DBS’ Hands-On Strategy Delivers for Clients
By Abby Schultz
933 words
4 Nov 2015
Barron's Online
BON
English
There is “no magic to fund management" says DBS Private Bank‘s Rebekah Chuan.
The veteran investment manager offers a simple formula to protect and grow wealth: Have a clear investment objective, stomach whatever risk that comes with the investment strategy (don't suddenly turn from a conservative to an aggressive investor when stocks start soaring) and then, stick with your plan.
At HSBC Private Bank, where Chuan ran discretionary portfolio management for the Singapore branch before taking charge of DBS Bank's brand new effort in 2011, more than 90% of her clients didn't let emotions get in the way and so they doubled their money between six and eight years.
“These are clients who are sophisticated enough, they don't need to fully understand the nuts and bolts of all the investments, but they understand returns come with risk," Chuan says. And, she adds, “they stay the course." The result? Steady growth and steady returns.
Discretionary management means you've given the bank full authority to invest on your behalf after working out your investment objectives and risk tolerance with your adviser. It's a strategy that has been slow to catch on in Asia, where wealthy business owners, who dominant the ranks of the region's rich, are used to making decisions themselves. Chuan's division only runs about 1% or so of DBS' wealth management assets of about US$73 billion at the end of last year. The bank's aspiration is to grow this sector to 3% to 5% of assets, in line with the region's average, but far less than the global average of close to 20%.
It's understandable to want to select your own stocks and bonds and to act on your own hunches, but Chuan's experience is compelling. And it's simple – pick a strategy and a risk tolerance, and then off you go to spend the afternoon sunning on your yacht, or more realistically, to run your business.
The strategies fall into typical baskets ranging from “aggressive" to “conservative," with the mix of stocks, bonds and cash designed to meet these objectives. But there is flexibility within each strategy to tilt your portfolio one way or another depending on changes in the economy or markets.
At the moment, DBS' discretionary portfolio managers are gingerly buying stocks again after cutting back beginning in May. Portfolios were stuffed with 30% to 80% cash depending on each customer's risk tolerance as of mid-October, but recently, managers have begun buying stocks in Japan and Hong Kong – including stocks of Chinese companies – as well as stocks in the U.S. and, selectively, in Europe. DBS is looking at China stocks again, she says, because “everything has a price and it comes down to a level one has to ask what could drive it lower?"
DBS' discretionary team mostly fills customer portfolios with individual stock and bond picks, and the occasional exchange-traded fund for a sector where it has less expertise, like when it comes to Russian stocks. They consider simple structured products linked to stocks, bonds and currencies, but they avoid more complex, illiquid securities, Chuan says.
“We want to have a very transparent portfolio for clients, and also we want to add value by adding alpha, by picking the stocks and picking the bonds, rather than going through financial engineering," she says.
If you want to make your own picks, or buy funkier securities, you can be a client of DBS' “active advisory" service. Beginning in October, DBS began to “soft launch" a managed advisory service that provides customers with portfolio advice, including asset allocation recommendations, but allows you to make your own investment choices. This approach appeals to “first generational wealthy," who aren't used to relinquishing control, and to family offices run by professionals who don't mind getting input from other investment experts. “We want to make sure there are no clients who slip through the cracks," Chuan says.
It takes at least SGD5 million (US$3.5 million) to open an account at DBS Private Bank, but DBS Treasures Private Client customers with at least SGD3 million can also open a discretionary account. Still, Chuan says its best to have at least SGD5 million to create a diversified mix of investments, even if your portfolio is 100% bonds. Considering the face value of most individual bonds you can buy is US$200,000, a SGD3 million portfolio could only hold 10 or 11 securities.
When you hand over your portfolio for DBS to manage, you don't pay for each stock and bond trade, but if your portfolio is less than SGD10 million, you pay a management fee of about 1.25% of the daily net asset value of your portfolio, or lower for less complex portfolios. By pegging the semi-annual fee to your portfolio's daily NAV, DBS aligns its objectives with yours, Chuan says.
If you have more than SGD10 million, you negotiate a fee with DBS factoring in the size and complexity of your portfolio. Above SGD100 million you can pay a much lower management fee and an agreed upon performance fee of say, 10 % to 20% if DBS meets an agreed-upon rate of return, she says.
“At the end of the day, we want to make sure the fee is justifiable and doesn't erode their return," says Chuan.
Comments? E-mail us at mailto:abby.schultz@barrons.com
Comments? E-mail us at mailto:asia.editors@barrons.com
Dow Jones & Company, Inc.
Barron's atricle on DBS - given less exposure to developing countries, DBS has the least problem when it comes to bad debt
DBS Is the Pick of Singapore’s Bank Stocks
The big 3 banks delivered solid third quarter earnings but DBS shares looks cheap and could rise 25%.
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By
DANIEL SHANE
November 12, 2015
[Image: ON-BM839_dbs_G_20150921213130.jpg]
Photographer: Munshi Ahmed/Bloomberg
Have Singapore’s bank stocks finally caught a break?
Investors have spurned shares in the Lion City’s big three banks on slower loan growth, crumbling asset quality and a gloomy macro picture. But the release of better-than-expected third quarter earnings has brought relief to the shares of DBS Group ( D05.SG ), United Overseas Bank ( U11.SG ) and Oversea-Chinese Banking Corp ( O39.SG ), all of whom have toppled from their 2015 highs. With share price losses of between 13% and 17%, the banks have underperformed the 8% drop in Singapore’s benchmark Strait Times Index.
Barron’s Asia has written positively about DBS Group in the past given its growing earnings and widening margins amid tough conditions. We still reckon they’re the best game in town. Expect Singapore’s biggest bank to win-out against peers UOB and OCBC in wringing more earnings out of its loan book while keeping asset quality high. OCBC looks the weaker out of the trio by some distance.
Profits at DBS came in at SGD 1.07 billion, up 10% minus a SGD50 million one-off charge. Earnings per share also pleasantly surprised analysts, rising to SGD 0.42. The bank’s net interest margin, or the spread between interest received from creditors and that paid to savers, hit a four-year high of 1.78%. The net interest margin was boosted by a hike in Singapore’s interbank rate, SIBOR, which spiked in September as the Singapore dollar weakened against the greenback. Singapore’s banks generally peg lending rates to SIBOR but less so their deposits - so any rise goes in bankers’ back pockets.
Barron’s Asia coverage of Singapore bank stocks
DBS’ Selloff is Overdone: It’s Time to Buy - Sep.22, 2015
DBS: Shares Set to Take A Breather - Jul.28, 2015
DBS Shares May Change Tack If Fed’s Doves Cry - Apr.27, 2015
Singapore’s Best Banking Bet - Apr.5, 2015
UOB’s third quarter was also a beat but at 3% profit growth was more muted. It expanded its loan book 4% - slower than DBS - and its net interest margin was static at 1.77%. OCBC was the loser during the quarter. Earnings would have been up 7% was it not for a large, one-off gain that flattered OCBC’s bottom line in the year-ago quarter. Instead, profits on paper were down by almost a third. Worryingly the bank failed to grow either loans or its interest margin, which fell slightly to 1.67%. “Loan growth continues to be anemic,” points out Jefferies analyst Krishna Guha.
DBS looks best placed to continue to fatten its net interest margin. Barclays analyst Sharnie Wong says it should reach almost 2.1% within two years, given the bank has less exposure to currency weakness in Southeast Asia and more to Singapore dollar and Hong Kong dollar-denominated lending, which will get re-priced if interest rates rise next year. The same can’t be said for UOB and OCBC, which Wong expects to see more tempered growth in interest fees.
Aside from nudging SIBOR higher, strength in the greenback has bolstered DBS’ income in other ways. Out of the three banks, DBS has by far the largest business in Hong Kong, where the currency is pegged to the US dollar. DBS reports in Singapore dollars, making the currency translation favorable for the group’s earnings.
Concerns about loan quality among Singapore’s three big lenders have been a focus among analysts this year. A stronger US dollar, beaten down Southeast Asian currencies, along with weak global commodities demand has raised the risks of loans going sour. DBS looks to be on safer ground here: at 0.9%, the ratio of loans in or close to default is the same as recent quarters. DBS suggests it’s not too worried about its asset quality. Its two rivals look to be on less sturdy ground, though. UOB’s non-performing loans (NPLs) stand at 1.3% as it has more exposure to weak commodity prices and resources sectors in Indonesia and Malaysia. OCBC will probably be fretting most about credit quality. Its troublesome loans are on a par with DBS, but Barclays thinks these could blow out to near 3% within the next two years. OCBC has extended loans to oil and gas companies in Indonesia and Malaysia, and Barclays’ Wong reckons bad loans will rise at an average of 75% per year between 2014 and 2017. Making matters worse, OCBC’s overall loan book will grow at a slower tick than DBS’s.
Barron’s Asia wrote in September that DBS looked undervalued given it is one of Asia’s premier banking names. We’re sticking to our guns - the stock could rise 25% in the next 12 months. At 10 times trailing earnings, DBS is trading well below its five-year average and on a par with UOB. “The stock is cheap and higher interest rates could help drive earnings,” reckons Nomura’s Jaj Singh. The likelihood of a US Fed rise is an obvious catalyst for the stock, given this means interest on its loans in Singapore and Hong Kong will get re-priced higher. DBS will need to find ways of beefing up the amount it lends if it is to maintain momentum. Growth in the ratio of cash it lends out against that it keeps in deposits won’t exactly be riveting over the next couple of years, Barclays says, but is unlikely to turn negative like that of its rivals.
Given its better prospects, expect better earnings growth. Per share earnings for the full-year could come in 7% higher at SGD 1.74. UOB’s will probably remain flat at SGD 1.96 and OCBC’s down 9% to SGD 0.93. DBS likes to call itself Singapore’s safest bank. It’s standing up to that claim – for now.
[Image: ON-BN887_danile_G_20151111221510.png]
Email: daniel.shane@barrons.com
It shows Mr. Piyush Gupta is very hungry for fintech. It also has shown that he is well-aware of the threat...
Two Harvard students are changing lending in Southeast Asia
SINGAPORE (April 7): Kelvin Teo, a Harvard Business School student building a Web-based peer-to-peer lending startup as part of his curriculum, pitched the project to a potential partner: DBS Group Holdings, Southeast Asia’s biggest bank. Omitting his student status, he sent the proposal last October to Chief Executive Officer Piyush Gupta on a guess of his e-mail address.
At DBS’s Singapore headquarters, the CEO received the message. Gupta had been seeking ways to harness the Internet to improve banking services and Teo’s venture, Funding Societies, might work. Three hours later, the executive sent his reply: interested.
...
http://www.theedgemarkets.com/sg/article...heast-asia
(07-04-2016, 04:55 PM)CityFarmer Wrote: [ -> ]It shows Mr. Piyush Gupta is very hungry for fintech. It also has shown that he is well-aware of the threat...
Two Harvard students are changing lending in Southeast Asia
SINGAPORE (April 7): Kelvin Teo, a Harvard Business School student building a Web-based peer-to-peer lending startup as part of his curriculum, pitched the project to a potential partner: DBS Group Holdings, Southeast Asia’s biggest bank. Omitting his student status, he sent the proposal last October to Chief Executive Officer Piyush Gupta on a guess of his e-mail address.
At DBS’s Singapore headquarters, the CEO received the message. Gupta had been seeking ways to harness the Internet to improve banking services and Teo’s venture, Funding Societies, might work. Three hours later, the executive sent his reply: interested.
...
http://www.theedgemarkets.com/sg/article...heast-asia
And also his competitors are doing those too ->
What Does UOB Investing In Peer-To-Peer Lending
Different perspectives from same financial report.
Just like a glass filled with water up to the half
mark: Is it half full or half empty?
Media reports 03 May 2016:
Business Times
DBS Q1 net profit slips 5%
DBS Group reported on Tuesday that its
net profit for the first quarter of 2016
was S$1.20 billion, down 5 per cent from
a year ago.
TODAY
DBS profits rise 6% to S$1.2 billion,
beating estimates
DBS Group Holdings, South-east Asia’s largest
bank, posted higher first-quarter profit as net
interest income rose.
(03-05-2016, 02:11 PM)Porkbelly Wrote: [ -> ]Different perspectives from same financial report.
Just like a glass filled with water up to the half
mark: Is it half full or half empty?
Media reports 03 May 2016:
Business Times
DBS Q1 net profit slips 5%
DBS Group reported on Tuesday that its
net profit for the first quarter of 2016
was S$1.20 billion, down 5 per cent from
a year ago.
TODAY
DBS profits rise 6% to S$1.2 billion,
beating estimates
DBS Group Holdings, South-east Asia’s largest
bank, posted higher first-quarter profit as net
interest income rose.
I moved it to the right location.
One is net profit, which is +6%, while the other is net profit ex-one-time, which is -5%. Both are right, but from different perspectives. I would use the -5% on recurring profit for analysis.
(not vested)
^^ I think its the other way round, core profit up 6%, but -5% if include one-off items.
The -5% is including a one off item in Q1'2015, if not, Q1'2016 is 6% higher y-o-y. DBS had a succession of record earnings, and as the CEO had said, this qtr performance is particularly satisfying because it was achieved in unusually challenging market conditions. I concur. One just need to look at the result of OCBC and UOB to appreciate the good performance of DBS.
In 1Q2015, DBS held 320mil of customer's deposit at an interest of 0.69% but now in 1q2016, they are offering customer's a lower deposit average of 0.56%, there are still 313 mil of customer's deposit with them!! That's a lot of "goondu money"
I wonder if the ordinary folks among these group of customer's are aware of salary crediting with OCBC 360 acct* or CIMB Fastsaver
*OCBC's interest is 1.16% (for 243 mil of deposit) and 0.89% (15 mil) for this current quarter; weighted average 1.14%. DBS is only giving half the rate...