She will have about eight months to transition to the CEO role, during which she will &lsquo try out and get comfortable with all the moving parts to run a bank&rsquo , says Piyush Gupta

 

BANKING icon Piyush Gupta&rsquo s impending departure from DBS is unlikely to rock the boat for South-east Asia&rsquo s largest bank, according to analysts.

 

In fact, market watchers said that DBS is likely to have picked its group head of institutional banking Tan Su Shan to be its next CEO for the sake of continuity.

 

On Wednesday (Aug 8), the bank appointed Tan as deputy chief executive on top of her current role. She will replace Gupta when he retires in March 2025.

 

This gives Tan around eight months to transition to the CEO role, during which she will &ldquo try out and get comfortable with all the moving parts to run a bank&rdquo , Gupta said at a media briefing on Wednesday.

 

She will be DBS&rsquo first female CEO, and the first home-grown staff member hired internally to take the top role at the bank.

 

Tan&rsquo s appointment may not come as a surprise, as markets have speculated that she was a potential successor, analysts said.

 

They also expect little change in DBS&rsquo direction under Tan&rsquo s management, given that she has been at the bank for over a decade, and is already part of the core team that is driving its culture and goals.

 

&ldquo Given the extended transition period and Tan&rsquo s extensive experience working with Gupta for 14 years at DBS (and before DBS at Citi), we view Tan as a continuity candidate,&rdquo said Lorraine Tan, director of Asia equity research at Morningstar.

 

Shares of DBS were down slightly on Thursday, after the announcement of Gupta&rsquo s retirement. The counter closed 0.2 per cent lower at S$33.57.

 

Meanwhile, OCBC was up 1.1 per cent to S$14.23, and UOB ended 0.5 per cent higher, at S$30.

 

However, DBS continues to rank among the top performers in Singapore&rsquo s blue-chip Straits Times Index this year. The counter is up 10.5 per cent in the year to Aug 8, compared to the index&rsquo s 0.8 per cent gain over the same period.

 

The strong performance led the bank in May to be the first Singapore-listed company with a market capitalisation of above S$100 billion.

 

Tan &ndash who has been looking after DBS&rsquo institutional business since 2019 &ndash managed the bank&rsquo s consumer banking and wealth management segments from 2010 to 2019.

 

Peter Seah, DBS chairman, said at the briefing that Tan performed well in looking after the &ldquo two big parts of the bank that contribute the lion&rsquo s share of the bank&rsquo s income&rdquo .

 

The succession process will likely be smooth, since she is well-entrenched into the culture and operating norms of the bank, said Ivan Tan, a banking analyst at S& P Global Ratings.

 

Investors can expect continuity in DBS&rsquo core focus and regional strategy under her management, he added.

 

Meanwhile, her key priorities ahead would be to drive growth in North Asia amid a structural slowdown, and pursue new growth opportunities in India, said Thilan Wickramasinghe, head of Singapore research at Maybank Securities.

 

She would also have to focus on staying the course with capital returns, Wickramasinghe said.

 

Tan has been a front runner for the position, in his view.

 

A research analyst at RHB noted that the bank&rsquo s capital plan agenda is driven by the board, which remains intact. Thus, the analyst does not expect the appointment to derail its dividend and capital return thesis.

 

In fact, Morningstar&rsquo s Tan noted potential for an increase in shareholder distributions before Gupta&rsquo s departure, if DBS continues to deliver strong results.

 

S& P&rsquo s Tan said there will likely be individual differences in leadership style, and certain strategic or business aspects might evolve. But he expects DBS will continue to build on its key pillars, such as its Asia-focused regional strategy, digital innovation and sustainability.

 

Speaking at the briefing, DBS&rsquo Tan noted four points that she will focus on: culture, customers, collaboration and continuity.

 

On succeeding Gupta, who has helmed DBS for nearly 15 years, Tan noted that she had &ldquo big shoes to fill&rdquo .

 

&ldquo But, guess what? Our shoes are different we wear different kinds of shoes. Our styles may be different, but some things may not change going forward,&rdquo she said.

Winning over the confidence of stakeholders is tough when one succeeds a long-serving, highly regarded and charismatic leader

DBS has done a good job of smoothly handling the thorny issue of leadership succession. It speaks well of the bank&rsquo s succession planning that the group chose an internal candidate who has served in various roles for many years to be its new chief executive officer.

 

Sure, there may have been some jostling for the much coveted top job. However, DBS&rsquo board was unanimous in choosing 56-year old Tan Su Shan from among many senior figures to be the next CEO of Singapore&rsquo s largest company by market capitalisation.

 

On Wednesday (Aug 7), DBS&rsquo board announced Tan&rsquo s appointment as deputy CEO, in addition to her existing role as group head of institutional banking. She will succeed Piyush Gupta, who turns 65 next year, when he retires at the next annual general meeting on Mar 28, 2025.

 

A period of nearly eight months between the announcement of Tan as the incoming CEO and her assuming the role looks right. There is time to handle transition issues internally and offer assurance to customers as well as investors. Meanwhile, problems surrounding having a &ldquo lame duck&rdquo outgoing CEO may be largely avoided.    

 

Tan&rsquo s elevation is path breaking as she will be the bank&rsquo s first female chief executive. However, the seasoned banker will have her hands full. She needs to ensure DBS leads in digital banking and adeptly navigates artificial intelligence risks.

 

Certainly, DBS has a strong platform. The bank&rsquo s Q2 net profit rose 6 per cent from the corresponding period a year ago to S$2.79 billion. Return on equity for the quarter was 18.2 per cent. For 2024, DBS is eyeing net profit growth in the mid to high single digits.

 

Keep the faith

Still, might the bank&rsquo s exposure to Hong Kong, which is facing huge challenges to keep its position as a financial and business hub, and China&rsquo s struggling economy, weigh on DBS&rsquo growth?

 

Moreover, with many countries turning inward looking, banks financing international trade and investment flows could find the going tough. And Singapore players might even face backlash in overseas operations. 

 

To achieve strong earnings growth, the bank may need to pursue mergers and acquisitions that move the needle. While DBS has the capital to fund inorganic growth, finding the right deals and post-deal integration will be challenging.

 

Banks sit at the heart of capitalism. Can banks like DBS contribute to keeping the faith of many people in capitalism by helping ensure inclusive economic growth?

 

Perhaps, Tan&rsquo s biggest task is that she has gigantic shoes to fill. Gupta is possibly Singapore&rsquo s best corporate leader in recent times. He will have been at the apex of DBS for over 15 years by the time he leaves the helm.

 

Certainly, Tan is someone whom DBS&rsquo board, staff, customers and investors are familiar with. Nonetheless, winning over the confidence of stakeholders is tough when one succeeds a long-serving, highly regarded and charismatic leader. Think of the troubles that storied English football club Manchester United has had in filling the managerial shoes of the legendary Alex Ferguson ever since he retired in 2013.

 

When she finally assumes the helm, Tan would do well to focus on her own strengths and ignore comparisons with her predecessor.

 

A top priority for Tan from day one as DBS&rsquo chief would be to work assiduously at leadership succession. 

 

Maybe, there will be fairly immediate gaps to fill in DBS&rsquo top team should some senior leaders, who were in the running for the CEO job, leave the bank, possibly for top jobs in other financial institutions. After all, DBS&rsquo leaders are likely to be viewed as good catches by other players.

 

Tan could be helming DBS for around eight to 10 years assuming she holds the job until her mid-60s. Therefore, expect Tan from early on in her tenure as DBS&rsquo chief to start grooming and pushing a new generation of leaders, who are in their 30s and 40s, into DBS&rsquo senior leadership.

 

DBS is a national treasure whose success is a source of national pride. DBS&rsquo continued success benefits Singaporeans by creating and sustaining many high quality jobs in Singapore as well as contributing to the performance of its major shareholder Temasek. 

 

The investment returns of Singapore reserves, which are managed by the likes of Temasek, supplement the annual budget through the net investment returns contribution.

 

The hope is that Tan will be able to bring DBS to new heights, thereby demonstrating that female leaders and Singaporean leaders can excel in corporate leadership.