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Small, slow and steady

DBS Bank climbs to pole position in the category of banks with a balance sheet size of more than Rs 3,000 crore and 10 branches or less. The success mantra: Stay away from retail.

Rachna M. Koppikar | Print Edition: December 13, 2009

It may not boast the expansive network of other foreign banks like HSBC (77 branches) or Standard Chartered (90). But as far as Sanjiv Bhasin is concerned, his bank’s top dog status in the small banks category (balance sheet size of over Rs 3,000 crore and 10 branches or less) has plenty to do with a branch expansion drive across eight cities embarked upon over the past one year. Today, DBS Bank Ltd’s 10-branch spread may not seem like much, but when you consider that for a decade since opening its representative office in India in 1994, DBS didn’t expand, that is progress of some kind. It was only in 2005 that DBS opened its second branch in India.

Bhasin, General Manager & CEO, DBS Bank, has reason to be pleased with his bank’s performance as it has been able to race past other global banks with much larger balance sheets. Deutsche Bank AG, for instance, slipped three notches from #3 to #6, whilst Barclays Bank is at #4 (although it did move up four notches). Propelling DBS to the top has been a close to 400 per cent spurt in fee income, and a 280 per cent jump in operating profits.

The Singapore-based DBS Group’s India plan got a boost when both Singapore and India decided to open up their financial markets to each other in 2008, almost three years after the two countries signed a Comprehensive Economic Cooperation Agreement (CECA) in 2005. Along with two other Singapore-based banks, the Reserve Bank of India allowed DBS to embark on its expansion programme. In the same year that it opened its second branch (2005), the parent company also entered into a joint venture for a nonbanking finance company with the Murugappa Group-owned Cholamandalam Investments and Finance Company Ltd. DBS Chola Mutual Fund, a loss-making subsidiary of this JV—called Cholamandalam DBS Finance Ltd— was recently bought by L&T Finance.

If DBS has been able to hold its own, that’s also because unlike most of its counterparts, it didn’t follow the conventional growth path of building retail assets aggressively. DBS Bank has chosen a more cautious path. “We have focussed on expanding the wholesale banking franchise and that will continue to be our focus in the near future. On the retail side, we will first focus on the liabilities side by expanding our retail deposit base and wealth management services,” says Bhasin.

Retail can clearly wait. Wholesale banking will remain the backbone. Bhasin says he will first get down to building a sales force and a robust collection system before his bank plunges into this highly-competitive market place. The Singapore parent has a presence across a range of financial services—private equity, asset management, broking and private banking—but the Indian subsidiary clearly is in no hurry to go on a launch spree in India. Not until it acquires the required bandwidth.

Straight-ahead banking is paying DBS dividends. In the last financial year, it grew its deposit base and loan book by 18 per cent and 16 per cent, respectively. The bank was able to lend to corporates and small and medium enterprises at a time when other large banks were holding back loan sanctions. Of its loan portfolio of Rs 2,742 crore, 15 per cent goes to non-profit organisations and microfinance institutions. The real estate sector constitutes another chunk of 14 per cent, followed by textiles, pharma and petrochemicals.

DBS India is also benefitting from its parent company’s regional focus. That it has an Asian focus has meant that the Singapore bank hasn’t been as badly hit as the global banks with huge exposures to Europe and the US. While Singapore and Hong Kong contributed 84 per cent of DBS’s net profits in 2008, other Asian markets are expected to play a larger role in the years ahead. “Within Asia, the group has identified China, India, Indonesia and Taiwan as growth markets and had raised capital to capitalise businesses in these markets,” reveals Bhasin. He will be keeping a close eye on the foreign bank pack, almost all of whom have identified India as a growth engine after the global credit crisis. DBS, for its part, has plenty of catching up to do.

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