The jewel in DBS's crown

The last two years have been tough and Singapore is on the verge of tipping into a recession, yet DBS Bank's consumer banking/wealth management business is enjoying robust growth and has become the crown jewel of South-east Asia's largest bank.

Despite market shocks and slowing economic growth, DBS's wealth management and consumer banking business will see double-digit growth this year," said Pearlyn Phau, DBS deputy group head of consumer banking and wealth management.

"Despite 2015 being challenging and 2016 more difficult, year-on-year we're still looking at double-digit growth," said Ms Phau in an interview with The Business Times last Wednesday.

Growing like gangbusters, the business is propping up the group's income and profits and is the only unit to show growth.

Institutional banking, the biggest contributor to group earnings and income, has seen a fall in growth, under strain from higher provisions for more bad loans and lower trade and treasury activities.

The group has four business segments: consumer banking/wealth management, institutional banking, treasury and others.

Consumer banking/wealth management employs 7,000 people including more than 1,000 relationship managers. DBS group has a staff strength of almost 22,000 people.

For the nine months ended Sept 30, 2016, consumer banking/wealth management profit before tax (PBT) was S$1.38 billion, up 49 per cent over the year ago period.

Total income grew 21 per cent to S$3.2 billion.

Net interest income increased 29 per cent to S$2.01 billion from higher loan and deposit volumes and net interest margin.

Non-interest income rose 9 per cent to S$1.19 billion from higher bancassurance and card fees.

For 2015, consumer banking/ wealth management income rose 23 per cent to S$3.5 billion and PBT was 34 per cent higher at S$1.17 billion.

The unit has been growing steadily since 2010 but the big jump came last year following the 2014 acquisition of Societe Generale's Asian private banking business and a 15-year regional bancassurance partnership with Manulife Financial Asia.

The partnership began in January this year.

Under the agreement, Manulife pays DBS S$1.6 billion over the life of the partnership which lets it sell life insurance products to the bank's some six million customers in Singapore, Hong Kong, China and Indonesia.

Both deals have been transformational for DBS.

DBS is now ranked the fifth largest private bank in Asia, up from ninth spot in 2012, and it is the only Asian bank in the 2015 league table compiled by Private Banker International.

Its assets under management (AUM) grew 8 per cent to US$79 billion and came amid a slowdown in AUM for the private bank industry in the Asia-Pacific region.

"We're quite pleased to represent Singapore in the league table," said Ms Phau, who also noted that the AUM growth of 8 per cent was the highest.

Last month DBS bought over ANZ's wealth and retail business in most of Asia, which will add S$23 billion of AUMs and some 1.2 million retail customers, mainly in Indonesia and Taiwan.

High net worth individuals account for S$6 billion of AUM and make up 3,500 customers, mostly in Singapore and Hong Kong.

The deal will add more than 100,000 affluent customers.

Critically it enables a rapid scale-up of DBS's digital strategy in Indonesia and Taiwan.

Ms Phau expects there will be a high retention rate of ANZ customers, going by the Societe Generale experience of more than 80 per cent.

DBS offers Asian values which is "core to our DNA", she said. By Asian values, she means the bank intends to stay around through the thick and thin of economic cycles.

The region is all too familiar with the boom-and- bust business models of global banks which venture into Asia, expanding when times are good and shuttering businesses when they are not.

Ms Phau, who was promoted to her current position almost a year ago after spending three years heading the bank's consumer/wealth management Hong Kong business, said travelling is the hardest part of her job.

"In this position I run our business across many segments, geographies and many product lines," she said.

At the same time, as with other staffers, she has to innovate, a DBS constant. Using new technologies and being able to harness the digital revolution bring costs down, and help DBS to connect with customers who are mobile obsessed, she said.

"Given their attachment to the device, it's non-negotiable," said Ms Phau. DBS spends "an inordinate amount" to embrace the new technologies and find out how customers behave when they surf.

Over the past six years, DBS has invested up to S$5 billion in technology and building a digital bank.

It started a digibank in India in April and will launch the digibank service in Indonesia in a few weeks.

The bank now has over half a million customers in India, though when the business will make money is another matter.

One big challenge is gauging the acceptable burn rate for new investments, Ms Phau said. Another challenge is dealing with non-bankers.

Previously a bank could operate with a team of experienced bankers; now it's about engineers, data scientists, UX/UI (user experience and interface) designers as well as people familiar with cloud computing and Hadoop.

Hadoop is an open-source Big Data platform.

To be able to attract engineers, DBS first had to hire an engineer, she said.

DBS now has a team of 15 designers but it took a while to hire its first designer, some three years ago.

The non-bankers help in areas like figuring out which colours might influence the sale of a loan; they are also able to help track the eyeball of a customer, remotely of course.

"We thought in the past it has to be red - it's DBS's colour - but certain colours call out more," she said. Yellow has positive vibes for loans, it seems.

With all this talk about going digital, still customers are not robotic in their preferences.

It seems celebrity endorsements are needed to drive sales, especially in Hong Kong, noted Ms Phau. Banks in Hong Kong employ celebrities, typically movie stars, to be their spokespeople.

Louis Koo, Hong Kong's highest earning actor, is DBS's brand ambassador for its Black credit card.

This article was first published on November 21, 2016.
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