The global economy averted a hard landing in 2023. After hiking interest rates seven times in 2022, the Federal Reserve – in a bid to combat the highest inflation in generations – raised short-term borrowing costs by another four times to 5.25-5.5%, the highest level in 22 years. Central banks around the world followed suit.

Elevated interest rates dampened consumer and investment demand, and stymied global trade. US-China tensions, the ongoing Russia-Ukraine war, as well as the Israel-Hamas conflict, added to the uncertainty.

DBS’ key markets Singapore and Hong Kong – being small, open economies – were impacted by slowing external demand. Singapore’s economy grew 1.1% in 2023, down from 3.8% the year before. Hong Kong’s economy did better – with advance estimates indicating that it expanded by 3.2% – though this was weaker than expected.

Against this backdrop, we delivered a solid financial performance, with net profit and return on equity at record highs. In a year marked by tumult in the US regional banking sector and the failure of Credit Suisse, we were named as Safest Bank in Asia by Global Finance for the 15th consecutive year. This is testament to DBS’ resilient franchise, underpinned by a solid balance sheet and prudent risk management, which position us well to be an important partner to our customers and the community.

A record year

For the year, DBS delivered record total income of SGD 20.2 billion, crossing the SGD 20 billion mark for the first time. Net profit rose 26% to an all-time high of SGD 10.3 billion. Return on equity (ROE), at 18.0%, broke all previous records.

Earnings were propelled by tailwinds from a rising interest rate environment, with net interest margin expanding 40 basis points to 2.15%. Non-interest income also recovered strongly, bolstered by wealth management fees, card fees and loan-related fees. Our solid financial performance was not just a reflection of the macroeconomic environment, but also a result of the structural shifts made to our franchise in the last decade. In particular, our focus on digitalisation, cash management and wealth management broadened our low-cost deposit base, from which we benefitted in 2023. Meanwhile, we transformed DBS Private Bank to become one of the top three in Asia, compared to in 2010, when it was outside the top 20. Treasury Markets shifted from being a business which relied mostly on proprietary trading to being primarily a customer-focused business. Across the franchise, asset quality remained resilient, which reflects improvements made to our credit processes and the use of data analytics and artificial intelligence.

Consumer Banking/ Wealth Management had a solid year, with total income up 35% to a record SGD 8.96 billion. In Singapore, we remained the market leader in deposits and mortgages. Compared to the previous year, an improving investment climate also encouraged more customers to convert their deposits into investments. Wealth management assets under management increased by 23% to SGD 365 billion.

Institutional Banking, which saw income rise 22% to a record SGD 9.36 billion, was buoyed by a sharp rise in cash management income. Our early investment in digital transaction capabilities continued to pay off, as we won over 1,000 cash management mandates in 2023. Income from Treasury Markets fell by 38% to SGD 725 million due to higher funding costs.

While we continue to watch macroeconomic and geopolitical events closely, our solid balance sheet with ample liquidity, prudent general allowance reserves and healthy capital ratios will provide us with strong buffers against uncertainties.

“The challenges facing our world – from military conflicts to rapid technological change to the present climate crisis – are multifaceted and complex. To future-proof ourselves, we need to strengthen our existing competencies and invest in new capabilities, while being nimble enough to respond to any unexpected changes in the external environment. As we have done in the past, we will continue to build on our DNA as an innovation-led, purpose-driven bank to build a sustainable advantage.”

Cementing our Asia franchise

Even with a slowing China, Asia’s structural growth story is very much intact. Asia’s large, growing middle class; burgeoning wealth; massive infrastructure needs; as well as rising intra-Asia trade underpin its prospects. Through the inorganic transactions we did in the Covid-19 years, we have now reached inflection point in India and Taiwan in terms of scale.

In India, following the integration of Lakshmi Vilas Bank, we now have more than 520 branches in 350+ locations, and a complete suite of products for every market segment. Outside Singapore, we have the most complete platform in India. With a deep footprint in five southern Indian states, growing brand recognition, and a continued rollout of new products and partnerships, we are seeing payoff to the business. In 2023, the consumer banking business saw double-digit income growth by scaling and deepening partnerships with ecosystem players such as Bajaj Finance and Cred. We also leveraged our expanded customer franchise and footprint to increase market penetration of personal loans, gold loans, small business loans and insurance. Overall, our customer base grew 18%, while income and net profit rose 15% and 30% respectively.

In August, DBS completed the acquisition of Citigroup Inc.’s consumer banking business in Taiwan. With the transaction, DBS has become Taiwan’s largest foreign bank by assets. DBS Taiwan’s consumer business growth has been accelerated by at least 10 years, and annual revenue was propelled past the SGD 1.3 billion mark. Our consumer banking customers in Taiwan more than doubled to about 1.1 million. We also have clear market leadership in loans, deposits, cards and investments among foreign players in the market.

We continued to make important strides in China. Since its borders reopened in 2023, we have seen an uptick in China connectivity with Singapore and other ASEAN countries. To capture business opportunities from China, we launched a foreign direct investment desk in Singapore. Our “China plus one” strategy, supporting companies wanting to diversify their supply chains and operations, had good traction. We also continued to make headway in growing our Greater Bay Area (GBA) franchise, both in wealth management as well as in banking corporates in the electric vehicle, high-tech manufacturing and new economy industries. In early 2024, we upped our stake in Shenzhen Rural Commercial Bank (SRCB) from 13% to 16.69%. SRCB is a high-returns bank, in which we are the largest shareholder, and gives us a good footprint in the GBA.

Maturing new ways of working

To create a sustainable advantage, DBS continued to focus on three areas that are differentiating.

The first is the industrialisation of artificial intelligence (AI)/ machine learning (ML) and data analytics. Our use of AI/ ML became even more broad-based in 2023, and delivered economic value of SGD 370 million, more than double that in 2022. The value created comprises incremental revenue from anticipating customers’ needs and serving them better, losses averted from scams and fraud, and productivity gains. The bank also started experimenting with Generative AI to improve the way we work.

DBS’ focus on Managing through Journeys (MtJs) matured yet further. MtJs bring together cross-functional squads guided by data-driven control towers, enabling us to be more agile in delivering new products, and responding to customer pain points and needs. In 2021, we had 25 customer journeys; this rose to 40+ in 2022 and increased to more than 60 in 2023. Through MtJs, we see improved customer satisfaction, faster turnaround times and positive revenue impact.

Finally, we continued to make headway in growing our ecosystem partnerships, enabling us to scale customer acquisition especially in the large Asian markets.

Enhancing our technology resiliency and governance

Since 2014, DBS has been on a journey of digital transformation to make banking seamless and effortless so customers can “Live more, Bank less”. Regrettably, we fell short in 2023 with several digital disruptions. Our review identified deficiencies and gaps in four main areas – change management, system resiliency, incident management, and technology risk governance and oversight. To address these areas, a comprehensive technology resiliency roadmap has been laid out, which we started to action on from May 2023. Implementation of this roadmap – known as the Technology Risk Management Uplift Programme – is chaired by the CEO.

To strengthen technology risk governance and oversight, the bank formed a new sub-committee of the Board Risk Management Committee called the BRMC Technology Risk Committee. We transferred the Technology Risk Management team to the Risk Management Group, reporting to the Chief Risk Officer, to enhance independent checks and balances. Additionally, we bolstered our Three Lines Model for better end-to-end risk management by enhancing executive level talent in the Technology Risk and Audit functions. Further details on how we have strengthened technology resiliency are outlined in the CIO Statement.

Despite the record 2023 earnings, to take accountability for the disruptions, the variable compensation for the CEO and other members of the Group Management Committee was collectively reduced by 21% from the previous year. The CEO took a deeper cut of 30%, which amounted to SGD 4.14 million.

We appreciate the patience of customers and shareholders as we progressively implement the various technology resiliency improvements. With the work we are doing, our assurance to customers is that they can expect to see concrete improvements in the near term and over time. In particular, apart from complying with regulatory requirements on system availability, we have committed to additional targets we are setting for ourselves on ensuring a high degree of service availability as well.

Singapore’s National Development Minister Desmond Lee (centre) joins DBS executives at the launch of a SGD 30 million partnership between DBS Foundation and the Ministry of Social and Family Development to support low-income families.

Advancing the sustainability agenda

In 2023, DBS continued to advance the sustainability agenda. In line with efforts to have net zero financed emissions by 2050, we actively built ecosystem partnerships to enable large-scale decarbonisation at pace. As an example, we partnered Sweden’s H&M Group to launch a collaborative finance tool to accelerate the decarbonisation of supply chains in the apparel sector. In Hong Kong, DBS partnered CLP Power to support SMEs’ low-carbon transition. Additionally, we signed ESG partnerships with a number of solutions providers such as Keppel Corp, Schneider Electric and Reset Carbon, among others.

As a purpose-driven bank, DBS has been active in giving back to the community. Amid increasingly challenging times for the economy, we intensified our social impact with a commitment of up to SGD 1 billion over the next 10 years to improve the lives and livelihoods of the low-income and underprivileged. In addition, the bank’s workforce will commit over 1.5 million volunteer hours over the next decade to give back to society. In Singapore, we kicked off our giving with an SGD 30 million three-year partnership with the Ministry of Social and Family Development to support low-income families. Hundreds of DBS employees will be mobilised to befriend the families.

For DBS’ commitment to sustainability and social impact, the bank was recognised by Euromoney as World’s Best Bank for Corporate Responsibility. In 2023, we were also named to the Bloomberg Gender Equality Index for the sixth consecutive year and the FTSE4Good Developed Index for the seventh consecutive year.

Board and management changes

In April 2023, DBS appointed David Ho to the Boards of DBS Group Holdings and DBS Bank. David is no stranger to the bank, having served on the Board of DBS Bank (Hong Kong) since March 2019. He is Chairman and founder of Kiina Investment, a venture capital company that invests in technology startups. His extensive technology and China market experience complements the composition of the DBS Boards.

In January 2024, Ho Tian Yee assumed the Chairmanship of the DBS Foundation (DBSF), taking over from Euleen Goh, who stepped down after having served in the role since DBSF’s inception in 2014. We would like to thank Euleen for her invaluable contributions.

As part of our commitment to grooming talent from within, in April 2023, we made a number of senior-level rotations following the retirement of Sim S. Lim from his role as Head of Consumer Banking/ Wealth Management. Shee Tse Koon, previously Country Head of DBS Singapore, took over Sim’s role. Han Kwee Juan, previously Group Head of Strategy and Planning, assumed the role of Singapore Country Head. Lim Him Chuan, CEO of DBS Bank Taiwan, returned to Singapore to be Group Head of Strategy, Transformation, Analytics and Research, previously Strategy and Planning. Ng Sier Han, who was appointed Director of Integration (Taiwan) in April 2022, took over as DBS Bank Taiwan CEO. In addition to his role as CEO of DBS Bank (Hong Kong), Sebastian Paredes also assumed the newly-created role of Head of North Asia. The creation of this new role reflected our belief in the need for greater focus and oversight of a region that will only grow in importance in the coming years.

DBS completes the acquisition of Citigroup’s consumer banking business in Taiwan, making it Taiwan’s largest foreign bank by assets.

Dividend and bonus issue

Given the record profit and strong capital base, the Board has proposed a final dividend of 54 cents per share, bringing the full-year dividend to SGD 1.92 per share, an increase of 42 cents from the previous year.

In addition, the Board proposed a bonus issue on the basis of one bonus share for every existing 10 ordinary shares held.

The bonus shares will qualify for dividends starting with the first-quarter 2024 interim dividend and will increase the pace of capital returns to shareholders.

Barring unforeseen circumstances, the annualised ordinary dividend going forward will be SGD 2.16 per share over the enlarged share base, which represents a 24% increase from the SGD 1.92 per share for financial year 2023.

Conclusion

Macroeconomic and geopolitical uncertainties remain. The International Monetary Fund’s latest projections are for the global economy to grow at 3.1% in 2024 and 3.2% in 2025. While this is an improvement from the previous forecast, it is below the historical (2000 – 2019) average of 3.8%. We also need to keep a close eye on geopolitics, particularly the impact of the Israel-Hamas conflict on oil prices.

Although we remain watchful, we take heart that our franchise continues to be resilient. Barring any unexpected shocks to the global economy, DBS’ ROE in 2024 will be in the guided range of 15-17%.

As we look ahead, we will continue to invest in cementing our digital banking leadership, particularly strengthening our technology resiliency and investing in AI/ ML so we can deliver banking that is seamless and personalised. We will also continue to step up efforts in advancing the sustainability agenda and executing on our net-zero commitments.

The challenges facing our world – from military conflicts to rapid technological change to the present climate crisis – are multifaceted and complex. To future-proof ourselves, we need to strengthen our existing competencies and invest in new capabilities, while being nimble enough to respond to any unexpected changes in the external environment. As we have done in the past, we will continue to build on our DNA as an innovation-led, purpose-driven bank to build a sustainable advantage.