Morningstar: Tan Su Shan Can Consider ASEAN Growth
Incoming DBS CEO Tan Su Shan will need to seek growth from already high levels of profitability and Southeast Asia could be the source to explore, according to a Morningstar note.
Tan Su Shan, who will officially become DBS’ new CEO on March 28, has a hard act to follow. Under current CEO Piyush Gupta, the Singapore lender drove return on equity from low double digits to high teens and quadrupled the bank’s share price.
«Over the past two years, DBS has achieved a return on equity of approximately 17 percent, which is around 4 percentage points higher than its Singaporean banking peers – all of which are also benefiting from the current favorable interest rate environment – and more than 5 percentage points above its own historical average,» said a Morningstar note authored by senior equity analyst Michael Makdad.
«While the bank has performed exceptionally well during this period, such favorable conditions probably will not persist indefinitely, and we think that these are some of the challenges that await Deputy CEO Tan Su Shan when she finally takes up the mantle of DBS CEO.»
Expand Footprint
According to Makdad, one area that could drive growth is expansion in foreign markets.
«I think DBS can do more to grow outside Singapore in a geographically balanced fashion. It has strong Greater China operations, which fit well with its Singapore base, but it has less of a footprint across ASEAN than its local banking rivals, which could be a source of growth as ASEAN has synergies not only with Singapore but also with Greater China,» he remarked.
«There’s a lot of uncertainty in the macro and geopolitical environment right now, so the role will require flexibility and an ability to adjust strategy quickly if needed.»
Tech Resilience
Another area where Makdad believes Tan could outperform Gupta is in technology, particularly regarding digital outages DBS previously experienced that led to various regulator responses including additional capital requirements.
«While it’s difficult to find fault overall with Gupta’s leadership of DBS, one area that faced occasional challenges was a series of disruptions to its digital offerings, which attracted scrutiny from regulators,» Makdad said. «Tan has the opportunity to excel in this area by ensuring seamless operations while driving continued growth.»
