Session 12 Extra Resource DBS-Annual Report 2017.pdf - DBS Group Holdings Ltd Annual Report 2017 Development Bank of Singapore Digital Bank of Singapore

Session 12 Extra Resource DBS-Annual Report 2017.pdf - DBS...

This preview shows page 1 out of 211 pages.

You've reached the end of your free preview.

Want to read all 211 pages?

Unformatted text preview: DBS Group Holdings Ltd Annual Report 2017 Development Bank of Singapore Digital Bank of Singapore 2018 marks DBS’ 50th anniversary. We trace our roots back to 1968, when as the Development Bank of Singapore we played a key role in financing the industrialisation of a newlyindependent nation. As Singapore grew, so did we. Today, we are not only Southeast Asia’s largest bank, but also one of the safest and best. We are excited about the future. At 50, it is a coming of age. By reimagining and innovating banking, we believe banking can be simpler, faster and more effortless for all. And as the Digital Bank of Singapore, we are committed to enabling all who deal with us to Live more, Bank less. About us About this report DBS is a leading financial services group in Asia, with over 280 branches across 18 markets. Headquartered and listed in Singapore, we have a growing presence in the three key Asian axes of growth: Greater China, Southeast Asia and South Asia. Our “AA-” and “Aa1” credit ratings are among the highest in the world. We have also been recognised for our leadership in the region, having been named “Asia’s Best Bank” by several publications including The Banker, Global Finance, IFR Asia and Euromoney since 2012. In addition, we have been named “Safest Bank in Asia” by Global Finance for nine consecutive years from 2009 to 2017. The Board of Directors is responsible for the preparation of this Annual Report. It is prepared in accordance with the following regulations, frameworks and guidelines: • The Banking (Corporate Governance) Regulations 2005, and all material aspects of the Guidelines on Corporate Governance for Financial Holding Companies, Banks, Direct Insurers, Reinsurers and Captive Insurers issued in April 2013 by the Monetary Authority of Singapore. • Singapore Exchange Securities Trading Limited (SGX-ST) Listing Rules 711A and 711B on Sustainability Report; and Practice Note 7.6 Sustainability Reporting Guide issued in July 2016 by SGX. • The International Integrated Reporting <IR> Framework issued in December 2014 by the International Integrated Reporting Council. • The Global Reporting Initiative (GRI) Standards issued in October 2016 by the Global Sustainability Standards Board. • The Guidelines on Responsible Financing issued in October 2015 by the Association of Banks in Singapore. View our report online and on the go Our Annual Report, accounts and other information about DBS can be found at . • The recommendations on enhanced banks’ risk disclosures issued in October 2012 by the Enhanced Disclosure Task Force (EDTF). We have implemented most of the recommendations, including those pertaining to expected credit loss approaches issued in November 2015. 1 Overview This section provides information on who we are and our leadership team. It also contains messages from the Chairman and CEO. 2 4 6 8 12 18 Who we are Board of Directors Group Management Committee Letter from the Chairman and CEO Digital Bank of Singapore: Deeper. Broader. Smarter. CEO reflections 20 22 24 25 28 How we create value – our business model How we use our resources How we distribute value created Material matters What our stakeholders are telling us 30 38 42 44 CFO statement Our 2017 priorities Institutional Banking Consumer Banking/ Wealth Management 48 Corporate governance 62 Remuneration report CRO statement Risk management Capital management and planning Sustainability Summary of disclosures 108 Corporate governance 112 Enhanced Disclosure Task Force recommendations 117 Global Reporting Initiative Content Index 124 Independent limited assurance report on sustainability information Business Model This section discusses our business model and provides details on how we use our resources and distribute value to our stakeholders. Performance This section provides information on our financials, 2017 priorities and performance by customer segments. Governance and Risk Management This section details our commitment to sound and effective governance, risk management and sustainability. 68 71 92 97 108 Financial Reports 126 Financial statements 189 Directors’ statement 193 Independent auditor’s report 200 Five-year summary Annexure 201 Further information on Board of Directors 206 Further information on Group Management Committee 209 Main subsidiaries and associated companies 210 International banking offices 212 Awards and accolades won Shareholder Information 214 Share price 215 Financial calendar 216 Shareholding statistics 218 Notice of Annual General Meeting Proxy form 2 DBS Annual Report 2017 Who we are DBS is a commercial bank headquartered and listed in Singapore. As one of Asia’s leading banks, we understand the intricacies of the region’s markets, and provide a full range of services in consumer banking, wealth management and institutional banking. To continue staying at the forefront of the industry, we are reimagining banking. We are using digital technology and innovation to extend our reach, enhance our efficiencies and create tomorrow’s solutions. We are proud to be recognised not only as Asia’s Safest and Best Bank, but also Asia’s Best Digital Bank. Present in 18 markets globally, including six priority markets in Asia Total Assets (SGD) 518 billion Income (SGD) 11.9 billion Net Profit (SGD) 4.39 billion Over 200,000 Institutional Banking customers Over 8.8 million Consumer Banking/ Wealth Management customers Mainland China Over Taiwan Hong Kong India 24,000 Employees Group Income 9% 26% Singapore 65% Indonesia Singapore Greater China South, Southeast Asia and Rest of the World Who we are Top of the Digital Class “DBS is perhaps the only bank that does a good job of quantifying what tech means for profitability. It can dissect to a minute degree the performance of digital versus traditional customers, on return on equity, income, frequency of transaction, cost to service and a host of other metrics.” Euromoney “DBS presented one of the most comprehensive digital strategies of any bank in the world, let alone Asia.” Citi Asia’s Safest, Asia’s Best Asia’s Best Digital Bank Euromoney 2017 Best Bank in Asia Pacific IDC Financial Insights 2017 Safest Bank in Asia Global Finance 2017 “DBS is rapidly evolving into flagbearer of digital initiatives in ASEAN, where we believe the bank has been ahead of the curve.” JP Morgan “For investors who feel banks need a strong grasp of technology, DBS shows edge.” Bernstein “This could be one of the first banks to develop a methodology in measuring digital value creation.” Deutsche Bank Most Valuable Bank Brand in ASEAN Brand Finance 2018 3 4 DBS Annual Report 2017 Board of Directors Board of Directors Peter Seah Piyush Gupta Bart Broadman The Board is committed to helping the bank achieve long-term success. The Board provides direction to management by setting the Group’s strategy and overseeing its implementation. It ensures risks and rewards are appropriately balanced. Euleen Goh Ho Tian Yee Nihal Kaviratne Olivier Lim Ow Foong Pheng Andre Sekulic Danny Teoh Best Managed Board Deep banking knowledge and experience Board independence Gender diversity Singapore Corporate Awards 2017 More than two-thirds of the Board are seasoned bankers, while the rest have extensive industry experience ranging from consumer goods to accounting. A majority of our directors including the Chairman are non-executive and independent directors. Two of ten directors are female. 5 6 DBS Annual Report 2017 Group Management Committee Group Management Committee The Group Management Committee executes the stategy and long-term goals of the Group. It drives business performance and organisational synergies. It is also responsible for protecting and enhancing our brand and reputation. Average years of experience of the Group Management Committee. About one-third of our Group Management Committee members are women. Piyush Gupta* Jerry Chen Chng Sok Hui* Eng-Kwok Seat Moey Philip Fernandez^ Neil Ge David Gledhill* Derrick Goh^ Lam Chee Kin Lee Yan Hong Sim S Lim* Andrew Ng* Jimmy Ng Karen Ngui Sebastian Paredes* Elbert Pattijn* Chief Executive Officer Legal, Compliance & Secretariat Taiwan Human Resources Finance Singapore Capital Markets Treasury & Markets Corporate Treasury Audit China Strategic Marketing & Communications Technology & Operations Hong Kong Audit Risk Management Those marked by * are also in the Group Executive Committee. Those marked by ^ are new members of the Group Management Committee in 2018. Pearlyn Phau^ Consumer Banking/ Wealth Management Shee Tse Koon Strategy & Planning Surojit Shome India Paulus Sutisna Indonesia Tan Su Shan* Consumer Banking/ Wealth Management Jimmy stepped down from the Group Management Committee at end 2017 following an appointment to a new role. Tan Teck Long^ Institutional Banking Jeanette Wong* Institutional Banking Read more about the Group Management Committee on page 206. 7 8 DBS Annual Report 2017 Letter from the Chairman and CEO Letter from the Chairman and CEO “2017 was a great year for DBS’ business franchise and digital transformation.” 11.9 SGD billion Chairman Peter Seah 4.39 93 + 50 SGD billion cents cents Total income Net profit Dividend Total income reached a new high, bolstered by growth in loans and fee income. Net profit increased 4% to a record SGD 4.39 billion from broad-based growth in business volumes. We proposed a final dividend of 60 cents per share, bringing the full-year ordinary dividend to 93 cents per share, up 55%. Special dividend A 50-cent special dividend has been proposed. A strong, resilient franchise 2017 was a great year for DBS’ business franchise. However, it was not without challenges. Low crude oil prices stretched into a third year, exerting significant stress on a number of our customers in the oil and gas sector. With technology continuing to disrupt the business of banking, the need to stay on top of the digital agenda was keenly felt. Notwithstanding these pressures, DBS turned in a strong performance. Total income reached a new high of SGD 11.9 billion, while net profit increased 4% to a record SGD 4.39 billion. This is despite an 8% increase in net allowances to SGD 1.54 billion as we accelerated the recognition of residual weak oil and gas support service exposures as non-performing assets. Our market shares remained robust. In Singapore, our share of housing loans rose from 29% to 31%, and our share of credit card receivables increased from 20% to 25%. We continued to do well in wealth management. Wealth income grew 25% to SGD 2.11 billion, while assets under management rose by 24% to SGD 206 billion. In the institutional banking space, SME income increased by 11% to SGD 1.71 billion. Cash management income grew 32% to SGD 1.11 billion while trade loans rose 25% to SGD 45 billion. In addition, we had some franchiseenhancing developments: • Completed the integration of ANZ’s retail and wealth franchise across five markets. The effort spanned Singapore, Hong Kong, China, Indonesia and Taiwan, and took 15 months, in accordance with schedule. In last year’s letter, we shared that the acquisition was expected to be return on equity (ROE) and earnings accretive one year after completion. In fact, we now project that ANZ will contribute net profit in 2018 that is more than initial projections. • Received approval to establish a whollyowned subsidiary (WOS) in India. Today, DBS is the largest Singapore bank in India with 12 branches, and the country’s fifthlargest foreign bank by assets. However, to bank certain segments of the economy, such as SMEs, a larger physical presence is required. With WOS status, we will be able to accelerate DBS India’s growth and expand its footprint, to serve a larger customer base. • Launched digibank, a mobile-only bank, in Indonesia. The groundbreaking proposition is aimed at the large digitally-savvy population in Asia’s third-most populous nation. It follows the introduction of digibank in India in April 2016, which has enabled us to penetrate India’s retail banking market with over 1.8 million new customers acquired. We also had a watershed year in our digital transformation. Transformation 2.0: making good progress In last year’s letter, we touched on the importance of digital in delivering simple, fast and contextual banking to customers. This is all-important in our next phase of growth, and involves being digital to the core, embedding ourselves in the customer’s journey and creating a start-up mindset. Good progress has been made on all three fronts. Being digital to the core Being truly digital involves a complete transformation of the bank, from front to back end. To be successful, we have to invest in people and skills differently, re-architect our technology infrastructure in the back end to be cloud-native, have systems and ways of working that shorten the release times of new applications, and enable scalability through ecosystem partnerships. 2017 was a breakthrough year in each of these areas. In 2009, our technology, hardware, data centres, network management and app development were fundamentally outsourced. At the end of 2017, we were 85% insourced. The shift is important because in order to be more digital, it is imperative that we own the technology resources. At the same time, we moved from legacy technology – big mainframes in large data centres – to cloud-native technology. By the end of 2017, 66% of our applications were cloud-ready. This, coupled with increased usage of microservices and opensource applications, has enabled us to reduce structural infrastructure costs, and at the same time improve resiliency and nimbleness. Through increased automation, we have been able to increase our release cadence of new applications in the market by close to 10 times, enabling us to constantly learn, test and iterate, the same way big tech does. In addition, we now have a common platform of services and application programming interfaces (APIs) enabling us to integrate best-in-breed technologies and move faster on the front end. In 2017, we launched the world’s largest API platform for a bank. We now have over 180 APIs for Singapore, with more than 60 partners. Embedding ourselves in the customer’s journey To become more customer-centric, we have continued to embed ourselves in the customer’s journey. In so doing, we have overturned our approach to customer service by starting from their perspective, rather than the logic and limitations imposed by our systems and processes. A case in point is the DBS Car Marketplace, which we introduced following the Monetary Authority of Singapore’s proposal to allow banks to operate adjacency businesses. Launched in partnership with sgCarMart and Carro, it is not only Singapore’s largest direct seller-to-buyer car marketplace, but also Singapore’s first online consumer marketplace helmed by a bank. At launch, the marketplace had some 3,500 direct-owner car listings. An on-site car budget calculator provides the estimated loan amount the buyer is eligible for, and then serves them a list of cars based on their budget. The initiative exemplifies how we are reimagining banking, using digital technology and innovation to seamlessly integrate banking in the lives of customers. Another example is POSB Smart Buddy, the world’s first in-school wearable tech savings and payments programme. In developing the initiative, we took input from parents who indicated that they wanted to teach their children the value of saving, but did not want the hassle of handling cash. The result was a groundbreaking solution that creates a contactless payments ecosystem within schools, enabling young students to cultivate sensible savings and spending habits in an engaging manner. An accompanying mobile app allows parents to remotely manage their children’s spending and savings, while empowering students to monitor their own finances. Since its official launch in August 2017, more than 30 schools in Singapore have signed up for it. 9 Letter from the Chairman and CEO 11 10 DBS Annual Report 2017 Having invested time and resources in digitalising the bank, we have seen visible results.” CEO Piyush Gupta Creating a start-up mindset To create a start-up culture and mindset, we have found that learning by doing and learning by partnering are key. We have facilitated this by creating immersion programmes such as sprints, scrums and hackathons. We have also collaborated with schools, universities and start-ups through incubator and accelerator programmes. In the last couple of years, we have conducted over 1,000 experiments in the bank and now have over 15,000 people engaged in innovation programmes. We have also refurbished our workspaces to encourage collaboration and fresh perspectives, created dedicated areas for design and experimentation, and fostered new project management systems to shorten the trial cycle for new ideas. We have hired user experience professionals and anthropologists, and co-located technology specialists and traditional bankers for better collaboration. Progress has been palpable. Ideas and initiatives are springing up spontaneously from the ground up, generating productivity gains and improving customer experience. Deeper, Broader and Smarter Having invested time and resources in digitalising the bank, we have seen visible results in a number of areas: • Deepened wallet share in the consumer and SME business in our core markets. In Singapore and Hong Kong, where we are a major player, becoming more digital has been key in helping us gain market share and create new income streams. In Singapore, for example, we are the leader in mortgages, auto loans, cards and bancassurance. Our digital strategy has enabled us to grow income from this segment from SGD 4.14 billion in 2015 to SGD 5.22 billion today. • Broadened our reach in growth markets. In these large geographies, digital has enabled the creation of new distribution models which reduce dependency on expensive brick and mortar outlets. While our consumer and SME franchise in these markets is still nascent, there is good traction in digital customer acquisition with our investments being a bet on the future. • Improved efficiency of traditionally more high-touch businesses such as large corporate banking and private banking. Digitalisation has helped our teams work smarter, reducing manual processes and increasing productivity. This has enabled us to support higher business volumes, without a commensurate increase in resources. Sustainability Sustainability has been at the core of our purpose-driven DNA. From the time of DBS’ and POSB’s founding as the Development Bank of Singapore and “People’s Bank” respectively, we have believed in the importance of good citizenship. This involves providing responsible banking, creating social impact by giving back to the community through the bank and DBS Foundation, as well as doing our part for the environment and combating climate change. In September 2015, the United Nations announced a set of 17 Sustainable Development Goals (SDGs) to end poverty, protect the planet and ensure that all people enjoy peace and prosperity as part of a new sustainable development agenda. DBS has chosen to focus on four of the 17 goals: • SDG 7 – Affordable and Clean Energy • SDG 8 – Decent Work and Economic Growth • SDG 12 – Responsible Consumption and Production • SDG 13 – Climate Action While we contribute towards the other SDGs, these four have been prioritised because they are where we can make the most positive impact given our heritage, client base, markets, ability to innovate and the strategic business opportunities that are increasingly emerging. In support of the sustainability agenda, DBS was one of the first Singapore companies to launch a green bond in 2017. In addition, DBS was the first Singapore bank to be included as an index constituent of the FTSE4Good Global Index, a global sustainability index. We were also the first Asian bank and Singapore company to join glob...
View Full Document

  • Spring '15

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture