DBS sees double-digit growth from consumer and SME business in Singapore, Hong Kong

DBS Group Holdings expects income from its consumer and SME (small and medium enterprise) business in Singapore and Hong Kong to grow at a double-digit pace, and to potentially contribute 50 per cent of total income in five years, chief executive Piyush Gupta said in a presentation outlining the bank's strategy on Friday.

He added that leveraging Asia's megatrends such as intra-regional trade and growing affluence has paid off with the bank reaping higher returns and diversified growth from 2009 to 2014.

Some of DBS's key strategies included: Building a diversified regional corporate bank; building a regional wealth business; regaining banking leadership in Singapore in the retail and SME sectors; as well as expanding SMEs in growth markets.

Now, the bank's consumer and SME business in Singapore and Hong Kong represents a "jewel in the crown" that is likely to provide double-digit income growth, and has the potential to contribute half of the bank's income in five years, DBS said. The sector's operations in Singapore and Hong Kong currently provide S$5.1 billion, or 44 per cent of the bank's 2017 income of S$11.6 billion.

Elsewhere, while the consumer and SME sector in growth markets such as India and Indonesia is still loss-making, income growth is likely to be more than 20 per cent on an annually compounded basis, and has the potential to contribute about 10 per cent of the bank's income in five years, with an aspirational ROE (return on equity) of more than 10 per cent, the bank said.

DBS's chief financial officer, Chng Sok Hui, also made a presentation on creating shareholder value from digitalisation.

She said that the bank's digital segment of the consumer and SME business in Singapore and Hong Kong is enjoying good returns, with its digital business having an ROE that is nine percentage points higher than traditional businesses in 2017.

Ms Chng added that while digital customers made up 39 per cent of DBS' retail and SME customers in Singapore and Hong Kong, they contributed 60 per cent of the segment's income and 68 per cent of their profit before allowances.

The bank's current agenda includes an emphasis on digitalisation as this will create opportunities to "pre-empt disruptors, disrupt incumbents and improve business profitability", DBS noted.

The bank also said that early results of their digitalisation efforts have been encouraging, as these have accelerated income growth and lowered structural costs.

As at 10.43am on Friday, DBS's shares were trading 1.24 per cent higher to S$23.63 per share.