DBS Group Annual Report FY14 review by SIAS

The 2014 Annual Report for DBS Group looks pretty hip these days with the selfie by the senior management team, and also hashtags are dotted throughout.
Here are some highlights.
DBS is now worth more than US$50 bln, having gone from 55th place in 2008 to 44th place now in the 2014 financial year.
It is strongly represented in China, Hong Kong, Taiwan and other markets, but Singapore is still the most important market. On page 102 you can see that 38% of their customers are incorporated or based in Singapore, and Singapore still makes up 62% of DBS' earnings, Greater China 30%, the remaining markets such as India and Indonesia just 8%.
Total shareholder return over the last three years was 94%. But as Chief Executive Piyush Gupta acknowledges in the Chairman and CEO's letter to shareholders, 2014 was not an easy year. Interest rates remained low and Singapore's housing market was still hit by the property cooling measures. There were other specific issues with the Qingdao port in China's Shandong Province, which has been quite detrimental to a number of banks. DBS says it was largely spared because of the prudent process that it loaned money.
There is also a very interesting interview which Piyush Gupta in the Annual Report. He says DBS is well-protected against downside risks in the Singapore property market, as those cooling measures continue to bite and interest rates remain low. He also points out that he doesn't believe China's economy will have a hard landing. DBS is not seeing any unusual signs of stress across their China portfolio.
The interview also carries comments about digitisation. Piyush Gupta says this is going to change banking forever. He says the digital revolution will fundamentally redefine the banking industry in just a few years because, as he puts it, banking is perhaps the most digitisable of all industries. It's only a matter of time before the disruption that the retail and telecom industries have experienced befalls banking. Monumental change is just around the corner, he says, pointing out that the biggest payment company in the region today is not a bank, but Alipay, the online payment platform of Alibaba. This means we are nearing a defining moment for traditional banks. Some will make the transition, he predicts, but many may not. Very hard-hitting words, reflected in some of the numbers. For example the cost-to-income ratio at 45% is where DBS wants it. But that doesn't mean they haven't saved money. Staff salaries are up from less than S$1.7 bln to almost S$1.9 bln. It spent a lot of money on digitisation, in order to get the bank ready for the future.
Page 28 has a quick summary of some of the other financials. Income is up 8%, but if you include one-time items, net profit was actually up 10%. Customer loans were up 11%, customer deposits up by 8%.
Return-on-equity is at 10.9%. That's below the 12% they’re aiming for in normal interest-rate circumstances. But we’re not in normal interest-rate circumstances, which is why they’re quite happy with the return-on-equity as it is.
Wealth income is at more than S$1 bln, up 19%. DBS points out that the S$220 mln acquisition of Societe Generale’s private banking business has helped them grow in this area, but getting new customers has been difficult, which is why they’re focusing on growing revenue from their existing customers.
Page 82 is where Piyush Gupta’s salary is detailed. You won’t find information on the salaries of the top 5 executives, not even in bands of S$250,000. This is because the bank says the competition for talent is so tough, and poaching staff is commonplace. Therefore, they only disclosed a total figure of around S$54 mln.
On page 210, you can see shareholders are being asked to approve remuneration for Directors. Interestingly, the total sum being asked for is S$3.5 mln, down from S$3.7 mln.