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Battle of Stocks (Blue Chip Stalwart): DBS Group

·5-min read
DBS Winner - Battle of Stocks
DBS Winner - Battle of Stocks

Dear Smart Investor,

We hope our two previous stock polls gave you a chance to vote for your favourite stocks.

The first round focused on COVID-19 winners while the second involved property moguls.

Keppel DC REIT (SGX: AJBU) won the first round while Frasers Logistics & Commercial Trust (SGX: BUOU) received the most votes for the second round.

The third and final round centred on blue-chip stalwarts DBS Group (SGX: D05) and CapitaLand Limited (SGX: C31).

DBS has won this last bout after an intensive round of voting!

The lender has a presence in 18 markets and offers a full range of services in consumer, small and medium enterprise (SME) and corporate banking.

The bank has also won the award of being the “Safest Bank in Asia” by Global Finance for an impressive 12 consecutive years from 2009 to 2020.

Let’s delve deeper as to why DBS can offer a great mix of both growth and dividends.

A pandemic winner in its own right

Keppel DC REIT may have won the COVID-19 winner award for the first round, but don’t forget that DBS itself is worthy of this award.

The bank has held up admirably despite the overall tough economic conditions that arose from a wave of lockdowns and border closures.

During its fiscal 2020 first quarter (1Q2020) operational update, DBS had already bumped up its provision for bad loans in anticipation of worsening conditions.

By the third quarter of 2020, the lender had continued to increase its overall allowances and suffered a fall in net interest income but these were mitigated by higher fee income.

By 1Q2021, DBS had defied the odds by posting a record S$2 billion net profit even as it wrote back some allowances and reported steady loan growth.

The group also continued to pay out a reduced quarterly dividend of S$0.18 as a result of the dividend cap imposed by the Monetary Authority of Singapore (MAS).

The move by MAS was to ensure prudence in the banking sector.

Keeping up with the competition

DBS has also been beefing up its digital capabilities over the years.

This roadmap was already part of the bank’s digitalisation plan but was accelerated to ensure its clients remained well-supported during the pandemic.

An example is the introduction of a comprehensive suite of contact-free trade financing digital solutions to provide corporate customers with access to banking lines to keep their businesses afloat.

The bank’s digitalisation capabilities also meant that its staff could telecommute safely and effectively, allowing around 80% to 90% of employees to work from home.

DBS is also giving up some pricey office space in Hong Kong and is planning to surrender around 75,000 square feet of office space in Singapore to reduce its rental costs.

These moves will help it to stay ahead of its competition and put it at the forefront of the ongoing digital transformation of businesses.

The bank will also stand ready to tackle a new set of competitors once the digital banks commence operations next year.

Growth initiatives

Not content to stay still as the world rapidly transitions to a post-pandemic future, DBS is working on several initiatives to spur growth in various areas.

Last December, the group announced the setting up of a digital exchange that will provide tokenisation, trading and custody of digital assets using blockchain technology.

The lender is also working with JP Morgan (NYSE: JPM) and Temasek Holdings to establish a platform for interbank payments.

Known as Partior, the platform will focus on enabling instantaneous settlement of payments for various types of financial transactions.

The bank is also collaborating with Temasek, Singapore Exchange Limited (SGX: S68) and Standard Chartered Bank (LON: STAN) to develop a carbon exchange and marketplace called Climate X for high-quality carbon credits.

And just last month, DBS received the securities business licence for its majority-owned Chinese securities joint venture, allowing it to operate brokerage, securities underwriting and proprietary trading.

Canny acquisitions

Growth will not be limited to just organic methods.

DBS has also undertaken two acquisitions to grow its franchise further afield.

Last November, it announced the acquisition of Lakshmi Vilas Bank in India for S$463 million to catalyse its expansion into India.

And in April this year, the bank acquired a 13% stake in Shenzhen Rural Commercial Bank for around S$1.1 billion, in line with its strategy to increase its presence in the Greater Bay Area.

Get Smart: Led by a savvy leader

Led by a savvy CEO in Piyush Gupta, DBS has managed to successfully navigate the challenges to emerge stronger than before.

Not only has the bank reported a robust set of financials, but it has also unveiled numerous partnerships to diversify its income sources away from net interest income.

Investors can look forward to better days for the lender as an economic recovery takes hold and spreads slowly throughout Asia.

It’s Fight Night on 29 July…and you’re invited! Crowd favourites, Keppel DC REIT (SGX: AJBU), Frasers Logistics & Commercial Trust (SGX: BUOU), and DBS (SGX: D05) will fight to the end for the title of “Champion of Dividends.” Be the first to find out who wins in this 3-way mayhem on the 29 July. We’ll host a webinar, and together we’ll analyse each contender’s strengths, weaknesses, and potential. To reserve a front-row ticket to this royal rumble, click HERE now.

Disclaimer: Royston Yang owns shares of DBS Group and Singapore Exchange Limited.

The post Battle of Stocks (Blue Chip Stalwart): DBS Group appeared first on The Smart Investor.

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