SINGAPORE (Nov 22): UOB Kay Hian is maintaining its “buy” call on DBS Group Holdings with a higher target price of $26.10 as the bank embarks on a digital transformation in mindset and culture.
In a Monday report, analyst Jonathan Koh says, “DBS has the ideal size, being small enough to be nimble but possesses sufficient scale across various markets.”
Management has encouraged its staff to take risks and experiment as well as to undergo immersion programmes and participate in hackathons.
DBS has revamped its IT architecture to leverage on cloud computing and built the largest application programming interface (API).
The bank even owns and runs its own technology IT infrastructure, insourcing 85% of IT in 2017, compared to previously outsourcing 85% of IT in 2009.
The group wants to make banking convenient and “invisible”, bringing banking services to customers instead of getting customers to be physically present in bank branches.
Recently, it introduced Digibank, a mobile app that usees an AI-enabled chatbot to service customers. The back-end processes of this service are also fully digital and automated, which minimises manpower requirement.
This app was launched in Indonesia in August.
At its Investor Day last Friday, UOB says it plans to create a diversified Asia-centric commercial bank that delivers double-digit growth in ROE and growth rates, leveraging on intra-regional trade and capital flows, urbanisation and infrastructure developments, and increasing consumption and growing affluence.
Meanwhile, DBS has developed a methodology to measure digital value creation for its Consumer & SME businesses in Singapore and Hong Kong, analysing profit and loss based on digital customers that interact predominantly through online and mobile channels, and traditional customers that interact predominantly based on offline channels.
It plans to grow its Consumer & SME businesses in Singapore and Hong Kong at double-digit rates and contribution to income should expand from 44% to 50% over five years.
The group also expects its Consumer & SME businesses in growth markets to grow at a CAGR of above 20% while contribution to income should expand from 4% to 10%.
For its other businesses such as corporate bank, wealth management, markets and other businesses, management is focusing on improving operating efficiency and reducing costs to enhance profitability.
As at 3.14pm, shares in DBS are trading 47 cents higher at $24.86 or 12.6 times FY18 forecast earnings.
