Always a strong player in small and medium-sized enterprise banking, DBS enjoyed a stellar year driven by digital investments, careful credit management and great progress in India.
As a franchise, DBS’s SME business increased net profits before tax by a mighty 67% year on year to the first quarter of 2022. SME revenue now accounts for 28% of all institutional banking, and is likely to grow; fee income was up 10% year on year in the SME business and deposits 9%.
As always with DBS, digital has a lot to do with it. In 2021, 84% of the bank’s SME income came from what it defines as digital customers, compared with 69% in 2017.
AI-driven revenue has grown fivefold, engaging over 150,000 customers with an in-house business intelligence engine that predicts the financial needs of SMEs and nudges them towards the right product.
The lending process for immediate access to working capital has been digitalized to such an extent that the bank boasts it takes a minute to apply, a second to approve, and disbursement is instant.
Digital has also helped to secure credit quality. More than 95% of non-performing asset or past-due cases were accurately predicted by the bank’s AI, enabling it to deal with problems before they really arrived; 80% of the borrowers who were identified as needing closer support were then averted from risk, covering S$700 million ($509 million) of the loan book.
It is partly because of this discipline that there was an 88% drop in specific allowances year on year in the first quarter. Delinquency rates are similar to pre-Covid levels even after over 90% of loans resumed principal repayment since the end of 2020.
The model now is to look at all the different situations and ask: which customers are going to be vulnerable here?
Joyce Tee, who runs the SME business for DBS, says the same system will be equally helpful planning for interest-rate hikes and supply-chain disruption. “The model now is to look at all the different situations and ask: which customers are going to be vulnerable here?”
Half of all SME revenue is from markets outside Singapore. This was the year in which DBS finally seemed to crack India after many years of trying out different models, and one of the areas this manifested itself is in the SME segment covered by Lakshmi Vilas Bank, which DBS acquired during the pandemic. The acquisition almost doubled DBS’s asset and liability book in the SME space in India, and the current-account balance of the customers through the Indian acquisition has grown 11% since the deal was completed.
DBS has also continued its pattern of building a network of ecosystem partners, connecting SMEs to integrated financial solutions. The bank participates in 106 anchor projects, among them Nexus, C2FO, Taulia, Odex and JDL. Networks such as these give clients access to everything from freight forwarders to suppliers.