DBS Group Holdings Ltd


Investment thesis


DBS has grown its business steadily in the past few years. From 2012 to 2018, its total income grew at a compounded average growth rate (CAGR) of 7.6% per annum. During this period, it has also grown its customer loans with a CAGR of 8.6% while total assets rose 8.0% per annum to S$551 billion.


Its expense/income ratio was between 42-45% during this period, while its total capital adequacy ratios were at 15.3% to 17.1%.



Company overview

DBS is a commercial bank headquartered and listed in Singapore. It is also a leading financial services group in Asia with over 280 branches across 18 markets. Its key franchises are in Singapore, Hong Kong, China, Taiwan, India and Indonesia. It has an extensive network of more than 2,300 DBS/POSB branches and self-service banking machines. It is also a key player in corporate and consumer banking, serving over 4.6 million retail customers.


In Singapore, its businesses are carried via both the DBS and POSB franchise. In other markets, the group focuses on three lines of business. These are Corporate/Investment banking, SME banking and Wealth management.


Hong Kong is the anchor of its Greater China franchise with 50 branches. In China, it was locally incorporated in 2007 and currently has 29 branches in 10 major cities. In Taiwan, it was locally incorporated in 2012, and has 43 branches. In India, it has 12 branches in 12 major cities. In Indonesia, it has 39 branches across 11 major cities.


In recent years, it has also focus on digital technology to widen its reach across Asia.


As of Dec 2018, it has total assets of S$551 billion, with over 200,000 institutional banking customers, more than 8 million consumer banking/wealth management customers and more than 26,000 employees. Singapore accounted for about 62% of its group income.


Catalysts


After reporting record earnings in 2018, DBS continues to be a good proxy for growth in Asia. Further, the broad-based growth in consumer banking and wealth management is expected to continue.


There is also a potential of re-rating of Asian banks which has not yet been priced in.


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