An important challenge will be to maintain the bank&rsquo s lead in the age of digital and online challenges, as well as coping with AI risks

MANY in Singapore&rsquo s analyst community have been busy speculating when the DBS chief executive post will become vacant. But they have less to say about who the replacement can be, simply because whoever is tasked with the role has big shoes to fill.

 

Under CEO Piyush Gupta&rsquo s leadership, DBS &ndash South-east Asia&rsquo s largest lender &ndash has continued to break its profit records and provide strong returns to investors.

 

Today, DBS&rsquo return on equity (ROE) ranks seventh among the 100 largest banks in the world, up from 46th place in 2015. It also ranks ninth in total shareholder returns among the 100 banks.

 

It is the first Singapore Exchange (SGX)-listed company to cross the S$100 billion mark in market capitalisation and, together with the other two local banks, represents a whopping half of the local market&rsquo s value.

 

The bank is going strong, with 2024 earnings expected to exceed even its record levels in 2023, aided by the higher-for-longer interest rate environment and strong operations.

 

Digital Bank of Singapore?

An important challenge will be to maintain DBS&rsquo lead in the age of digital and online challenges, as well as coping with artificial intelligence risks.

 

Howard Yu, Lego professor of management and innovation at IMD Business School, expects DBS would want a successor that has visionary leadership &ndash much like Gupta demonstrated when he recognised the disruptive potential of fintech companies early on.

 

&ldquo This foresight must be coupled with a deep technological savvy, enabling the new CEO to continue DBS&rsquo digital transformation journey and implement cutting-edge technologies,&rdquo he said.

 

Already, Gupta has made great strides in getting DBS digital-ready. He was among the first to see that digital was the way to go when it came to competing in large markets without a large physical footprint.

 

Ahead of the competition, DBS was the first to enter Singapore&rsquo s mobile wallet market with the ambitious launch of PayLah! in 2014. The bank even started a completely paperless and branchless mobile-only bank in India in 2016.

 

It termed itself the &ldquo Digital Bank of Singapore&rdquo in its annual report for the financial year 2017 to highlight its commitment to digitalisation.

 

Even more ambitiously, Gupta said in a 2018 interview that he wanted DBS to be benchmarked against the biggest tech companies in the world &ndash Google, Amazon, Netflix, Apple, LinkedIn, Facebook &ndash effectively, representing the &ldquo D&rdquo in &ldquo Gandalf&rdquo .

 

The success on the digital front has seen the bank land a slew of awards. In 2016, DBS received the World&rsquo s Best Digital Bank and Asia&rsquo s Best Bank by Euromoney, the first time an Asian bank has won a global award from Euromoney.

 

But some of the shine of the above achievements has been lost given digital disruptions to the bank&rsquo s services between 2021 and 2023, the most severe of which lasted around two days in November 2021.

 

Following the spate of incidents, Singapore authorities imposed several exigencies on the bank, which included additional capital requirements, and barred it from making non-essential IT changes and acquiring new business ventures.

 

At the end of 2023, DBS set aside S$80 million to enhance its system resiliency, while its management committee took a pay cut to take accountability for the disruptions.

 

It is still too early to say if the money has been well-spent and has resolved all the tech issues. This will be something that Gupta or his replacement will need to assure investors that the disruptions are a thing of the past.

 

IMD&rsquo s Yu said the tech disruptions have highlighted the critical need for enhancing digital infrastructure resilience.

 

&ldquo The new leader must prioritise strengthening DBS&rsquo technological backbone while simultaneously pushing forward with digital innovation,&rdquo he said.

 

Growth and expansion

While tech will remain a key focus area, analysts also noted the bank&rsquo s ample capital base, which provides room for mergers-and-acquisitions (M& A) plans ahead.

 

For FY2023, DBS&rsquo common equity Tier-1 (CET-1) ratio stood at 14.6 per cent, while its total capital adequacy ratio was 16.1 per cent.

 

In a research note dated Jul 24, Citi analyst Tan Yong Hong noted that DBS had enough capital to both raise its dividends as well as make further acquisitions.

 

DBS currently has operations in 19 markets, and is the sixth-largest commercial bank in Hong Kong.

 

Tan thinks M& A will be a better use of capital. Given the Singapore-Johor Special Economic Zone, among other developments between Singapore and Malaysia, a move to acquire a Malaysian bank and attain an onshore banking licence could be on the cards.

 

Meanwhile, Lorraine Tan, director of Asia equity research at Morningstar, expects improving capital allocation to remain an important focus point both for the bank and its shareholders.

 

For the immediate term, the bank mainly has to manage the risks of slowing global growth as well as easing net interest margins on its earnings, she said.

 

Uncertainty

Gupta&rsquo s replacement will likely have to match, or even outdo, what has been achieved.

 

DBS was not in the best shape when he first took over the role in November 2009.

 

Predecessor Richard Stanley died of leukemia in April 2009, less than a year into the job, while global economies were also recovering from one of the worst worldwide economic crises in years.

 

Gupta streamlined the group&rsquo s operations across all markets, simplified its management structure, and worked to fix its consumer banking business in Singapore, to build the DBS of today.

 

Yu noted that succeeding a long-tenured, high-profile CEO such as Gupta presents significant challenges, but it is &ldquo certainly not an insurmountable task&rdquo .

 

Amid the increasingly uncertain and volatile global operating environment, plagued by higher-for-longer interest rates and rising geopolitical tensions, a successor will need to be an outstanding individual who can handle the unknown.

 

This ideal successor would need to have a &ldquo unique blend&rdquo of traditional banking acumen and forward-thinking leadership, Yu said.

 

He added that mere technological prowess will not suffice as IT capabilities become increasingly commoditised.

 

&ldquo The true differentiator will be the ability to blend traditional banking knowledge with innovative problem-solving skills, addressing the complex and evolving needs of customers across DBS&rsquo diverse markets,&rdquo he said.

As banking veteran Piyush Gupta nears his 15th year at the helm of South-east Asia&rsquo s largest bank, questions are being asked about who his successor will be

 

DBS : D05 -5.78% chief Piyush Gupta is nearing his 15th year at the helm of South-east Asia&rsquo s biggest bank, and does not appear to be slowing down. But there has been considerable chatter about how long he is going to remain in charge.

 

At a briefing for analysts held when the bank released its first-quarter results in May, he was asked point-blank if he was leaving this year. His reply: &ldquo No, I am not retiring this year.&rdquo

 

Asked subsequently whether he would be at DBS three years hence, Gupta, among the highest-paid CEOs in Singapore, sidestepped the question. He pointed to the bank&rsquo s &ldquo robust succession planning process at every step and in every level of the organisation&rdquo .

 

He added: &ldquo The defining questions to me are: Do we have enough momentum in the business, is our strategy sound, is our execution capability robust, and is the culture in the company long-lasting? I think the answer to all of those is yes.&rdquo

 

Given that answer, even if there is no change, it is probable that Gupta could step aside in the near future.

 

While Gupta&rsquo s time at DBS is at this point not as long as his 27-year stint at Citi, he is already DBS&rsquo longest-serving CEO.

 

At 14 years, his tenure is almost twice as long as the bank&rsquo s next longest-serving CEO, Ngiam Tong Dow, who held the top role for eight years.

 

Gupta, 64, is among the oldest of chief executives helming Singapore companies in Singapore state investor Temasek&rsquo s portfolio.

 

There is Loh Chin Hua of Keppel, and Hiew Yoon Khong of Mapletree Investments, who are both 62. Other Temasek-portfolio company chiefs range in age from their late 40s to 60.

 

That said, Gupta has been at the helm for a shorter period of time than Hiew, for example. Mapletree&rsquo s group CEO was appointed in 2003, six years before Gupta took DBS&rsquo top job.

 

Leadership reorganisation

DBS has historically chosen most of its successors from outside the bank, with Gupta himself having joined DBS from Citibank.

 

But Gupta himself has made reference to the internal candidates who are qualified for his role.

 

DBS made a leadership reshuffle in 2023, rotating some of its younger management staff into different roles at the bank, following the retirement of Sim S Lim, then group head of consumer banking and wealth management.

 

Among those moved was Han Kwee Juan, who became Singapore country head from head of strategy and planning.

 

Hired in 2019, he was named by Gupta, in a 2019 interview with business and finance magazine Euromoney, when he spoke about his potential successors.

 

Then, Gupta said he had four or five candidates, all of whom &ldquo with the right grooming, have the potential to take my job some day&rdquo .

 

Other bankers he named included Tan Su Shan, head of corporate and commercial banking, and Shee Tse Koon, head of consumer banking group and wealth management.

 

Tan was formerly head of consumer banking group and wealth management, while Shee was formerly Singapore country head.

 

Han also wore a second hat as acting chief information officer for DBS from November 2023 to May 2024, when the bank split its technology and operations function into two units under its drive to improve technology resiliency.

 

Gupta said he was a &ldquo big believer in having generalists&rdquo , which meant someone who could look after the consumer, wealth, as well as corporate side of the business.

 

Howard Yu, Lego professor of management and innovation at IMD Business School, rates the chances of DBS selecting an internal candidate as &ldquo quite high&rdquo &ndash around 70 to 80 per cent.

 

He said: &ldquo The recent leadership reorganisation, which saw key internal candidates elevated to critical roles, strongly suggests that DBS is actively grooming potential successors from within.&rdquo

 

The professor also said that the ideal candidate would be an &ldquo inside outsider&rdquo &ndash someone who has been with the company for a long time, but has not been responsible for the mainstream business. This would imbue the individual with a unique blend of institutional knowledge and fresh perspective.

 

&ldquo This type of &lsquo rebel talent&rsquo can be particularly valuable in driving necessary changes, while still understanding the organisation&rsquo s limits and levers,&rdquo he said.

 

In any case, the choice for DBS&rsquo next CEO would likely need the green light from its largest shareholder, Temasek.

 

Yu said Temasek&rsquo s substantial stake in the bank is likely to influence the selection of a new CEO &ldquo who aligns with Singapore&rsquo s long-term strategic interests&rdquo .

 

&ldquo The chosen candidate will need to demonstrate an ability to maintain strong relationships with government stakeholders and continue DBS&rsquo role as a key pillar of Singapore&rsquo s financial sector,&rdquo he said.

 

The next thing is timing

These indicators aside, there is no official word on when or if Gupta is stepping down anytime soon.

 

The timing of the change could well depend on various factors. Given the significance of such a change, the bank is likely to give the market some time to digest the news before the actual handover.

 

One could look to Singapore&rsquo s second-largest bank, OCBC, which announced in January 2021 that Helen Wong would take over as CEO. She officially took up the post in April, around the time of the bank&rsquo s annual general meeting, when she then could meet the shareholders.

 

Wong was already at OCBC. If the next DBS CEO comes from within the ranks, a similar timeframe could possibly work.

 

There are also various moving parts. Another factor might well be determined by what happens to the board chairmanship.

 

The bank&rsquo s chairman, Peter Seah, has been in his role since May 2010, and a board member since 2009.

 

Depending on when board-level renewal takes place, it is likely to have an impact on when the CEO change happens.