DBS (Development Bank of Singapore)

(07-04-2020, 03:52 PM)weijian Wrote: - It looks like Jamie Dimon is indeed different from Piyush Gupta. Because contrary to Gupta's actions, Dimon spent more to buy shares when prices were hitting new heights.

- I would have hope Jamie Dimon would act more rashly like a retail investor and buy more at this time. But alas, probably no one can get away from the institutional imperative. Of course, things have escalated and even Gupta has stopped share buyback since i last posted about it on 23rd March

Weijian, putting the typical US corporation's indiscriminate buybacks for the past 10 years aside (mindless capital allocation), given my unfamiliarity with both companies' capital structure and risks to loan exposure, I am coming up with 2 possibilities:

1) Jamie Dimon is behaving very conservative with regards to the current 2020 pandemic crisis. That explains his preference to conserve capital. Piyush Gupta on the other hand is confident of DBS's balance sheet to survive similar 'tough times' crisis without capital injection, and think the impact to DBS might not be that severe, which explains his aggressive buybacks.

2) Piyush Gupta either do not foresee the same 'tough times' scenario as Jamie Dimon, or he overestimated DBS's balance sheet to survive the current 2020 pandemic crisis.

Either way, it is interesting to see the stock market enter into a technical 'bull market' that quickly, pricing in a V-shape recovery, given that various global leaders such as Jamie Dimon and Lee Hsien Loong etc do not foresee a V-shape economic recovery. Looks like investors are conditioned to BTFD during the past 10 years.

hi holyimage,

- To be honest, i am also not into the 2 banks' capital structure. But it is probably safe to infer that with GFC2008 memories still not exactly stale, it is politically incorrect to do too much share buyback now. You never know what the future holds (Look at the criticism that the US airlines are getting)

MAS to adjust banks' capital requirements amid Covid-19 pandemic

The new measures will effectively put a stop to banks' share buyback activities. In its statement, MAS said that the release of capital buffers "should not be used to finance share buybacks during this period".

https://www.businesstimes.com.sg/compani...9-pandemic

- I do not have much inputs of whether the stock market OR the global leaders that are singing a different tune, is correct. But i do know each of them have their own biases (eg. fear of been wrong) according to their experiences and positioning. This is how the market works - through different parties with different motivations/experiences interacting with each other - until some sort of "dynamic equilibrium" is reached. This is why Mr Market is pretty efficient, because if everyone is in unison at most times, it probably isn't quite efficient at those times. So sometimes, I feel the interesting thing is not their tune, but the story behind their tune

The new ruling from MAS disallows local banks to buy back their shares. They are also urged to be circumspect in dividend payment.
This may put downward pressure on banking stocks.

(08-04-2020, 12:06 AM)Shiyi Wrote: The new ruling from MAS disallows local banks to buy back their shares. They are also urged to be circumspect in dividend payment.
This may put downward pressure on banking stocks.

MAS worried many are using credit and withdrawing deposits, spore savings bonds to buy shares which gave much higher rates than current fix d rate i guess. I am one of those who withdrew all my ssb last mth.

Gupta is going to get a lot of kpkb with his $1.20 base dvd pledge. 

https://www.businesstimes.com.sg/compani...d-earnings

Covid-19 will be a very good excuse for companies to explain away their poor results, withhold cash and raise fund through rights issues. SPH is among the first company to do just that. More companies will follow. And I suppose the risk premium will be adjusted upwards when company results are announced.

20 Apr 2020 Gupta pans banks' dividend cuts, see C19 as threat to all
https://www.euromoney.com/article/b1l8qq...eat-to-all
(click to read)

Piyush Gupta, head of Singapore’s DBS Bank, tells Euromoney that scrapping dividends now is a mistake, discusses the mental stress of working from home, and says a multi-year recovery will hit banks hard and lead to mergers and job losses.

Massive shift Coronavirus is a clearly a “moment in digital development”, Gupta says. “It is breaking through people’s inhibitions to go online and work and do [their] banking." He also points to an inevitable and “massive shift across the region toward people working from home, using technology in its many forms”. But this presents challenges too. Most people, he says, “haven’t worked out the long-term consequences of working from home, not just in productivity terms but in the impact on mental health: How lonely do people get, how do they feel being at home all the time, about being part of a team, about company loyalty and culture? The vast majority of DBS employees we surveyed feel more productive working from home – but will that remain true after four or five or six more weeks?” Employees are encouraged to take part in training sessions and webinars, and many are. But will productivity go on rising? Gupta wonders if coronavirus will bring people and teams together – or cause the interpersonal bonds that comprise any strong corporate community to fray at the edges. 

“It’s not clear if, two months from now, people will say it’s better to be together or not,” Gupta says. He is also looking down the line, to challenges all banks will face. 

The dividend question has divided the industry. Banks such as Santander, HSBC, UBS and Credit Suisse have postponed payouts at least until later this year. Others, including Australia’s four biggest firms, have pledged to continue to pay out, despite pressure from the regulator, arguing that not to do so sends all the wrong kinds of bearish signals. For his part, Gupta says cutting dividends now is “nonsensical” and “a bit of a red herring”. He notes that years of Basel reforms have left banks with “enormous capital reserves” and a clear protocol: 
to dip first into buffers, then counter-cyclical buffers, and finally into capital reserves.

Watch Gupta says why Digital banking is important:


Stay home and stay healthy, guys.

If the banks are facing more NPL , and need to write off more bad debts, can they continue to maintain the same dividend pay out ratio ? Hin Leong Oil is one potential with billions of debts to be written off by banks.

30 Apr 2020 Q&A for DBS (Development Bank of Singapore)
(click to read Q&A)

Looks very strong and NPL is under control (page 8 of ppt)

Stay home and stay healthy, valuebuddies.

(23-04-2020, 08:31 AM)¯|_(ツ)_/¯ Wrote: 20 Apr 2020 Gupta pans banks' dividend cuts, see C19 as threat to all
https://www.euromoney.com/article/b1l8qq...eat-to-all
(click to read)

Piyush Gupta, head of Singapore’s DBS Bank, tells Euromoney that scrapping dividends now is a mistake, discusses the mental stress of working from home, and says a multi-year recovery will hit banks hard and lead to mergers and job losses.

Massive shift Coronavirus is a clearly a “moment in digital development”, Gupta says. “It is breaking through people’s inhibitions to go online and work and do [their] banking." He also points to an inevitable and “massive shift across the region toward people working from home, using technology in its many forms”. But this presents challenges too. Most people, he says, “haven’t worked out the long-term consequences of working from home, not just in productivity terms but in the impact on mental health: How lonely do people get, how do they feel being at home all the time, about being part of a team, about company loyalty and culture? The vast majority of DBS employees we surveyed feel more productive working from home – but will that remain true after four or five or six more weeks?” Employees are encouraged to take part in training sessions and webinars, and many are. But will productivity go on rising? Gupta wonders if coronavirus will bring people and teams together – or cause the interpersonal bonds that comprise any strong corporate community to fray at the edges. 

“It’s not clear if, two months from now, people will say it’s better to be together or not,” Gupta says. He is also looking down the line, to challenges all banks will face. 

The dividend question has divided the industry. Banks such as Santander, HSBC, UBS and Credit Suisse have postponed payouts at least until later this year. Others, including Australia’s four biggest firms, have pledged to continue to pay out, despite pressure from the regulator, arguing that not to do so sends all the wrong kinds of bearish signals. For his part, Gupta says cutting dividends now is “nonsensical” and “a bit of a red herring”. He notes that years of Basel reforms have left banks with “enormous capital reserves” and a clear protocol: 
to dip first into buffers, then counter-cyclical buffers, and finally into capital reserves.

Watch Gupta says why Digital banking is important:

Stay home and stay healthy, guys.

Generally speaking the Singapore banks are managed far more conservatively compared to many western global banks. Their CET1 ratios are all in the 15% +/- range with total capital ratios on the high teens side, dividends are also covered with significant buffers close to 2x. This is in contrast to many other high yeilding western banks such as HSBC, SCB, NAB, ANZ etc. that pay out dividends that are sometimes not even fully covered and have to rely on various non-GAAP adjustments to generate an "adjusted" profit to demonstrate sustainability. Their capital ratios are also much lower usually by 3 - 5 ppt compared to Singapore banks, that's why at the slightest sign of trouble they have to cut/suspend dividends to make up for book deterioration.