DBS lays out 2020 goals for transaction banking
Singapore
DBS Bank is eager to grow its cash management at a faster clip than before, and at a time when its trade book has been hit by a slowing China, falling commodity prices, and as arbitrage opportunities for the yuan have dried up.
The bank expects to double its income from the trade finance business, and quadruple its cash management segment by 2020, said John Laurens, group head of global transaction banking services at DBS. Mr Laurens joined the bank in November from HSBC.
The growth will be driven partly by new technology to detect trade fraud - a common and long-standing problem for trade finance houses - which the bank hopes to use to help it stand apart from competitors.
As it is, revenue from the bank's global transaction business stood at S$1.62 billion in 2014, up 9 per cent from a year ago. This rose at a faster pace than that in 2013.
Over the last few years, the transaction business - which made up nearly 20 per cent of the bank's profit in 2014 - has been driven by companies taking advantage of cheaper yuan found in offshore yuan centres in Singapore and Hong Kong. A Singapore bank would be able to earn fees by lending offshore yuan to a supplier the amount that his customer owes him for his goods, but that are not due to be paid yet.
DBS has also risen to among the top in trade finance, as it captured market share earlier from European banks that were retreating in the post-crisis period to repair their balance sheets. Today, the bank is mentioned in the same breath as traditional trade finance banks HSBC and Standard Chartered.
Just 30 per cent of the business is derived through cash management now, with the rest coming from trade finance. This mix should be more balanced in the years to come, noted Mr Laurens, who was HSBC's head of global payments and cash management in Asia-Pacific.
"The intent is to balance the cash and trade business, so we will get to 50:50 in terms of cash and trade revenues," he said.
The drive in transaction services has added some S$10 billion in deposits for DBS, with the bank acquiring 27,000 transaction-banking customers last year alone, said Mr Laurens. Of these, about half are monies in corporates' operating accounts - active corporate accounts used to receive money and make payments - meaning that DBS has locked up a lead relationship with such clients. This helps not only in keeping the clients for longer, but can also benefit universal banks such as DBS that are eager to cross-sell.
DBS now has a large pool of staff of about 2,000 working-capital advisers, which help large corporations and small-and-medium-sized enterprises (SMEs) to look at cash management, with an eye on earning fees from selling services that will allow companies to maximise cash flows to and from suppliers and customers, as well as from overseas operations.
The bank will soon employ artificial intelligence - as powered by IBM's Watson technology - to create red flags that pinpoint trade fraud through data analytics, said Mr Laurens.
