DBS (Development Bank of Singapore)

(03-07-2024, 12:31 AM)donmihaihai Wrote:

(02-07-2024, 10:36 PM)jfc18 Wrote: Remember DBS world beating 18% ROE? This ROE is actually dragged down severely by the excess $11bn capital. Hypothetically if DBS has returned all this $11bn excess capital to shareholders last year and with the same net profit, actual ROE would be 22.6% instead of 18%.

Less $11B also mean interest income got to be reduced as the contribution by $11B got to be removed. DBS average rate for income about 4++% mean earning reduced by around $500M pretax. Cost remain the same because liabilities remain and operating expense remain. 
Leverage increased too, $62 billion less $11 billion mean equity about $51 billion. While total assets reduced from $739Billion to 728 billion. 
After > 20 years, this is my first time to read about DBS having World beating ROE and being best bank in the world. Wouldn't be surprised when share price and results are doing well.

Hi donmihaihai,

A bank capital structure is broadly classified into Tier 1 and Tier 2. 

Under Tier 1 capital, the components are Common Equity Tier 1 (CET1) and Additional Tier 1 (AT1).

CET1 consists mainly of common shares equity plus retained earnings and minority interests.

AT1 consists of perpetual bonds with no maturity.

Under Tier 2 capital, it consists of unsecured bullet bonds of max maturity of 5 years.

If a bank collapses, Tier 1 capital investors would be wiped out first, followed by Tier 2 investors, lastly the depositors.

A bank would have to incur cost for its capital. Eg, coupons for bonds issued. DBS does not earn interest income from its $11b excess capital. On the contrary, it needs to pay money for them. DBS bonds and perpetual bonds coupon ranges from 3% to 5+% depending on the denominated currency. However, a ball park 4% funding cost for AT1 and Tier 2 bonds is reasonable.

Henceforth, if DBS was to return all excess $11b capital, it would save $500m of funding cost annually which would boost bottomline. This $500m savings is not an one-off but is recurring in nature. For context, that would be a 5% earnings growth on a $10b profit. 

As a fellow Singaporean who uses DBS app everyday and grew up in a country where DBS and POSB branches are ubiquitous, I too did not realise we really do have a world class bank in our own backyard. I was convinced only after a deeper study two years ago.

The numbers speak for themselves. DBS 2023 ROE of 18% was 7th highest among world biggest 100 banks. Beating US, Europe and Aust leading banks of JPM, GS, HSBC, SC, BNP, NAB. It is important to take note DBS 18% ROE is achieved with a lower NIM compared to the global peers above. More amazingly, stripping off $11b excess capital to optimal CET1 of 13%, DBS true ROE would be 22% in 2023.

Banks with above 20% ROE are usually the ones in developing countries with ultra high CASA ratio and thus high NIM. For example, Indonesia big 4 banks have NIM of 4+% to 5+% in 2023. The biggest Indonesia bank is Bank Central Asia whose 2023 NIM is 5.6% and ROE 21%. For perspective, DBS ROE is not far behind and is achieved with a relatively low NIM of 2.13%.

Let's zoom out now. Actually DBS has won numerous World's Best Bank accolade this past decade. Since 2018, it has won 7 "World's Best Bank" award from Global Finance, Euromoney and The Banker. These are all reputable institutions. DBS has also won "Asia's Safest Bank" award by Global Finance for consecutive 15 years and running. There are still a slew of other awards like Best Digital Bank, Most Innovative Bank, etc. Too many to mention, really. In 2023 alone, DBS has won 39 awards. 

Again, I have vested interest. My views may be biased. YMMV.

@ghchua,
My questions were more rhetorical in nature than anything else, not seeking "clear" answers as you have said. We choose the poison that suits our temperament. Also, I try to create choices between "good" and "better" now, rather than "good" and "bad".

@donmihaihai,
I do not have an easily available example of a Spore bank that went to the moon and back, so I had to use Public Bank. That said, Public Bank probably has 1 of the lowest cost-to-income ratio (<35%), lowest NPL (in the realm of 0.5%) with decent low teens ROE despite having really low CASA ratios. It is truly doing shareholder service compared to many of its peers doing national service.

(02-07-2024, 10:36 PM)jfc18 Wrote: Hi karlmarx, weijian and ghchua,

I have been a fan of your postings and learnt immensely from your knowledge. Thank you guys!

I am vested in DBS and would like to share with my thoughts. Below are my three different comments to a financial blog couple of weeks ago. I will just copy and paste what I wrote. My views may be biased.

Not trying to bump up DBS price or whatever. It's market cap is above $100b. Small retail investors like us will not move the needle. Solely for sharing purpose and healthy discussion. Thank you.


*Comment 1 - On why DBS 1.65x PTB is justified*

You have missed out an important metric for banks analysis which is ROE. ROE is a function of PE and PTB.

Market prices DBS at 1.65x PTB because its ROE is 18% last year. UOB and OCBC PTB is 1.2x because their ROE is around 14%. However, all three have the same PE around 9x.

Hypothetically if DBS can achieve ROE of 25% and has a rich PTB of 2x, it is actually cheaper as PE is only 8x. PTB alone is only half of the story.

DBS has a structurally 4% ROE outperformance vs peers due to:
– higher CASA ratio.
– higher non interest income which requires less capital.
– superior tech

Question is can DBS defend 18% ROE? With interest rate coming down, probably no. But Piyush Gupta has commented many times that their modelling indicates DBS can achieve 15-17% ROE in next 3-5 years if interest rate does not plummet to zero like in the past.

If we assume middle ground 16% ROE is sustainable, market is now ascribing 1.65x PTB, which equates to PE 10x. It is not expensive for a well run bank which can stand shoulder to shoulder along global peers.

For perspective, DBS 18% ROE is 7th highest in the world’s top 100 banks. Beating even JP Morgan, Goldman, Citi, HSBC, StandChart, BNP Paribas, Deutsche, NAB and many more.

Moreover historically SG banks have the lowest NIM among the developed countries. Past 20 years average SG banks NIM is 1.7%. UK and AUS is 1.9%. US is 3.4%. To achieve world beating high ROE with low NIM, DBS must be doing something right with Piyush Gupta at the helm.

Going forward, DBS has clearly communicated post bonus issue, it will raise dividend by $0.24 p.a for the next 2-3 years at the minimum. Hence using share price of $34 post bonus issue, 2025 dividend of $2.40, yield is 7%. With 2026 dividend of $2.64%, yield is 7.8%. This is the baseline. Risk is on the upside.

Is the high dividend sustainable? Yes, because DBS business mix requires less capital now. It can comfortably give out 70% dividend payout ratio and still grow its business nicely.

More importantly, CET1 is now at 14.6%. During the tech disruption, MAS penalised DBS and increased its RWA Operational Risk Multiplier to 1.8x. When this tech penalty is eventually lifted off (OCBC tech penalty is lifted off this year), CET1 will be bumped up to 15.51%. From 15.51% to optimal CET1 target of 13%, it means DBS has $9.2bn of excess CET1 capital.

During Covid years, Dbs has also built up $2.2bn of Management Overlay which is over and above of what is required of GP. This amount is totally untouched yet.

All in, DBS may have excess capital of approx $11bn which can be returned to shareholders and still be able to run its banking operations optimally.

Remember DBS world beating 18% ROE? This ROE is actually dragged down severely by the excess $11bn capital. Hypothetically if DBS has returned all this $11bn excess capital to shareholders last year and with the same net profit, actual ROE would be 22.6% instead of 18%.

Judging DBS by 1.65x PTB alone is missing the forest for the trees. At current price, we are getting a world class bank with:

Actual ROE 22%
PE 10x
Sustainable forward dividend of above 7%

Not pricey at all.

hi jfc18,

I read this comment earlier on a local popular blog and I have to commend that this comment is actually much better than many of the posts from the blogger itself (and this is more of a compliment on your post than to say the blogger doesn't write good stuff)

There are probably tons of stuff that I have to learn from you on banks. And so here I am, poking.

Higher CASA ratio: Who determines CASA ratios? While higher CASA ratios mean one has higher NIM but it also means probably higher liquidity risk as well. The former is a very clear thing but latter is pretty abstract. A structural advantage can easily turn into a structural disadvantage one day?

Higher non interest income which requires less capital: I reckon this is probably the Holy Grail of Banking - Lend money to poor people and sell products to the rich people (or the other way around, depending on your experience). Unless you got a rogue trader or decide to become a principal yourself, else I suspect this portion of the business (agency, management) is actually pretty good. At most times, I have a soft spot for asset/capital-light businesses over those capital-heavy ones.

Superior tech: After all their service disruptions that eventually got MAS doing some enforcement, superior tech is the last thing that I would associate with DBS. Could you actually elaborate more?

P.S. did you mix up between our VBs K and D? 

Hi jfc18,

From your post you mentioned that DBS, CEO, Piyush Gupta had done something differently that DBS able to higher ROE than OCBC & UOB. Do you know what had he done over the past years? Appreciate you able to share me so I can learn more about banking business. Thanks.

I was educated in one of AGM by an independence director of a company (I would not like to reveal the name) that higher ROE is a function of the risk taken unless the business has a competitive edge over it's peer.

(03-07-2024, 10:34 AM)weijian Wrote:

(02-07-2024, 10:36 PM)jfc18 Wrote: Hi karlmarx, weijian and ghchua,

I have been a fan of your postings and learnt immensely from your knowledge. Thank you guys!

I am vested in DBS and would like to share with my thoughts. Below are my three different comments to a financial blog couple of weeks ago. I will just copy and paste what I wrote. My views may be biased.

Not trying to bump up DBS price or whatever. It's market cap is above $100b. Small retail investors like us will not move the needle. Solely for sharing purpose and healthy discussion. Thank you.


*Comment 1 - On why DBS 1.65x PTB is justified*

You have missed out an important metric for banks analysis which is ROE. ROE is a function of PE and PTB.

Market prices DBS at 1.65x PTB because its ROE is 18% last year. UOB and OCBC PTB is 1.2x because their ROE is around 14%. However, all three have the same PE around 9x.

Hypothetically if DBS can achieve ROE of 25% and has a rich PTB of 2x, it is actually cheaper as PE is only 8x. PTB alone is only half of the story.

DBS has a structurally 4% ROE outperformance vs peers due to:
– higher CASA ratio.
– higher non interest income which requires less capital.
– superior tech

Question is can DBS defend 18% ROE? With interest rate coming down, probably no. But Piyush Gupta has commented many times that their modelling indicates DBS can achieve 15-17% ROE in next 3-5 years if interest rate does not plummet to zero like in the past.

If we assume middle ground 16% ROE is sustainable, market is now ascribing 1.65x PTB, which equates to PE 10x. It is not expensive for a well run bank which can stand shoulder to shoulder along global peers.

For perspective, DBS 18% ROE is 7th highest in the world’s top 100 banks. Beating even JP Morgan, Goldman, Citi, HSBC, StandChart, BNP Paribas, Deutsche, NAB and many more.

Moreover historically SG banks have the lowest NIM among the developed countries. Past 20 years average SG banks NIM is 1.7%. UK and AUS is 1.9%. US is 3.4%. To achieve world beating high ROE with low NIM, DBS must be doing something right with Piyush Gupta at the helm.

Going forward, DBS has clearly communicated post bonus issue, it will raise dividend by $0.24 p.a for the next 2-3 years at the minimum. Hence using share price of $34 post bonus issue, 2025 dividend of $2.40, yield is 7%. With 2026 dividend of $2.64%, yield is 7.8%. This is the baseline. Risk is on the upside.

Is the high dividend sustainable? Yes, because DBS business mix requires less capital now. It can comfortably give out 70% dividend payout ratio and still grow its business nicely.

More importantly, CET1 is now at 14.6%. During the tech disruption, MAS penalised DBS and increased its RWA Operational Risk Multiplier to 1.8x. When this tech penalty is eventually lifted off (OCBC tech penalty is lifted off this year), CET1 will be bumped up to 15.51%. From 15.51% to optimal CET1 target of 13%, it means DBS has $9.2bn of excess CET1 capital.

During Covid years, Dbs has also built up $2.2bn of Management Overlay which is over and above of what is required of GP. This amount is totally untouched yet.

All in, DBS may have excess capital of approx $11bn which can be returned to shareholders and still be able to run its banking operations optimally.

Remember DBS world beating 18% ROE? This ROE is actually dragged down severely by the excess $11bn capital. Hypothetically if DBS has returned all this $11bn excess capital to shareholders last year and with the same net profit, actual ROE would be 22.6% instead of 18%.

Judging DBS by 1.65x PTB alone is missing the forest for the trees. At current price, we are getting a world class bank with:

Actual ROE 22%
PE 10x
Sustainable forward dividend of above 7%

Not pricey at all.

hi jfc18,

I read this comment earlier on a local popular blog and I have to commend that this comment is actually much better than many of the posts from the blogger itself (and this is more of a compliment on your post than to say the blogger doesn't write good stuff)

There are probably tons of stuff that I have to learn from you on banks. And so here I am, poking.

Higher CASA ratio: Who determines CASA ratios? While higher CASA ratios mean one has higher NIM but it also means probably higher liquidity risk as well. The former is a very clear thing but latter is pretty abstract. A structural advantage can easily turn into a structural disadvantage one day?

Higher non interest income which requires less capital: I reckon this is probably the Holy Grail of Banking - Lend money to poor people and sell products to the rich people (or the other way around, depending on your experience). Unless you got a rogue trader or decide to become a principal yourself, else I suspect this portion of the business (agency, management) is actually pretty good. At most times, I have a soft spot for asset/capital-light businesses over those capital-heavy ones.

Superior tech: After all their service disruptions that eventually got MAS doing some enforcement, superior tech is the last thing that I would associate with DBS. Could you actually elaborate more?

P.S. did you mix up between our VBs K and D? 

Casa ratio is just simply current account / savings account ratio to total accounts. A lot of consumers in Singapore will likely have DBS/POSB as the primary account for GIRO payments etc. Those earn very little interest  0.05% or something. Similarly, a lot  of businesses will have a primary business banking account with DBS. I recollect reading somewhere that they have close to 50% share in business banking. The only risk is deposit fleeing like in case of bank collapsex, which is very unlikely for DBS.

(03-07-2024, 10:13 AM)weijian Wrote: @donmihaihai,
I do not have an easily available example of a Spore bank that went to the moon and back, so I had to use Public Bank. That said, Public Bank probably has 1 of the lowest cost-to-income ratio (<35%), lowest NPL (in the realm of 0.5%) with decent low teens ROE despite having really low CASA ratios. It is truly doing shareholder service compared to many of its peers doing national service.

Just use DBS.

Ten-yearSummary.pdf (dbs.com)
SharePrices.pdf (dbs.com)

If CASA ratio is low, well I don't know what low is low, then it has a higher raw material cost, controlling operating cost should not be enough, what more this is banking and bankers do need to be paid and can cost quite some money. Removing cost side from the equation, that mean Public Bank is more leverage or able to charge more to their customers. 

Btw, of the 3 local banks, DBS earn higher NIM by charging lower interest to customers. Well, DBS has the lowest prime rate in Singapore. Singapore is the easy part, overseas operations is the place where Singapore banks are in disadvantage because they are facing the DBS, UOB and OCBC of those countries.

(03-07-2024, 02:33 AM)jfc18 Wrote: Hi donmihaihai,

A bank capital structure is broadly classified into Tier 1 and Tier 2. 

Under Tier 1 capital, the components are Common Equity Tier 1 (CET1) and Additional Tier 1 (AT1).

CET1 consists mainly of common shares equity plus retained earnings and minority interests.

AT1 consists of perpetual bonds with no maturity.

Under Tier 2 capital, it consists of unsecured bullet bonds of max maturity of 5 years.

If a bank collapses, Tier 1 capital investors would be wiped out first, followed by Tier 2 investors, lastly the depositors.

A bank would have to incur cost for its capital. Eg, coupons for bonds issued. DBS does not earn interest income from its $11b excess capital. On the contrary, it needs to pay money for them. DBS bonds and perpetual bonds coupon ranges from 3% to 5+% depending on the denominated currency. However, a ball park 4% funding cost for AT1 and Tier 2 bonds is reasonable.

Henceforth, if DBS was to return all excess $11b capital, it would save $500m of funding cost annually which would boost bottomline. This $500m savings is not an one-off but is recurring in nature. For context, that would be a 5% earnings growth on a $10b profit. 

As of 31 December 2024, shareholders funds and total equity around 62B, CET1 capital @ 54B, Tier 1 capital @ 56B and total capital(Tier 1 & 2) @ 59B. I am not sure where to look at based on your comments. I am not an expert on bank, just leave it until I have a better understanding.

As for there is no income for those excess capital, since assets = equity +liabilities, any capital retained or borrowed will has the same amount of cash sitting on the asset side or when the cash is being used to generate income, turned into productive assets other than cash. Look at the assets side of DBS B/S, I got to assume even a reasonable run bank would not has cash sitting around not generating income. So pretty sure a "world class" bank like DBS would do better.

So, if the excess is from capital side, any reduction means reduction of income and if the excess is from the liabilities side, then reduction of liabilities will result in reduce income as well.

Hi weijian and setan,

Bank lending business is a game of spread. Whoever commands highest CASA wins. Size of bank and user experience will determine outcome.

Typically the biggest bank in any country will have highest CASA due to its perceived safety. In modern age where one could transfer huge sum of money between different banks at fingertips, UX which leverages on tech, has become game changer. This is true for both retail and corporates.

In times of crisis, money would flock to the biggest bank. During SVB saga, in US, JPM was flooded with cash. When Credit Suisse imploded, even in SG, DBS had a surge of new funds inflow. From this viewpoint, DBS CASA structural advantage is rather weatherproof. Leakage of CASA in recent times is mainly due to high rates of FD and Tbills.

DBS has three capital light high ROE businesses, namely Wealth Mgt (ROE 30%), Global Transaction Services (ROE 38%) and Treasury Market Sales (ROE 14%). In 2015, they accounted for 37% of DBS total income. In 2023, they contributed 52% and the uptrend growth is intact. Assuming this trio blended ROE is 26% and traditional lending business ROE is 10%, put together we get a ROE of 18%, which is DBS ROE in 2023. Even in a lower interest rate environment and NIM, I am cautiously optimistic DBS could sustain ROE of 15% and above. The fact that this trio of capital light high roe businesses is growing faster than traditional lending business will also pull up the number overtime.

Is DBS 1.65x PTB expensive? Market is currently valuing DBS lending business at 10x PE and fast growing capital light high ROE businesses (blended ROE 25-28%) at a cheap 10x PE too. To me, the high roe businesses are undervalued by market esp in view of their fast growing trajectory.

Because of the high ROE business mix, DBS does not require as much capital to grow as compared to the past. To my best guesstimate, DBS capital neutral ratio is 70-75% which means it can pay out 70% of earnings as dividend and not impacting CET1. A dividend payout ratio of below 70% would accrete more capital to its already high CET1. With excess $11b capital and high ROE business mix, it is clear DBS will need to accelerate its dividend payout to shareholders in order to avoid growing its CET1 which brings down ROE. DBS is likely to increase dividends steadily over the medium term. Hypothetically, in a few years time, if DBS dividend payout hits 100%, it does not mean it is not retaining some earnings to grow its business. Rather its the extra 30% simply comes from excess capital. Despite recent mini run up of share price, DBS investment thesis of growing dividends cum yield compression in a rate cutting environment, is still compelling and intact.

After a breakfast with Jack Ma in 2014, Piyush Gupta was convinced big tech would eventually take over banking sector. He thought its better to disrupte ourselves now rather to be disrupted by others later. Hence in 2014, DBS digital transformation took off. It even came out with an quirky techy acronym, GANDALF, from Lord of the Rings.

G - Google
A - Amazon
N - Netflix
D - DBS
A - Apple
L - LinkedIn
F - Facebook

Piyush Gupta wants DBS to be in the middle of big techs. Now this shift is of paramount importance. With GANDALF, DBS reference is not the JPMs or Citis anymore. He has set his sights firmly on techs. In order to survive and thrive, DBS most be digitalised to the core. Since 2014, approx $1b is spent on tech yearly. Back then 80% of tech ops is outsourced. Now most tech ops are in house. DBS currently has more technologists than bankers in its organisation. 

To have a deeper understanding how DBS digital transformation has created greater shareholder value. Please to go DBS Investor Day 2023 website, https://www.dbs.com/investorday/index.html. There are dozens of slides and videos which are extremely informative.

(09-07-2024, 08:13 PM)donmihaihai Wrote:

(03-07-2024, 02:33 AM)jfc18 Wrote: Hi donmihaihai,
A bank capital structure is broadly classified into Tier 1 and Tier 2. 
Under Tier 1 capital, the components are Common Equity Tier 1 (CET1) and Additional Tier 1 (AT1).
CET1 consists mainly of common shares equity plus retained earnings and minority interests.
AT1 consists of perpetual bonds with no maturity.
Under Tier 2 capital, it consists of unsecured bullet bonds of max maturity of 5 years.
If a bank collapses, Tier 1 capital investors would be wiped out first, followed by Tier 2 investors, lastly the depositors.
A bank would have to incur cost for its capital. Eg, coupons for bonds issued. DBS does not earn interest income from its $11b excess capital. On the contrary, it needs to pay money for them. DBS bonds and perpetual bonds coupon ranges from 3% to 5+% depending on the denominated currency. However, a ball park 4% funding cost for AT1 and Tier 2 bonds is reasonable.
Henceforth, if DBS was to return all excess $11b capital, it would save $500m of funding cost annually which would boost bottomline. This $500m savings is not an one-off but is recurring in nature. For context, that would be a 5% earnings growth on a $10b profit. 

As of 31 December 2024, shareholders funds and total equity around 62B, CET1 capital @ 54B, Tier 1 capital @ 56B and total capital(Tier 1 & 2) @ 59B. I am not sure where to look at based on your comments. I am not an expert on bank, just leave it until I have a better understanding.
As for there is no income for those excess capital, since assets = equity +liabilities, any capital retained or borrowed will has the same amount of cash sitting on the asset side or when the cash is being used to generate income, turned into productive assets other than cash. Look at the assets side of DBS B/S, I got to assume even a reasonable run bank would not has cash sitting around not generating income. So pretty sure a "world class" bank like DBS would do better.
So, if the excess is from capital side, any reduction means reduction of income and if the excess is from the liabilities side, then reduction of liabilities will result in reduce income as well.

Hi donmihaihai,

Please take a look at asset side of B/S.

First item "Cash and balances with central banks - $50b". Out of this, some cash earns no income at all. Some of it earns just a little interest from central bank. This is liquid cash. 

Second item "Government securities and Tbills - $70b". This will earn income from SG bonds and Tbill rates.

First and second items are components of High Quality Liquid Assets (HQLA). Other components are highly rated corporate bonds and covered bonds. HQLA is used to calculate Liquidity Coverage Ratio (LCR). DBS LCR for all-currency and SGD are 144% and 297% respectively, well above the regulatory minimum requirement of 100% for both all-currency and SGD.

Assume DBS has $11b excess capital and wish to return them over a period of 5 years. That would be $2.2b per year. It could simply use the non-yielding money from "Cash" rather than yielding money from "Government securities and Tbills" or other yielding items from assets side of B/S. For perspective, $2.2b is just a fraction of DBS HQLA and would hardly make a bent on LCR.

DBS could use $2.2b non-yielding money from "Cash" to redeem expensive AT1 bonds from liabilities side. Thus assets and liabilities sides offset each other in B/S. Assume AT1 bonds coupon is 4%, this would save DBS $88m every year and bump up bottomline and ROE.

Alternatively, DBS could return $2.2b as dividend. "Cash" and "Equity aka Shareholders' Funds" offset each other in B/S. This would bump up ROE even more than the example stated above. However, the downside is Book Value would drop as well, PTB would rise. DBS could also do a mix of both, return capital from Equity and redeem expensive AT1 bonds concurrently. 

Maybe I have mistaken you but I don't really understand why you insist if DBS return capital to shareholders or redeem AT1 bonds, DBS would make a loss and impact profits.

As what you have said, "a world class bank like DBS would do better". I concur.

(12-07-2024, 03:14 AM)jfc18 Wrote: After a breakfast with Jack Ma in 2014, Piyush Gupta was convinced big tech would eventually take over banking sector. He thought its better to disrupte ourselves now rather to be disrupted by others later. Hence in 2014, DBS digital transformation took off. It even came out with an quirky techy acronym, GANDALF, from Lord of the Rings.

G - Google
A - Amazon
N - Netflix
D - DBS
A - Apple
L - LinkedIn
F - Facebook

Piyush Gupta wants DBS to be in the middle of big techs. Now this shift is of paramount importance. With GANDALF, DBS reference is not the JPMs or Citis anymore. He has set his sights firmly on techs. In order to survive and thrive, DBS most be digitalised to the core. Since 2014, approx $1b is spent on tech yearly. Back then 80% of tech ops is outsourced. Now most tech ops are in house. DBS currently has more technologists than bankers in its organisation. 

To have a deeper understanding how DBS digital transformation has created greater shareholder value. Please to go DBS Investor Day 2023 website, https://www.dbs.com/investorday/index.html. There are dozens of slides and videos which are extremely informative.

hi jfc18,

You sound like an IR officer from DBS.

Jokes aside.

I am generally sceptic when a bank talks about digital transformation (whatever it means) but its basic online banking services break down. It was like SGX talking about digital transformation but its equity/derivative trading broke down some time back. Nonetheless, I believe both companies may have realized that fail-safe backend is more transformative than all the fanciful features we see on their mobile app or the various ML (whatever it means) they are executing.

Putting aside my skepticism, it is a fact that DBS is in the middle of a "transition". I define "transition" here as companies carrying out big value-accretive moves - like Keppel/Capitaland Investment wanting to double their AUM (and reduce their capital footprint) or hospitality firms like Ascott/Mandarin Oriental focusing their business models from ownership to mgt contracts/franchise. In DBS case, they are determined to have higher/maintain ROEs by returning capital (especially the excess ones). And when executed right, Mr Market rightfully recognizes it and gives it a premium valuation. After all, Mr Market weighs things correctly after some time.