as AIG,
DBS PayLah! is Singapore’s fastest-
McDonald’s, MSIG and PropertyGuru
DBS Home360
growing personal mobile wallet with more
Acquiring wealth
have already plugged into it to develop
than 785,000 users. We were the first
solutions that help customers live more,
e-wallet in Singapore to enable QR code
management
bank less.
The DBS Home360 app is the first app
POSB Smart Buddy
payments and now process more than
customers online
that introduced the power of virtual
15,000 peer-to-peer transactions a day.
reality to the Hong Kong residential
POSB Smart Buddy is the world’s first
property market. It was developed
37 of our new wealth management
in-school wearable tech savings and
in partnership with Century 21, one
customers started their relationship
payments programme. Since its official
of Hong Kong’s largest realtors.
with us online.
launch in August 2017, more than
Homebuyers are now able to get an
30 schools have signed up for it.
affordability assessment on-the-go, while browsing shortlisted properties that DBS Home360 identifies. They can also make
Through our digital strategy, DBS use of the virtual reality function and
SMEs
“tour” properties in the comfort of
continues to deepen wallet share of
their own home.
consumer and institutional customers in our core markets of Singapore and Hong Kong.
Our relentless focus on digitalising
DBS iWealth
the bank is paying off. It has been
SME online
instrumental in helping us create new Our wealth management customers
account opening
are the first in Singapore to be able to
income streams and gain market share.
conduct banking transactions, manage their investment portfolio and trade
80 of our new SME customers in
Online payments
from one single app.
Singapore started their relationship
In a mature market like Singapore,
with us digitally.
We saw a 2.7 times increase in corporate
this strategy has propelled us to top Fast and Secure Transfers payments
Today, 92 of our equity transactions
are done digitally. Of these, in the fourth
in 2017.
position in mortgages, auto loans, quarter of 2017, 30 were done via the
mobile phone.
cards and bancassurance.
14 DBS Annual Report 2017
Digital Bank of Singapore: Deeper. Broader. Smarter. 15
Deeper. Broader. Smarter.
India
Tally partnership Indonesia for SME banking
The integration of DBS India’s e-banking platform with Tally, a popular SME accounting software, has improved
digibank India
customers’ ability to access fi nancial information and manage cash fl ow. The
India’s fi rst mobile-only bank – which is
value proposition has accelerated the
branchless, paperless and signatureless –
growth of our SME base in India.
digibank Indonesia
Our digital strategy has enabled
has signed on over 1.8 million customers
us to broaden our footprint in since its launch.
Following the launch of digibank in India, we introduced digibank in Indonesia in
growth markets. It has made
12 months instead of 24.
it possible for us to expand our reach into new customer segments without expensive
China
physical distribution networks.
Onboarding through WeChat
Customers in China can complete their onboarding process for DBS online banking in just three steps on the WeChat platform. Once done, they can enjoy banking services 247.
Taiwan
Personal loan collaboration with
ibon at 7-Eleven
DBS Taiwan collaborated with ibon at 7-Eleven to allow customers to apply for personal loans at 5,000 outlets in Taiwan. The partnership offers greater customer convenience, and accounts for around
16 DBS Annual Report 2017
Digital Bank of Singapore: Deeper. Broader. Smarter. 17
Deeper. Broader. Smarter.
Digitalisation has helped us work smarter, reduce manual processes, and increase productivity.
From improving the way our customers pay for their everyday coffee to growing their businesses and wealth, we understand that our customers want to live more, bank less.
We improved the way we work so that we can provide solutions that are joyful to all our customers from large corporates to the man-on-the-street.
live app
Like other customer centres, ours suffered from high employee attrition and absenteeism. To address this, we
IDEAL RAPID worked with our customer service
Talent management offi cers (CSOs) to develop an app that
would enable them to bid for shifts, get
The IDEAL RAPID API helps verify and
instant feedback on their performance,
expedite customer payments and
CYCLE People are our greatest asset and we
and receive peer compliments.
Audit
claims instantly.
want them to have meaningful careers with us.
Since the live app was introduced,
With the CYCLE tool, our wealth
Through predictive data analytics,
Customers of global insurance fi rms such
it has imbued the CSOs with a sense of
internal audit teams can now better
as AIG, Chubb and MSIG can now get
management relationship managers
With this in mind, the human resources
belonging and purpose. Attrition and
monitor sales processes, trading activities
their travel insurance claims verifi ed and
Treasury Prism
(RMs) have a full view of a customer’s
team uses predictive data analytics to
absenteeism rates have since dropped
and branch risk profi les. We also
paid out instantly.
life stage, investment patterns and
proactively identify potential employee
to one of the lowest among our
With Treasury Prism, the world’s fi rst
lifestyle preferences at their fi ngertips.
attrition so that their managers can
receive early warning of possible
industry peers.
online treasury and cash management
This has resulted in strong gains in RM
provide the necessary career guidance.
credit deterioration.
simulation tool, chief fi nancial offi cers
productivity across all wealth segments.
The higher morale has resulted
These insights have led to better risk
and corporate treasurers can manage
in a 23 times increase in customer
management through timely alerts to
and project their cash positions at the
compliments.
senior management.
click of a button. More than 200 corporate treasurers
signed up to use the solution in the
18 DBS Annual Report 2017
CEO refl ections
Q1: You recently spoke
rise by only 5 on a pro forma basis when
about a return on equity the rules are fully implemented in 2022.
The capital we have been building up
(ROE) target of 13. It is
because of the uncertainty can now be
a level that DBS has barely
returned. The special dividend of 50 cents
achieved in the past; at the per share is the initial step to recalibrate our
Common Equity Tier 1 (CET1) ratio closer to
same time, banks are fi nding
our long-term target of 13 compared to
it diffi cult to maintain their
the 14 we have been operating on. Barring
historical returns because unforeseen circumstances, we are also raising
the annual payout to SGD 1.20 per share. The
of more stringent capital
reduction in CET1 will be another driver for
requirements. Why would it
improving ROE.
be different for DBS?
A third ROE driver is the improvement to the cost-income ratio that digitalisation brings.
A: Our ROE since 2010 has been around
Digitalisation enables us to increase wallet
11, similar to the preceding decade.
share at lower marginal costs in developed
Normalising for allowances, our 2017 ROE
markets and scale profi tably into the
would also have been at that level. However,
granular SME and mass consumer segments
the underlying returns of our business have
in emerging markets. These gains should
been rising since 2010. Wealth management
reduce the cost-income ratio by at least
income has quadrupled during the period to
half a percentage point annually in the near
Piyush Gupta shares term. Over the intermediate term, the rate
SGD 2.11 billion and now accounts for 18
of group income, while cash management
of cost-income ratio improvements will pick
his thoughts on some income crossed SGD 1 billion this year from
up if our digital strategy enables emerging
pertinent matters. markets to contribute more meaningfully to
almost nothing. Both are low-capital-usage
and high-returns businesses. The proportion
DBS. A fi ve-percentage-point improvement
of capital-intensive trading income has
in the cost-income ratio translates into a one-
halved to one-tenth of group income. These
percentage-point improvement in ROE.
improvements have been masked by the low interest rate environment and a build-up
These three drivers will contribute to DBS’
of our capital, both of which are now
ROE at their own pace and cycles, but their
being reversed.
combined effect should result in a discernible improvement in our returns over the next
Interest rates have been low over the past
few years. We believe a ROE of 13 is
decade. Three-month Singapore-dollar
readily achievable.
interbank rates, the benchmark for pricing domestic loans, last peaked in 2006 at 3.5, declined during the global fi nancial crisis
Q2: How do you feel about
and then stayed below 1 until 2015. Since
DBS at 50?
then they have been hovering around 1. With refl ation in the global economy well
A: DBS at 50 is an amazing success story.
under way, the general view is that interest rates around the world are on a cyclical
Our story is intertwined with Singapore’s,
upturn. Given our balance sheet structure, a
and our achievement mirrors hers.
one-percentage-point increase in domestic interest rates roughly translates into a one-
In our early years as the Development Bank
percentage-point improvement in ROE.
of Singapore, we anchored Singapore’s development as a manufacturing and
With the publication of Basel regulatory
fi nancial hub. During our adolescent years,
requirements in December, we fi nally have
we expanded out of Singapore. While we
clarity on capital requirements. The impact
learnt some lessons along the way, DBS has
on us is not signifi cant – risk-weighted assets
built a credible regional franchise.
CEO reflections 19
Today, we are Southeast Asia’s largest bank,
Q3: DBS, along with its
minimum, direct our financing towards
with a diversified franchise across businesses
Singapore peer banks, has
more efficient fossil-fuel-based
and geographies. Our credit ratings are
technologies. We will also work with
among the highest in the world. In the past
come under the spotlight
clients to establish safeguards in line with
few years, we have also been increasingly
for lending to controversial
regulation and best practice.
recognised for our leadership in Asia.
sectors such as palm oil and
iii. We will rebalance our portfolio towards
But at 50, DBS is at a crossroads. So, too, is
coal. Does DBS have plans to sustainable activities by consciously seeking
banking. What is clear is that what has got us
exit these sectors? such projects to work on.
this far will not take us into the future.
In line with this philosophy, we have decided
A: Let me say that even though being
With the digital revolution, banking is being
to discontinue financing new greenfield coal-
purpose-driven is becoming a cliché in
fundamentally redefined. The ubiquity of the
fired power generation projects in developed
today’s business world, the truth is that DBS
mobile phone is rendering the paradigm of
markets. In developing markets, we will
does have this sense of purpose embedded
going to the bank, or an ATM, or interfacing
be changing our focus to more efficient
in our DNA. This comes from our roots
with the desktop, irrelevant. The explosion
technologies. On coal mining, we will cease
as a development bank, created for the
of big data means that as we go forward, a
project financing of greenfield thermal coal
express purpose of helping Singapore’s
huge part of the battle for the customer will
mines going forward. Our commitment
industrialisation, as well as our heritage in
be fought along data lines. With the rise of
reflects a balanced approach to the energy
POSB, where “Neighbours first, bankers
the network economy, there is also no longer
trilemma – the trade-off between security,
second” is more than a tagline. We recognise
a premium on scale.
affordability and sustainability of supply.
that not all returns can be found in financial statements. Our responsibility to shareholders
While the pressure is on, it is not all
Similarly, palm oil accounts for the livelihoods
is complemented by our responsibility to
doom and gloom. Banks have some
of millions of small-scale farmers and the
society at large.
innate advantages: robust networks
accompanying supply chain in some of the most
and infrastructure, and established risk
populous countries in our neighbourhood. It is
Climate change is one of the biggest
management frameworks. We are also
a highly versatile and productive crop. However,
challenges facing mankind. We are therefore
generally seen as safer and more trustworthy.
its production, if not conducted properly, can
committed to taking a leadership role in
have negative impact on the environment,
promoting sustainable development, including
To successfully navigate the change, however,
economy and people.
the transition to a low-carbon economy.
banks have to embrace what the big tech
companies do. We need to develop new ways
While our credit exposure to palm oil is not
However, it would be foolhardy to assume
of working, and organisational culture has to
material, we promote sustainable production
that the transition can happen overnight.
be more customer-centred and data-driven.
by being discerning in our lending practices. We now require new lending relationships in
In ASEAN, 65 million people remain without
I am optimistic that DBS will make the
the sector to demonstrate alignment with no
access to electricity today. While the region
transition well. With 24,000 people, the
deforestation, no peat and no exploitation −
has made efforts in adopting low-carbon
bank is of a “Goldilocks size” – big enough
otherwise known as NDPE, the best-in-class
energy, by 2040, coal will still account for 40
to matter but small enough to be nimble. In
policies that are increasingly being adopted in
of the generation mix to support the region’s
the last few years, we have made significant
the palm oil sector. We will also consider new
economic and population growth (1)
. To tackle
strides in advancing the digital agenda. Today,
customers who have achieved Roundtable on
climate change, developed and developing
digital innovation in the bank is pervasive and
Sustainable Palm Oil (RSPO) certification or
countries made differentiated pledges based
cuts across all units, from front to back.
are able to demonstrate that they are working
on their respective financial and technological
towards achieving RSPO certification within a
capabilities, levels of economic development,
Few people realise that when DBS was formed
satisfactory timeframe. These commitments
limitations and needs.
in 1968, we were younger than many of our
must include a zero-burning policy.
local competitors – a “Johnny-come-lately”.
Given this reality, we have adopted a
As a latecomer to the scene, our people had to
In 2017, we started the systematic integration
framework that allows us to make meaningful
constantly innovate and think out-of-the-box
of environmental, social and governance risk
impact in a planned and phased way. Our
to gain market share. Fifty years on, that same
factors into the credit assessment process. This
philosophy is anchored on three principles:
spark which helped finance the development
is a milestone for our responsible financing
of Singapore is spurring us on to become a
i. In developed markets, we will actively
agenda. We do this not only to protect our
future-forward bank.
finance sustainable alternatives given that
reputation, but also because it is the right thing
factors such as grid capacity, electrification
to do.
ratio and tariff reform present a relatively
Read more about our responsible financing
mature environment for renewable energy.
approach on page 100.
ii. In developing markets, we will pursue
(1) Source: Southeast Asia Energy Outlook 2017, International Energy Agency
How we create value – our business model
Our resources
Our strategy
Differentiating ourselves
How we create value
Our strategy
Our strategy is predicated on Asia’s megatrends, including the rising middle class, growing intra-regional trade, urbanisation, and the rapid adoption of technology that is fuelling new innovations.
We seek to intermediate trade and capital flows as well as support wealth creation in Asia. Our established and growing presence in Greater China, South Asia and Southeast Asia makes us
a compelling Asian bank of choice. In Singapore, we traditionally serve all customer
segments. Outside Singapore, we have begun to engage individuals and SMEs through a digital strategy as we leverage digital technologies to extend our reach in growth markets.
Making Banking Joyful
Our vision in our next phase of growth is to “Make Banking Joyful” – embedding ourselves seamlessly in our customers’ lives and delivering simple, fast and contextual banking in the digital age. To achieve this, we are building five key capabilities: leveraging digital for customer acquisition, eliminating paper and creating instant fulfilment in transactions, engaging customers digitally, building ecosystem partnerships, and becoming
a data-first organisation. To build these capabilities, we are focused on
three execution priorities: transforming the bank to be digital to the core, embedding ourselves in the customer’s journey to be truly customer- centric, and re-wiring the organisation to create
a start-up mindset. Read more about our digital strategy on
pages 8 to 11. We periodically review our strategy, taking into
account emerging megatrends, the operating environment and what our stakeholders are telling us. These are material matters that can impact our ability to create value.
Read more about our material matters and stakeholder engagement on pages 25 and 28.
Our businesses
We have three core business segments:
• Institutional Banking • Consumer Banking Wealth Management • Treasury Markets
Read more about our businesses on pages 42
Banking the Asian Way
We marry the professionalism of a best-in-class bank with an understanding of Asia’s cultural nuances.
Asian relationships
We recognise that relationships have swings and roundabouts, and stay by our clients through down cycles.
Asian service
Our service ethos is to be Respectful, Easy to deal with and Dependable.
Asian insights
We know Asia better; we provide unique Asian insights and create bespoke Asian products.
Asian innovation
We constantly innovate new ways of banking as we strive to make banking faster and simpler, while delivering contextualised and relevant Asian products and services.
Asian connectivity
We work in a collaborative manner across geographies and businesses, supporting our customers as they expand across Asia.
Technology and infrastructure
Over the years, we have invested in our people and skills, and re-architected our technological backbone to be cloud-native, resilient and scalable. Today, we have a common platform of microservices and application programming interfaces that enables us to automate for faster releases and better leverage ecosystem partners to shift to a platform model. We have embraced the practices of global technology companies – adopting agile methodology, user interface and human-centred designs to deliver customer- centric front-end applications.
Nimbleness and agility
We are of a “goldilocks” size – big enough to have meaningful scale yet nimble enough to quickly act on opportunities. We are continuing to foster a start-up culture to embed customer centricity and drive internal collaboration by embracing experimentation, entrepreneurship and innovation.
Brand
Customer relationships
Digital capital
Financial
Employees
Societal relationships
Physical infrastructure
Natural resources
20 DBS Annual Report 2017
Governing ourselves
Measuring ourselves
Our stakeholders
Competent leadership
A strong, well-informed and fully engaged board provides strategic direction to management. Management executes on strategy and drives performance and organisational synergies. A matrix reporting structure drives joint ownership between regional function heads and local country heads.
Read more about our leaders on pages 4 to 7 and 201 to 208.
Effective internal controls
Three lines of defence guard our operational excellence: identification and management of risks by units, corporate oversight exercised by control functions, and independent assurance by Group Audit.
Read more about our internal controls on pages 58 to 60.
Values-led culture
Our PRIDE! values shape the way we do business and work with each other: Purpose-driven, Relationship-led, Innovative, Decisive, Everything Fun!
Rooted in our DNA is a role beyond short-term profit maximisation: doing real things for real people to create social value in the long run, while ensuring that DBS is a joy to deal with.
Read more about our sustainability efforts on pages 97 to 107.
Balanced scorecard
We use a balanced scorecard approach to assess our performance, track the progress we have made in executing our strategy and determine remuneration.
The scorecard is divided into three parts and is balanced in the following ways: • Between financial and non-financial
performance indicators. Almost one-quarter of the total weighting is focused on control and compliance metrics. On top of that, in line with our digital agenda of “Making Banking Joyful”, we have key performance indicators (KPIs) to track progress made on our digital transformation and the value created from digitalisation
• Across multiple stakeholders • Between current year targets and long-term
strategic outcomes The scorecard is updated yearly and approved
by the Board before being cascaded throughout the organisation, ensuring that the goals of every business, country and support function are aligned to those of the Group. Performance is assessed against the scorecard to determine remuneration, providing a clear line of sight between employee goals and organisational imperatives. We have achieved a well-established rhythm towards performance monitoring and our rewards are closely linked to scorecard outcomes.
Read more about our balanced scorecard on pages 38 to 41.
Read more about our remuneration policy on pages 62 to 67.
Our business model seeks to create value for stakeholders in a sustainable way.
Our strategy is clear and simple. It defines the businesses that we will do and will not do. We use our resources to build competitive advantages. We have put in place
a governance framework to ensure effective execution and risk management. Further,
we have a balanced scorecard to measure our performance and align compensation to desired behaviours.
Read more about how we use our resources on pages 22 to 23.
Shareholders
Customers
Employees
Regulators and policy makers
Society
How we create value - our business model 21
22 DBS Annual Report 2017
How we use our resources 23
How we We utilise or enhance our resources to differentiate
ourselves and maximise value creation for our
use our stakeholders in the long run. Read more about how resources we distribute the value created to our stakeholders
on page 24.
Key initiatives driving outcomes in 2017
Key initiatives driving outcomes in 2017
Brand value according
USD 5.4 bn
USD 6.5 bn
DBS was the most valuable bank brand in
Shareholders’ funds
SGD 45 bn
SGD 47 bn
We continued to build up shareholders’ funds
to “Brand Finance
as at Feb 17
as at Feb 18
ASEAN for the sixth consecutive year, and the
by retaining a portion of our record net profits.
Banking 500” report
first ASEAN bank to make it to the top 40 in
Customer deposits
SGD 347 bn
SGD 374 bn
We also grew our customer deposits and
the global banks ranking.
continued to widen our investor base as well as
Brand
Financial
Wholesale funding
SGD 28 bn
SGD 41 bn
diversify wholesale funding sources.
A strong brand is an
Our strong and growing brand value reflects
Our strong capital base and
Read more about this on page 30 and page 85.
important business
our efforts to make banking simple, effortless
diversified funding sources
driver and allows us to
and seamlessly integrated into our customers’
allow us to support our
compete not just locally,
digital lifestyles.
customers through good
but also regionally.
Read more about this on pages 42 to 47.
and bad times, and enable us to provide banking
Customers
We continued to grow our customer base with
solutions competitively.
– Institutional Banking
digibank in India and Indonesia, the successful
– Consumer Banking
> 6.9 m
> 8.8 m
integration of ANZ wealth management
Over the past years, we have invested in our
Wealth Management
and retail business across five markets, and
expenditure in
technology platforms to become digital
Customer
through our continued efforts to enhance our
technology – rolling
to the core.
relationships
Customer engagement
“Live more, Bank less” value proposition to
four years
Putting customers at the heart of what we do helps
measures (1)
customers.
Read more about this on pages 12 to 17.
(1=worst, 5=best)
Physical infrastructure
Our best-in-class technology
Of which relating to
SGD 1.4 bn
SGD 1.7 bn
differentiate ourselves in an
– Wealth Management
4.17 4.22 We maintained satisfactory customer scores
building for digital and physical infrastructure (3)
industry as commoditised
– Consumer Banking
4.09 4.12 across segments through our relentless focus
as banking, enabling us to
– SME Banking
4.10 4.07 on customer journeys and digital innovations.
allow us to be nimble
build lasting relationships
– Large corporates
th
th
4 4 Read more about this on pages 42 to 47.
and resilient.
and deepen wallet share.
market penetration
Carbon emissions
from purchased
We recognise the impact of climate
ranking
change and are committed to reducing our
Digital customers (2)
2.2 m
2.5 m
Our digital transformation has enabled
electricity (tCO 2 e)
environmental footprint as well as
us to gain market share through delivering
influencing our customers and suppliers
Contribution to total
55 63 superior customer experience, and to create
Natural resources
towards more sustainable operations.
income from digital
new markets through ecosystems.
We impact the natural
consumption (MWh)
Refer to “Sustainability” on page 97.
Digital capital
customers
Refer to “Deeper. Broader. Smarter.” on pages 12
environment directly in
–
to 17, and “CFO statement” on pages 36 to 37.
our operations, as well
Peak capacity of
386 kW
Our digital transformation is pervasive and
Cost-income ratio from
as indirectly through our
solar panels installed
encompasses technology,
digital customers (vs.
(vs. 55)
(vs. 58)
customers and suppliers.
on premises
customer journey thinking
traditional customers)
Customers under
We rolled out our enhanced responsible
and a start-up culture.
Return on equity (ROE)
Social Enterprise
financing policies and processes in 2017
from digital customers
and undertook various sustainable finance
(vs. traditional
initiatives, contributing to the Sustainable
customers)
Societal relationships
Number of social
12 14 Development Goals.
We recognise that not all
One of our priorities is to future-proof our
returns can be found in the
awarded grants
Through DBS Foundation, we continue to
people and equip them with the necessary
financial statements and our
nurture social enterprises across the region
Employee
81 82 skills and tools to stay ahead of the curve.
licence to operate comes
Volunteer hours
to enable them to scale and enhance
engagement score
from society at large.
their social impact through innovative and
Employees
In 2017, we launched DigiFY – a platform
sustainable businesses.
An agile and engaged
Voluntary
12 13 where our employees can acquire digital skills
Refer to “Sustainability” on page 97.
workforce enables us to
attrition rate
and knowledge.
be nimble and react quickly
Through the enhancement of our resources, value is created.
Read more about this on page 106.
to opportunities.
Training hours
We distribute this value to our stakeholders in several ways.
per employee
Read more on page 24.
(1) Based on Ipsos Customer Satisfaction Survey (CSS) for Wealth Management, Scorpio Partnership CSS for Consumer Banking, and Nielsen SME Survey. Large
corporates market penetration ranking from Greenwich. (2) This relates to the consumer and SME businesses in Singapore and Hong Kong.
24 DBS Annual Report 2017
How we distribute value created
Material matters 25
How we distribute
Material
value created
matters
We distribute value
Distributable financial value
to our stakeholders in several ways. Some
Identify
Prioritise Integrate
manifest themselves
We identify matters that may
From the list of identified matters,
Those matters that are material
in financial value while
impact the execution of our
we prioritise those that most
to value creation are integrated
others bring about into our balanced scorecard,
strategy. This is a group-wide
significantly impact our ability to
effort taking into account input
successfully execute our strategy
which is used to set objectives,
intangible benefits. from all business and support
and deliver long-term value to
drive behaviours, measure
units, and incorporating
our stakeholders.
performance and determine the
We define distributable financial value
28 48 Read more about our stakeholder
feedback from stakeholders.
remuneration of our people.
as net profit before discretionary bonus,
Important matters are managed
taxes (direct and indirect) and community
engagement on pages 28 to 29.
as part of our business and
investments. In 2017, the distributable
Shareholders
Retained earnings operational processes.