You need money to make money. Singaporean banks plan to use their excess billions to find more billionaire clients. Leader DBS’s fourth-quarter profits beat expectations, but it has bigger ambitions. It seeks to expand in Asia’s lucrative wealth management market.
Net income rose to S$1.4bn ($1bn), up 37 per cent. Full year loan growth increased almost a tenth. Wealth management growth meant fee income rose 15 per cent. Non-performing exposure fell and its CET1 ratio finished the year well above its own and regulatory targets at 14.4 per cent.
That suggests DBS has excess capital of roughly $3.3bn to spend. Buying Citigroup’s consumer banking businesses in Taiwan last month should make DBS the largest foreign bank there. It has already bought access to China last year, gaining approval to become the largest shareholder of Shenzhen Rural Commercial Bank Corporation with a 13 per cent stake. Local rivals are keen too. United Overseas Bank will acquire Citi’s south-east Asian retail banking assets.
The timing is good. Over the past two years, Asia-Pacific has become home to more billionaires than any other region. Taiwan has as many billionaires as Japan. No surprise that wealth management offers very promising opportunities for banks focused on Asia. Singapore’s capital-rich banks can now buy the coveted market share that HSBC and Standard Chartered have also sought for years.
Markets have taken note. DBS trades at 1.8 times tangible book value, a big 80 per cent premium to Asia-focused peers such as HSBC.
But acquisitions will not eat into dividends, with the annualised payout to DBS shareholders rising by about a tenth. DBS shares have climbed more than 40 per cent in the past year, and well above 2020 lows. Back then, Singapore’s banks had exposure to energy trader losses plus a credit crunch.
Today, the health of the city-state has improved. Its economy grew 7.2 per cent last year, the fastest rate in more than a decade. But rather than simply chasing loan growth, seeking more fees from billionaire clients should justify DBS’s hefty valuation.
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