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DBS shareholders hard to please with grievances over service and questions on ROE

DBS Group Holdings shareholders are a tough lot, grilling their board on Wednesday over bank service issues and return on equity (ROE) despite 2017 record earnings and significantly higher dividend payout.

At the annual general meeting, chief executive Piyush Gupta began by telling shareholders that he had been asked by some what would be a good price to sell the stock, and his answer was: "As CEO of the bank, I will tell you never to sell the bank."

Around 1,000 shareholders attended the meeting.

Year to date, DBS's share price has risen 18 per cent to S$29.79. For 2017, DBS posted record profit of S$4.39 billion and rewarded shareholders with a hefty dividend of 93 Singapore cents, up 55 per cent, plus a special 50 Singapore cent dividend.

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Mr Gupta reported on the bank's 2017 results and shared that its branch revamp includes opening a 24-hour new lifestyle space at Plaza Singapura which features an open layout that creates a relaxed atmosphere.

The branch does not look like a bank as customers walk in through a coffeeshop, where Bettr Barista, a social enterprise supported by the DBS Foundation, stands. The Plaza Singapura branch has an open space with tables and chairs where teenagers and young people hang out.

Mr Gupta said that he was there recently at 9.30 pm, and was happy to see schoolkids studying there.

Not all shareholders were happy though.

One complained that DBS needs to be more careful with its charity donations, claiming that some organisations could be "fake."

Another complained that the bank had reduced his credit card limit despite being a 30-year customer, and was unhappy that he had to send documents by mail although he lives close to a branch.

One shareholder's grievance was that of frequent changes to relationship managers (RMs). She also said that she could not get hold of her RM for a foreign exchange trade and by the time the RM got back, the "rates had moved".

She was also unhappy with the perceived unfriendliness of counter staff; she related how they did not smile, which was also commented upon by a client of hers when they went to a DBS branch together. She recalled that previous bank counter staff whom she had met were more friendly, and added that they were Singaporeans.

DBS chairman Peter Seah said that the majority of DBS bank counter staff are locals, and that the bank does have some turnover issues - as does the industry.

Other shareholders asked about DBS's ROE and compared it with its local rival United Overseas Bank and the much higher ROEs of US and Australian banks.

DBS and UOB posted 2017 ROE of 9.7 per cent and 10.2 per cent respectively.

Mr Gupta has said that ROE of 13 per cent is a doable target.

He said that US banks have higher ROEs because they enjoy higher net interest margin (NIM) of over 3 per cent while banks in Singapore and Asia are half of that, at 1.7 to 1.8 per cent.

He explained that while NIM is a big driver of returns, the higher capital requirement of Asian and Singapore banks is another factor.

Also helping Australian banks' higher ROE is that they have a loan to deposit ratio (LDR) of 120 per cent, noted one shareholder, while DBS has a more conservative LDR in the 90 per cent range.

Other questions included threats from fintech giants such as AliBaba, Tencent and Google, and blockchain technology.

Mr Gupta said that AliBaba and Tencent are challenging in their home market of China but "when they come to South-east Asia, "we're quite strong in our own home market".

For instance, in the transfer of money, DBS can do it in three seconds across 11 markets, he said.

Banks also have their strengths in areas such as liquidity management and dealing with market and credit risks, he said.

As for blockchain technology, it is a powerful idea but also very expensive, and there is no one protocol, he said. Still, DBS is experimenting with blockchain technology, he added.

One customer asked about DBS's expansion plans in India and was worried about the difficulties of doing business in that country.

DBS has launched digibank India, garnering 1.8 million customers and will be expanding its current 12-branch network to serve more corporates.

Mr Gupta said that he is well aware of the complexity of operating in India, adding that since he grew up there and can speak the language, hopefully it might give some advantage.

In the long term, DBS needs to have two major markets outside its home base of Singapore, he said.

Besides India, DBS is also investing more in China and Indonesia; and these are long-term projects, he said.