DBS’ newly appointed CEO faces the challenges of US recession fears and persistent geopolitical risks. OCBC believes the bank’s profit will shrink in 2025 when Tan officially takes on the new role.
During a media briefing yesterday, management at DBS provided guidance of S$4 million ($3 million) in net interest income sensitivity per basis point of US Fed fund rate movement, down from S$21 million in 2021, taking note of the challenging outlook ahead. According to an OCBC note, such caution is understandable given the challenges ahead.
«Recent market uncertainty sparked by the weak US job data has led to rising concerns of a US recession. This has impacted sentiment for the rest of the region due to heightened risk aversion. Geopolitical tensions have also risen in the Middle East,» said OCBC Singapore strategist Carmen Lee.
Earnings Outlook
Given such an environment, OCBC is forecasting net profit at DBS to grow 5 percent in 2024 before shrinking 3 percent in 2025 with higher loan volumes, healthy wealth income from a wider client asset base and prudent cost management to offset lower margins.
In the first half of 2024, the bank's net profit rose 9 percent to a record S$5.8 billion with broad-based growth in net interest income, fee income and treasury customer sales.
No Significant Impact
This will pose a challenging start for Tan Su Shan, who will succeed Piyush Gupta as DBS’ new CEO in March 2025.
«With this appointment, it has also put to rest months of market speculations over the CEO succession at DBS,» Lee added. «We do not expect this change to have a significant impact as Su Shan is an internal candidate with more than a decade of working experience with the group and familiar with two of its key business pillars.»
