DBS expects medium-term earnings to reach S$10 billion, ROE up to 17%

SINGAPORE’S largest lender has forecast a return on equity (ROE) of between 15 per cent and 17 per cent in the medium term, as well as earnings of more than S$10 billion within the same timeframe.

These targets, announced during DBS’ investor day presentation on Monday (May 22), are set to be driven by a strong balance sheet and tech capabilities the bank has been honing the past few years.

DBS shares have fallen 8.8 per cent year to date, amid a high interest rate environment and anxiety over several bank collapses since the start of the year.

Confidence in the bank this year took a hit after users experienced two disruptions in the bank’s digital banking services. This led the Monetary Authority of Singapore (MAS) to impose an additional capital requirement on DBS, bringing its total additional regulatory capital requirement to about S$1.6 billion.

Group chief information officer and head of technology & operations Jimmy Ng said in his presentation that it takes time to build technology capabilities, just as Rome was not built in a day.

As compared with other Big Tech firms such as Alphabet and Google, which have been building their tech capabilities for over 10 years, DBS began its digital transformation journey nine years ago.

While the year has been fraught with a series of setbacks, including a rise in Additional Buyer’s Stamp Duty, the bank remained confident in its growth journey, targeting “high potential opportunities in growth markets” such as India, Indonesia and Taiwan.

Following its acquisition of Lakshmi Vilas Bank in 2020, DBS also aims to be among the top 10 private sector banks in India.

Surojit Shome, country head of DBS India, announced targets to double the bank’s overall loans and overall deposits as well as expand the bank’s net interest margin (NIM) by 100 basis points for its franchise in India by 2026.

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He also projected total income to grow 2.5 times, and net profit to expand three times to S$375 million, from the current S$126 million.

For the year, the bank has forecast a return on equity of above 17 per cent, with full-year NIM to be around 2.05 per cent to 2.1 per cent.

It is also eyeing two new pilots of growth – in cross-border, low-value payments as well as through its digital asset ecosystem.

DBS expects its cross-border, low-value payments to grow by 50 per cent to reach over S$40 billion in volume and over S$300 million in revenue, while revenue for its digital asset arm is projected to hit between S$80 million and S$120 million by 2025.

DBS shares closed S$0.08 or nearly 0.3 per cent higher at S$30.91 on Monday.