Analysts bullish on DBS' digitalisation drive

Profit forecasts for DBS rose by as much as 2%.

The revamp of DBS' IT architecture is vital to its digital transformation as it could cut costs and improve investment returns, UOB Kay Hian and RHB said.

DBS revamped its IT architecture which uses cloud computing and has built the largest application programming interface (API).

DBS owns and runs its own technology IT infrastructure, insourcing 85% of IT in 2017, compared to previously outsourcing 85% of IT in 2009.

"This digital architecture makes it inexpensive to scale the platform software, and hardware is also inexpensive as there are many suppliers," RHB analyst Leng Seng Choon said.

From 90% traditional architecture in 2014, DBS is targeting for 93% cloud architecture by 2019. This would help in cost savings.

Moreover, DBS' current staff size of 22,000 allows it to scale its digital business easily across markets.

"Management encourages staff to take risks and experiment. Employees undergo immersion programmes and participate in hackathons," UOB Kay Hian analyst Jonathan Koh said.

UOB Kay Hian raised its profit growth forecasts for 2018 and 2019 to 4.4% and 6.2%, due to digital's improved operating efficiency and cost reduction. The broker maintained a BUY stance.

RHB cut its forecast of DBS' operating expenses and raised their profit forecasts by 2%. They also raised long-term return of investment (ROE) from 10.6% to 11.1%.