DBS expands in China and India, cuts dependence on Singapore

In a bid to reduce reliance on its Singapore home market, DBS Group Holdings Ltd., Southeast Asia's biggest bank, is instead looking at expanding its operations in China and India without pursuing acquisition.

In a Bloomberg report, Chief Executive Officer Piyush Gupta said DBS aims for Singapore to account for 40 percent of revenue in the next five years, from over 60 percent now. Greater China and south and Southeast Asia would each make up 30 percent, he added.

Speaking in his first media briefing since becoming CEO in November, Gupta said boosting earnings in the Asian region outside Singapore will be challenging. DBS posted on Friday a quarterly profit that surpassed estimates by analysts as investment-banking fees and lending income advanced.

Fourth-quarter net income at DBS went up 67 percent to S$493 million, or an increase of $347 million, the biggest increase in quarterly profit in three years, beating the S$464 million average estimate of seven analysts consulted by Bloomberg.

Analysts, still, are not very optimistic. "The strategy is largely unchanged over the last 10 years," Singapore-based Matthew Wilson, an analyst at Morgan Stanley, quipped.

"Execution will be critical, and this will be interesting given we have essentially the same senior management team in place." He rates DBS shares "underweight/in-line."

DBS fell 1 percent to S$14.06 in Singapore even as stock has climbed 3.8 percent in the past 5 years, trailing rivals United Overseas Bank Ltd. and Oversea-Chinese Banking Corp. UOB gained 30 percent in the period and OCBC rose 42 percent, according to data compiled by Bloomberg.

According to Gupta, DBS seeks to focus on corporate and affluent customers in China and India, as regulatory restrictions in the two countries may hamper the bank's growth acquisitions, he said.

Even with Singapore accounting for more than 60 percent of total income last year, the Singapore-based lender disclosed it has doubled Indian revenues since 2007. Customer base in China has also grown more than fourfold since incorporating in the nation in 2007.

"We really want to build an Asian franchise with an Asian footprint," Gupta said. "We have enough to do in our backyard and that is where we hope to focus."

In Hong Kong, meanwhile, where the bank acquired Dao Heng Bank Group for $5.4 billion in 2001, DBS aims at improving profitability by investing in rebuilding its brand there, Gupta also said.

The bank has a market share in Hong Kong of about three to five percent with more than 50 branches in operation, making the Chinese territory its second largest market after Singapore.

"Thinking through and developing a far better refined segmented strategy for our Hong Kong businesses will be a priority," according to Gupta.

In addition, the bank's consumer banking operations in Taiwan and Indonesia are also being expanded, he said.