DBS Profit Misses Estimate; CEO Takes Pay Cut on Disruptions

(Bloomberg) -- DBS Group Holdings Ltd.’s fourth-quarter profit came in short of analyst expectations amid signs of pressure on margins. And while 2023 results hit a record, Chief Executive Officer Piyush Gupta’s compensation got hit due to last year’s digital banking disruptions. 

Net profit, excluding one-time items, rose 2% to S$2.39 billion ($1.78 billion) in the three months ended Dec. 31, Singapore’s biggest lender said in a statement Wednesday. That was below the S$2.44 billion average estimate by analysts surveyed by Bloomberg News. 

Last year’s outages that saw payment and ATM transactions stalled across the city-state have resulted in the variable pay for DBS’ group management committee being collectively cut by 21% from a year earlier. This includes a deeper 30% reduction for Gupta, one of the highest paid executives in the country, amounting to S$4.1 million. 

DBS is the first of major Singapore banks reporting results, showing how its robust performance that has been propelled by elevated interest rates may have peaked as rates are expected to decline this year. 

Rivals United Overseas Bank Ltd. and Oversea-Chinese Banking Corp will report results later this month. 

In November, the Monetary Authority of Singapore had banned DBS from acquiring new business ventures and reducing local branch and ATM networks for six months after a spate of digital banking service outages. 

The actions followed repeated and prolonged disruptions of DBS’ online banking services last year, prompting Gupta to apologize to customers and assure them the bank is addressing the issues “with utmost priority.” DBS said on Wednesday customers can expect greater service reliability, as well as alternative channels for payments and enquiries should issues happen.  

Singapore Directs DBS to Halt Acquisitions on Outage Fallout 

Under Gupta’s leadership since November 2009, DBS has expanded operations in India, Taiwan, and mainland China through acquisitions and organic growth. He has also beefed up the bank’s wealth management business, which is now one of the largest in Asia in terms of assets under management.

For 2023, the bank’s net profit already exceeded S$10 billion, a target it had set for itself for the medium term. It posted return on equity of 18%. 

Gupta said that even though interest rates are expected to soften and geopolitical tensions to persist, the bank should sustain its performance in the coming year.

Here are more details about DBS’ results:

• Net interest margin for its commercial book fell in the fourth quarter to 2.75% from the previous quarter
• Net fee income rose 31% from a year ago due to higher wealth management, card and loan-related fees, as well as the consolidation of Citi Taiwan
• Assets under management for wealth management grew 23% to a new high of S$365 billion, driven by net new money inflows
• Treasury markets total income fell 45% from a year ago due to higher funding costs
• Bonus issue on the basis of one bonus share for every existing 10 ordinary shares held proposed

--With assistance from Patrick Winters.

(Updates with more details throughout)

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