2023 overview

Against a backdrop of economic uncertainty and subdued trade flows, the Institutional Banking Group (IBG) business demonstrated resilience.

Record financials, boosted by higher net interest margins, reflected the strength of our diversified franchise and quality of execution to strategy. Our extensive Asia network and connectivity enabled us to capture opportunities arising from outbound investments from China and elsewhere, as companies looked towards alternative supply sources and production bases in South and Southeast Asia. Deepening client relationships continued to be a key priority underpinned by our industry expertise, digital capabilities and sustainability leadership. At the same time, demand for sustainable and transition financing accelerated in line with the urgent need for climate action.

Robust financials despite macro challenges

IBG’s total income rose 22% to a record SGD 9.36 billion in 2023. Net interest income grew 28% from net interest margin expansion, prudent and nimble deposit pricing, as well as sustained volumes.

Non-interest income grew 4% to a record SGD 2.20 billion, underpinned by healthy growth in loan and cash management fees from deepening customer relationships. Our focus on growing real-time payments and improving client journeys also contributed to the strong cash management performance. Trade fees fell from the previous year, impacted by a subdued market.

Allowances stayed low as asset quality remained healthy. Profit before tax grew 20% to SGD 6.79 billion, driven by a higher interest rate environment, robust non-interest income and a lower cost-income ratio of 27%, compared to 29% in FY2022.

Strengthening our franchise across industries and markets

There was broad-based growth across our industry segments especially in Real Estate (RE), Energy, Renewables and Infrastructure (ERI), Telecoms, Media and Technology (TMT) and Financial Institutions (FI).

The RE industry group benefitted from growing demand across a wider cross-section of clients looking to invest in prime assets in gateway cities across the region. The ERI industry group continued to see good momentum in the financing of renewables and capital recycling, driven by Asia’s accelerating energy transition. Supply chain diversification contributed to increased regional activity in the TMT sector as clients sought to expand operations beyond China.

Revenue from the FI group reached new highs, crossing the billion-dollar mark for the first time as we successfully captured private capital flows to Asia, supported by healthy non-interest income. By leveraging our digital capabilities, we strengthened our value proposition and expanded coverage in geographies including the Middle East, United Kingdom and Australia.

Work to deepen our franchise across our core markets continued at pace. Our ongoing efforts to dial up customer centricity contributed to increased market penetration among large corporates across our six core markets – moving us from second to first place on the Coalition Greenwich survey index.

In China, we had to be agile to leverage opportunities amid the challenges posed by a soft reopening and structural headwinds. Our extensive network and capabilities in Asia’s key axes of growth put us in good stead to support companies looking to diversify their supply chains abroad. We also launched a foreign direct investment advisory desk in Singapore to capture business opportunities emanating from Asia’s largest economy.

Indonesia and India delivered solid performance as we expanded our client footprint amid robust growth driven by domestic demand.

Scaling Global Transaction Services with digital connectivity and trade propositions

Our Global Transaction Services business continued to be a strategic priority, delivering over 50% of institutional banking revenue.

Digital capabilities enabled us to deliver more meaningful cash management solutions to customers in Singapore and across the region. Real-time payment volume grew by more than 50%, which when combined with an increased market share for cross-border payments, led to higher fees. This was driven by active commercialisation and regionalisation of our digital products and services, as well as the implementation of over 1,000 new cash management mandates across the region. Nimble pricing strategies for deposits, underpinned by artificial intelligence/ machine learning (AI/ ML) tools, meant that we could respond more quickly to volatile market conditions.

In addition, we were able to help regional customers deposit their monies with us more seamlessly with the launch of new online fixed deposit services across all our core locations. The market response was resounding – in Singapore, we garnered SGD 6.5 billion in online fixed deposits as at end December 2023. This contributed to an increase of over 20% in the fixed deposit book.

In trade, our AI/ ML capabilities and use of data-driven tools for underwriting powered sustained growth in supply chain financing. Documentary trade loans fell due to unattractive pricing and a slowdown in trade volume.

Notwithstanding this, we continued leveraging opportunities in the creation of digital trade corridors across the region. In August, we successfully completed the first interoperable electronic bills of lading transaction between Singapore and India. The transaction was implemented under the TradeTrust framework, an initiative by the Infocomm Media Development Authority and supported by Enterprise Singapore.

Leveraging digital capabilities to enhance client engagement

Data and digitalisation continued to underpin our efforts to deliver stickier and deeper customer relationships as we integrated our solutions into customer and industry ecosystems. API calls grew 61% as more customers embedded our digital solutions into their businesses.

Our digital proposition was especially key to our SME franchise. By leveraging AI/ ML, we enhanced our digital servicing capabilities and client engagement to deliver a more tailored customer experience.

Enabling the path to net zero with meaningful partnerships and innovative solutions

As the first bank in Southeast Asia to set decarbonisation targets, our priority has been to provide practical solutions to enable our clients – from large corporates to SMEs – to execute their sustainability agendas. With increasing momentum around the need to create environmental and social impact, our sustainable financing commitments, net of repayments, was around SGD 70 billion as at end December 2023.

In 2023, we pioneered several innovative solutions to grow our ESG portfolio. For example, DBS partnered apparel giant, H&M Group, to develop a first-of-its-kind collaborative finance tool to accelerate supply chain decarbonisation in the apparel sector. We completed the first successful transaction with a textile supplier in India, to fund the installation of low-carbon technologies in their factory. This in turn contributes towards H&M Group’s supply chain emissions targets. DBS also became the first bank in Hong Kong to combine energy saving loans and deposits together with subsidies to SMEs for the purchase of renewable energy certificates from local energy provider, CLP Power.

In addition to financing solutions, we also expanded our ecosystem partnerships and advisory services to SMEs. As at end 2023, we formalised collaborations with several industry-leading solution providers including Keppel Corp, Schneider Electric and Univers. We engaged over 1,000 companies through various sustainability training courses and programmes to develop their capability and capacity in the field. We also strengthened our in-house capability, by providing sustainability training to over 1,800 relationship and credit risk managers.

Additionally, DBS played an active role in various industry and policy workgroups to help advance the region’s transition finance agenda. For example, as a member of the Glasgow Financial Alliance for Net Zero, we co-chaired the workgroup to develop a proposal for the managed phaseout of thermal coal in Asia Pacific. DBS is also a key participant and enabler in the China-Singapore Green Finance Taskforce that was set up in 2023.

Leading in Asian bond markets

Capital markets activity was muted in 2023. Despite this, DBS continued to maintain pole position in the SGD bond markets, while also gaining market share across regional bond markets.

Scaling and maturing a new way of working

In 2023, we continued to scale our Managing through Journeys (MtJs) approach. To deliver better customer experiences, we expanded MtJs into two new areas – corporate documentary trade, as well as domestic payments, collections, and merchant solutions.

By breaking down internal silos and redesigning our processes to be more customer-centric, we have been able to shorten processing times and facilitate a more joyful banking experience. In just six months, we embedded a horizontal framework to streamline corporate documentary trade processes across our six core markets, enabling more seamless transactions via digital solutions. Similarly, more efficient processes reduced the turnaround time needed for corporates to implement our digital payments and collections solutions in Singapore, Hong Kong and India.

Looking ahead

We expect a softening of net interest margins as tailwinds from a high-rate environment ease in 2024. Geopolitical uncertainty, market volatility and climate risk will continue to shape the landscape.

To help clients successfully navigate these challenges, we will need to leverage our strength as an Asia-centric bank to deliver value, at scale. Our deep local knowledge and extensive regional footprint, enabled by digital capabilities, put us in a strong position to capitalise on regional investment and trade flows as supply chains continue to diversify.

At the same time, sustainability will continue to be high on national and corporate agendas, as a growing urgency for climate action raises the stakes for a just energy transition. We aim to build on our leadership in sustainability to channel capital towards green and transition activities to help create a more sustainable future.