Case Study - Dbs Ltd: The Development Bank of Singapore

Company Profile: DBS Ltd – The Development Bank of Singapore

I. Singapore’s Banking Industry

Context - Singapore is a global financial hub, with its banks offering world-class corporate banking facilities. As the fourth-strongest financial market in the world, financial services comprise 12% of Singapore’s GDP1. Singapore’s financial stability, bank efficiency, and commercial access to capital have won it praise from the World Economic Forum2.

Following independence in 1965, Singapore’s government attracted foreign capital from the developed world to establish export-oriented industries, while simultaneously building a modern service sector based on banking and financial services3. Singapore’s fiscal policies, including a compulsory savings system, have created large budget surpluses, which finance sizable foreign reserves3.

Banking Sector - Singapore offers financial institutions a cost-competitive environment, effective regulatory environment, excellent infrastructure, and a highly skilled, cosmopolitan workforce. With total assets of ~US$2 trillion (December 2013), the Singapore’s banking sector has played a key role in financing local and regional growth, particularly facilitating trade, corporate finance, and infrastructure projects4. Singapore rapidly grew as an offshore banking center after the government lowered tax rates in 20045.

Capital Markets – Singapore’s financial success lies in its deep, liquid capital markets. While the bond market grew in depth and breadth over the past decade, Singapore’s equity capital markets maintained significant foreign listings. About 40% of Singapore Stock Exchange (SGX) listings are foreign companies spanning diverse sectors across Asia Pacific, Europe and America13. Singapore’s average daily FX turnover volume was US$383 billion in April 2013, making it the third largest FX center globally and the largest FX center in Asia Pacific.

In April 2011, a Private Banking Code of Conduct was launched, reinforcing Singapore’s established private banking reputation and continuing to attract high net worth individuals globally4. With total assets under management of around S$1.4 trillion, Singapore is also recognized as one of the premier asset management location in Asia4.

Banking outlook - Singapore’s 2015 headline loan growth has been entirely driven by a 3.4% SGD/USD depreciation in 1Q, with minimal growth. System M2 money supply growth improved (8.1% YoY), while business loans were driven by manufacturing (+6.7% QoQ), but trade loans (-2.5% QoQ) continued to shrink. Housing loans (0.9% QoQ) fell to the slowest growth since 20066.

Rising interest rates due to the US Fed’s expected policy rates increase will increase credit costs, putting