During a results briefing on Nov 6, DBS Group Holdings’ group CEO Tan Su Shan identified structural growth drivers for the bank. First on the list is wealth management, a sector on which local banks rely to drive fee income. Adjacent to wealth management, Tan says, is the structural growth in assets and funds managed by the bank’s Financial Institutions Group (FIG). “These are our clients. They’ve seen trillions of dollars in asset growth,” Tan said during DBS’s 3QFY2025 ended Sept 30 results briefing. These two structural growth drivers are linked.
Local banks are emerging as a hybrid of sorts, trapped in the sweet spot between growth stocks and yield stocks. Whether banks can continue with their generous dividends and capital returns will depend on their growth prospects. The local banks’ minimum payout ratios are 50% of net profit. Hence, dividends depend on earnings. Dividends and capital returns also depend on banks’ growth opportunities and where they seek them, which can consume capital.
What does growth look like for the local banks and is it cyclical or structural? But what is cyclical and what is structural?
