Question 1: 2020 was undoubtedly a seminal year. What are some of the enduring shifts borne out of the pandemic? How do they affect the path forward for banking?

2020 was indeed an inflexion point in a few ways, of which three stand out in my mind.

1. There has been a dramatic acceleration in the digital consumption of goods and services, especially healthcare, education, and financial services. In banking, lockdowns encouraged consumers to adopt digital behaviours for activities ranging from account maintenance to payments. This was also true for customers who had previously been less comfortable making the shift. Customers over 60 years of age saw a 2.4 times increase in new digital take-up! Similarly, from applying for loans to looking for trade finance, SMEs quickly pivoted to electronic instructions and engagement. Larger corporations revisited their supply chain arrangements and raced to put resiliency and transparency into the process.

2. Perhaps the biggest change has been a dramatic transformation in work habits as white-collar populations took to e-working remotely. This reflects a tremendous increase in capabilities (bandwidth, access equipment, security protocols) as well as corporate risk appetite. Depending on the country and regulatory requirements, 50-90% of our people worked from home for large parts of the year.

3. Covid-19 has brought to fore the sustainability agenda, in particular social and environmental issues. The pandemic has accentuated socio-economic fault lines within countries, compelling governments to direct more fiscal resources to the poor. On the environmental front, the pandemic has sharpened the recognition of tail risks and that it is incumbent to be better prepared for them.

   Governments had to dig deep for unprecedented amounts of fiscal and monetary resources to address the crisis. I believe the realisation that we can and will find resources when a gun is pointed at us, will lead to significantly greater resources being devoted to climate change and biodiversity in the coming years. Governments have already made significant commitments towards green initiatives. In the United States, President Joe Biden has pledged a USD 2 trillion climate plan. In Europe, a substantial portion of the European Union Recovery Fund will be made available for the green transition. In Singapore, the Emerging Stronger Taskforce is focused on building a more sustainable economy.

These trends have far-reaching implications on banking.

The digitalisation of banking will accelerate even more. For example, we have been focused on completing the “last mile” gaps that came to light in our various customer journeys, and sharpening tools to embed banking services into the customer context. The use of digital authentication, e-signatures and digital documentation in trade finance or property conveyancing will gain steam, reducing the need for paper. Digital payments will continue to erode the use of cheques and cash, and tokenised assets will gain acceptance. Greater digital footprints will lead to an increased use of data and Artificial Intelligence (AI) to improve customer experience. I am pleased that DBS has made enormous progress on this front in recent years. The change in work habits will lead to what I call the “future of work”. I talk about this more in the next section.

Finally, banks will be pushed to having a sustainability agenda that addresses each of the ESG pillars and is integral to their strategy and operating models. We are already advanced on our journey of responsible banking, responsible business practices and creating social impact. Responsible banking includes being thoughtful about the financing we provide and the capital we help companies raise, focusing on financial inclusion for the unbanked and the underbanked, and creating a high level of trust in our services through transparency and fair dealing.

We will continue to lower our own carbon footprint (mostly from our data centres and our property occupancy) and work with our corporate clients to facilitate their move to lower carbon intensive business models. Finally, it will be even more incumbent on us to be a force for good in society. One avenue is the DBS Foundation, now in its seventh year, which continues to work with social enterprises to solve the world’s sustainability issues.

Question 2: What is DBS’ take on the future of work? What is DBS doing to address the magnitude of the challenge?

In the early days of the crisis, many leaders suggested that the day of the “office” was over, and remote working would be the new norm. I did not agree, believing that at heart, we are social creatures. The need to engage with each other in the flesh is critical to creating social capital. It is also critical to creating organisational culture and ethos. However, I also believe that we will not go back to the old ways of working. I believe that there are five critical changes that will drive the “future of work”.

1. The workforce will be more distributed by location. In addition to catering for employee convenience, this will also be driven by the need to create greater resilience and the ability to source better talent. The different “lockdown” requirements in different countries and markets showed us that concentrating large pools of employees in a single location comes with unforeseen risks. The ability to connect people from remote locations to our entire infrastructure created the possibility that we could have smaller teams of people work for us from regions where suitable talent is abundant. Therefore, we are revisiting the locations of our incremental engineering resources.

2. There will be greater flexibility in respect of time and hours of work required. Some months into the crisis, we formed a ‘Future of Work’ Taskforce to think about our future work arrangements. The Taskforce found that while almost all employees were able to work seamlessly from home, staying engaged and connected with colleagues was challenging. They preferred hybrid work arrangements over a pure ‘remote work’ or ‘work in office’ approach. As a result, all employees have been given the flexibility to work from home up to 40% of the time but the actual execution of that is left to individual operating units to suit their own rhythm.

One interesting opportunity that arises from such flexibility is the idea of job sharing – two people jointly taking on one job. Many companies experimented with this idea last year (without explicitly recognising it) when they resorted to Team A and Team B constructs in line with their contingency plans. At DBS, we have formally announced a job-sharing program. This sort of flexibility opens the possibility of leveraging additional sources of talent too, for example, mothers of young children or people with disabilities.

3. Work will be organised more horizontally rather than vertically. Today’s organisational structures are largely functional, principally to gain subject matter competencies as well as economies of scale. However, all of us know the challenges this creates - silo thinking, hand-offs and ineffective customer journeys. In recent years, the comprehensive digitalisation of workflows allows us to revisit the vertical, functional paradigm. Several companies – including DBS have been experimenting with this through agile practices in the technology domain. I believe that this will extend to areas outside technology too. Creating and running “horizontal” organisations will be a big focus for us in the coming years.

4. Data will become central to managing work, and data-driven operating models (DDOM) will emerge. Take the F1 race: till a decade ago, the race was mostly driver-centric. Today, it is controlled by a data-driven team which uses real-time feeds to help guide the driver every step of the way. Running experiments and AI models will be an integral part of this new model. At DBS, we have embraced DDOM in earnest, and are already seeing visible outcomes.

5. With people coming into office increasingly to “collaborate and ideate”, the physical contours of the office will also change. The need for a degree of social distancing may also drive this. We are advancing well in this direction through our “Joyspace” programme, which allows each department to configure the workspace to suit their workflows. Going forward, we expect a lot more open and collaborative workspaces. We are also likely to see more usage of satellite offices.

All these changes will require significantly reskilling our workforce. Employees will be trained in emerging areas such as design thinking, data and analytics, artificial intelligence, machine learning and agile practices. We have identified over 7,200 employees across the bank to be upskilled and/ or reskilled from this year. Managers will have to learn how to manage differently, including how to drive employee engagement and measure performance. To help managers pivot to managing a horizontal workforce, we have launched transformational leadership programmes to help with their transition.

Question 3: How will DBS navigate the challenges of low interest rates and asset quality risks?

Between the two challenges, asset quality risks are perhaps easier to deal with. The sharp rebound in several countries in the later part of 2020, as well as confidence from the vaccine rollout, create optimism that credit risks may not be as dire as originally forecast.

Of the SGD 3 billion-5 billion we estimated as 2020-21 credit costs due to the pandemic, we have conservatively taken over SGD 3 billion in 2020, of which around SGD 1.7 billion was in the form of general allowances. If actual credit costs come in closer to SGD 4 billion, credit costs will be lower and provide a boost to earnings in 2021.

Low interest rates pose a more prolonged challenge as they are expected to remain for the foreseeable future, resulting in an eventual reduction in our interest income by SGD 2.5 billion-SGD 3 billion. In 2020, the interest rate impact on our commercial book was almost SGD 1.8 billion, which means there is another billion dollars to take.

In 2020, we were able to recoup almost all of the interest rate shortfall through an increase in business volumes as both loans and deposits grew strongly. In particular, current and saving accounts grew by almost SGD 100 billion. We also benefitted from record Treasury Markets income and through gains in our investment securities portfolio which had been positioned for a drop in interest rates.

Gains from investment securities and Treasury Markets performance are dependent on market conditions, and it is possible that we may not be able to repeat 2020’s performance in 2021. However, we have greater visibility on loan growth given that economic activity is expected to rebound in 2021 from a low base. The IMF forecasts Asia to grow 6.9%, with China and India above 8%, Indonesia at 6%, and Singapore and Hong Kong at 3-5%. The business momentum will translate into mid-single-digit loan growth, in line with the average of recent years.

Fee income will also benefit. It was flat in 2020 because an 11% decline in the second quarter due to the sharp economic and financial market dislocations offset a record first quarter. Higher economic activity in 2021 should lead to double- digit fee income growth. In particular, there has been strong momentum in wealth management. While low interest rates have played a role, we have been using our digitalisation capabilities and the advent of open banking to expand our reach to lower market segments with robot- assisted portfolios, regular savings plans and budgeting tools.

Digitalisation will bring additional growth prospects. The accelerated adoption of digital behaviours by customers creates opportunities for market share gains. There will also be new business opportunities, such as the Digital Exchange we launched in the fourth quarter.

We will continue to manage costs. Organic expenses for 2021 will be kept at 2019 levels even as we process higher business volumes.

Finally, the amalgamation of Lakshmi Vilas Bank expands our presence with 600 branches and 1,000 ATMs, increases our consumer and SME customer base and strengthens our deposit franchise in India, accelerating our growth trajectory in a major emerging market.