In 2021, global economies bounced back from the depths of a pandemic-induced recession. Thanks to mass vaccinations, pent-up consumer demand, accommodative monetary policy and strong fiscal support, global growth rebounded sharply. In Singapore, our home market, the economy grew 7.6%. Hong Kong, our second-largest market, expanded 6.4%.

The robust economic recovery belied a pandemic that continued to rage on for most of the year, which resulted in economic and border re-openings happening in fits and starts.

Against this mixed backdrop, we turned in our best year ever, with not just excellent financial performance but also all-round delivery against key scorecard goals.

In particular, we made good progress in transforming the bank through managing by customer journeys; kept employee morale high through the pandemic, and launched multiple new businesses within a short 12 months.

Notably, we were recognised by not one but two global publications as being the best in the world yet again.

An outstanding year

For the year, DBS delivered record net profit of SGD 6.80 billion, up 44%. Return on equity, at 12.5%, was the second-highest in more than a decade. These achievements were extraordinary given the near-zero interest rate environment globally, and speak to the strength of our broad-based franchise and the success of multi-year transformation efforts.

With the collapse in interest rates since the pandemic, net interest margin came under severe pressure. Even full-year loans growth at a seven-year high was unable to fully offset the impact of lower rates, and net interest income fell to SGD 8.44 billion. We were, however, able to substantially make up for this through the strength of our fee and trading income.

In Consumer Banking/ Wealth Management, the fall in interest income was moderated by fee income. Wealth management fees, in particular, rose to a record SGD 1.79 billion as our digitalisation efforts continued to bear fruit. For example, by leveraging artificial intelligence (AI) and hypersonalisation, our NAV Planner tool generates more than 30 million insights each month to help customers manage their money better. Our human cum robo-advisory service, digiPortfolio, has also grown in popularity in recent years, fuelled by demand from a predominantly Gen Z/ millennial demographic. In 2021, retail investors accounted for 32% of total assets under management.

Institutional Banking did well across the board, from lending to cash management, trade finance and capital markets. Corporate lending was broad-based across geographies and industries. Cash management fees were boosted by the strength of our digital offerings, while trade finance fees benefitted from higher regional trade volumes. Investment banking fees rose on the back of a recovery in equity markets, as well as record fixed income fees as companies took advantage of the low interest rate environment to tap debt funding.

Treasury Markets (TM) had another record year, with trading income of SGD 1.51 billion, up 5%. Treasury customer income, which is booked in Consumer Banking and Institutional Banking, was SGD 1.71 billion. The combined trading and customer income growth outperformed many Wall Street banks. Much of TM’s success over the past two years can be attributed to its digital transformation, enhancing its scalability, efficiency and competitiveness. For example, TM uses algorithms to offer faster and more accurate FX pricing to customers, and harnesses data to provide personalised trading recommendations.

During the year, China’s common prosperity agenda dominated headlines as its government cracked down on several industries and tempered the exuberant property market. Some banks were caught on the wrong side of these policy moves. Given our prudent risk management, DBS was able to navigate China and its idiosyncratic risks without suffering any material credit loss.

For the year, we booked just SGD 52 million in total allowances, down significantly from SGD 3.07 billion a year ago, as asset quality improved.

In a turbulent time, DBS continued to be recognised as a safe and trusted bank. Coupled with the strides we have made in innovating our cash management offerings, over the past two years, we benefitted from SGD 143 billion in current and savings account (Casa) inflows into the bank. Today, Casa as a proportion of total deposits is 76%, a record high, positioning us to benefit strongly when central banks start hiking interest rates in 2022.

Positioning ourselves for the future

In 2021, we made significant down payments for the future, executing several inorganic transactions and launching a multitude of new businesses that will position us well in the coming decade.

These initiatives were borne out of the “Get Ahead” and “Future of Work” internal taskforces that were created in the midst of the pandemic, as we sought to identify megatrends and structural shifts taking place in our industry and society-at-large.

Scaling our business in key Asian markets
Reflecting our belief in Asia’s long-term prospects, in 2021, we capitalised on the opportunity to do several strategically important deals that will strengthen our franchise in key growth markets. In India, we successfully amalgamated Lakshmi Vilas Bank (LVB). LVB gives us an enlarged footprint, particularly in southern India on which to overlay our digital strategy. It also scales up our consumer and SME businesses significantly. Integration has progressed well, and after an initial focus on stabilising the LVB franchise, business momentum has picked up.

In Taiwan, we agreed to acquire Citigroup’s Taiwan consumer banking business (Citi Consumer Taiwan). Citi Consumer Taiwan is an incredibly attractive and high-returns franchise, and widely considered to be the best foreign consumer bank in Taiwan. It will accelerate DBS Taiwan’s growth by at least 10 years, making it Taiwan’s largest foreign bank by assets. The transaction is expected to be accretive to earnings and return on equity immediately after completion, which is slated for mid-2023.

In China, we acquired a 13% stake in Shenzhen Rural Commercial Bank (SZRCB), becoming its largest single shareholder. SZRCB is a well-managed profitable franchise, and the investment allows us to accelerate our Greater Bay Area (GBA) strategy via Shenzhen, arguably GBA’s fastest-growing city.

DBS Bank (Hong Kong) received approval to offer investment products and solutions to GBA customers under the Wealth Management Connect scheme. This represents a significant opportunity given the more than six million affluent households in the GBA. Through our partnership with the Postal Savings Bank of China, one of the largest retail banks in China, we expect a quarter of DBS Hong Kong’s Treasures Wealth customers to come from the GBA region over the next three years.

China’s capital markets liberalisation also presents another exciting growth opportunity. To position ourselves early to capture two-way deal-flow as China opens up, we launched DBS Securities (China) Limited, a joint venture securities company, in June. Already, business has surpassed expectations – we completed five onshore capital markets transactions since starting operations, and the pipeline is robust.

Underlining our confidence in the future of Asia, DBS also committed to participating in two funds. One is the USD 500 million EvolutionX Debt Capital, which was set up with Temasek to provide non-dilutive financing to growth-stage technology-enabled companies across Asia. The other is Muzinich Asia Pacific (APAC) Private Debt I, which provides us with growth exposure to recovery opportunities in the region.

Being ahead of the curve as emerging technologies reach tipping point
The financial services industry is on the cusp of massive changes. While blockchain and artificial intelligence technologies have been in existence for some years, they are finally reaching a tipping point and creating exponential impact in areas such as trade finance and digital currencies.

To ensure that DBS is ahead of the curve in harnessing these technologies, we launched a number of new businesses, both on our own and in partnership with others.

They include the DBS Digital Exchange (DDEx), which offers tokenisation, trading and custody services of digital assets; Partior, a blockchain-based cross-border clearing and settlement provider; Climate Impact X (CIX), a global exchange and marketplace for high-quality carbon credits; and DBS Fixed Income Execution (FIX) Marketplace, Asia’s first fully digital and automated fixed income execution platform.

Since its launch in December 2020, DDEx has seen good business momentum, both in terms of new clients onboarded as well as assets under custody. Partior became operational in October 2021, and is in the midst of signing up banks keen to join the network. CIX goes live in Q1 2022. DBS FIX Marketplace executed 20 issuances amounting to SGD 4 billion in 2021.

In 2020, we incorporated a new company, DBS Finnovation, to house some of these new businesses. Being separately held, it provides an opportunity for us to create greater value transparency and monetise these new ventures when the time is right.

We recognise that embracing new technologies comes with some risks. We saw this in our two-day digital disruption and in the growing number of scams in Singapore. We are cognisant of these risks, and are working on strengthening the resiliency of our services and enhancing our fraud surveillance and prevention capabilities.

Building and securing a sustainability future
For a few years now, DBS has focused on advancing the sustainability agenda through responsible banking, responsible business practices and creating impact beyond banking. More recently, we established a Board Sustainability Committee to provide greater governance and oversight into climate-related risks and opportunities, as well as our broader environmental, social and governance efforts.

We felt this was important as we continued to dial up our commitments in the space, both in terms of tackling climate change as well as the growing social issues in our midst.

In 2021, DBS also became the first Singapore bank to become a signatory to the United Nations-convened, industry-led Net-Zero Banking Alliance. This commits us to transitioning the operational and attributable greenhouse gas emissions from our lending and investment portfolios to align with pathways to net zero by 2050 or sooner.

In line with this, we were also the first Singapore bank to commit to zero thermal coal exposure by 2039. Since April 2021, DBS has ceased onboarding new customers that derive more than 25% of their revenue from thermal coal, and we will lower the threshold as time progresses. At the same time, we will leverage the DBS Sustainable and Transition Finance Framework to achieve meaningful decarbonisation in carbon-intensive sectors, as well as nudge more companies to embed sustainability into their business models. In 2021, DBS committed SGD 20.5 billion in sustainable financing transactions, taking our cumulative efforts to date to SGD 39.4 billion.

With Covid-19 exacerbating issues of social inequality, over the past year both DBS Bank and DBS Foundation continued to increase our support for community and social causes. Recognising that there is more we can do, the Board approved an additional SGD 100 million to be set aside to catalyse greater impact.

Transforming the way we work
Given the rapid pace of change, we believe the successful organisation of the future will have to operate very differently.

In 2021, we re-architected our most important customer processes – namely, those around credit cards, wealth management, consumer finance, foreign exchange and supply chain – horizontally. We felt that if we are to be truly customer-obsessed, then we must manage by customer journeys. Given that journeys are by definition horizontal, silo-breaking cross-functional teams are best-placed to deliver differentiated customer experience and business outcomes. The horizontal organisation formalises the collaboration and joint accountability needed to maximise end-to-end customer and business outcomes. Results have been positive so far.

With Covid-19, the nature of work has also changed. Along with this, we instituted a hybrid work model where employees need only be in the office three days a week. We also availed flexi-work arrangements to those who prefer to work fewer hours. With these shifts, we reconfigured our workspaces, improving occupancy footprint efficiencies. In addition, 80,000 sq ft of our office space was turned into Joyspaces, or activity-based workplaces, in 2021. More workspaces will be transformed to allow for greater ideation and interaction in the next few years.

Recognitions

In 2021, DBS was recognised by Euromoney and The Banker as being the best in the world.

In naming us “World’s Best Bank”, Euromoney said, “Of all the banks we cover worldwide, DBS was the one that most clearly demonstrated a rare skill: not just surviving a crisis, but using it as a chance to innovate and to be a better bank. As well as fortitude and profitability, it showed opportunism and smart thinking, all underpinned by its digital leadership.”

The Banker, a leading Financial Times publication, recognised us as ‘Global Bank of the Year’ for “driving a reimagination of banking as we know it today”. “Importantly, the bank has also taken a lead in sustainable and transition financing, spearheading framework and taxonomy developments to support the shift to a low-carbon global economy. A truly forward-looking organisation with solid foundations and a spirit of innovation,” it said.

DBS was also named to the FTSE4Good Global Index and the Bloomberg Gender-Equality Index for the fifth consecutive year.

Board and management changes

During the year, we appointed two non-executive directors to the Board. They are senior civil servant Chng Kai Fong and risk management veteran Judy Lee. Kai Fong is the Second Permanent Secretary of The Smart Nation and Digital Government Group. Judy is Managing Director of Dragonfly LLC, an international risk advisory firm based in New York. Concurrently, she is CEO of Dragonfly Capital Ventures LLC, which develops and invests in renewable energy in Southeast Asia. Both are strong additions to DBS’ 10-member Board.

Underscoring our deep bench strength, we filled the Chief Risk Officer (CRO) role vacated by Tan Teck Long internally. Soh Kian Tiong, who has over 25 years of experience in business and risk roles, stepped into the CRO role seamlessly in November.

Dividends

The Board has proposed a final dividend of SGD 36 cents per share for approval at the forthcoming annual general meeting. This is an increase of three cents per share from the previous payout. This will bring the dividend for financial year 2021 to SGD 1.20 per share.

Barring unforeseen circumstances, the annualised dividend going forward will rise to SGD 1.44 per share, an increase of 9%.

Going forward

At the time of writing, the world seems ready to open up and we are learning to live with Covid-19. At the same time, geopolitics is casting some shadows, and the macroeconomic policy pathways are uncertain. In such an environment, we have to continue to be watchful and nimble. We take heart that our business pipeline is robust. Importantly, we have a prudently managed balance sheet that is poised to benefit from rising interest rates.

The inorganic transactions and investments we made over the last 12 months will strengthen our franchise, and position us well to ride the crest of a structurally rising Asia. We expect payoff from these initiatives will materialise in the short to medium-term, and give us additional engines of growth.

Looking further out, given that technological changes could fundamentally reshape the financial system, we must do what we can to be ahead of the curve. With DDEx, Partior and CIX, we have put some irons in the fire, and are learning by doing.

In short, while 2021 was our best-ever year, we will continue to re-position ourselves as a bank of the future.