An Overview Of DBS Group – The Likes And Dislikes

DBS Group Holdings Ltd (SGX: D05) or DBS in short, is one of the three major banks based in Singapore. Its peers are United Overseas Bank Ltd (SGX: U11) and Oversea-Chinese Banking Corp Limited (SGX: O39).

As investors, it is important that we can be objective. That means that we should look at both the positives and the negatives.

We might be wrong in our opinions about a company. But having a neutral attitude – though difficult – could help us make better investment judgements.

Here are some positives and negatives about DBS Group.

Revenue and operating profit growth:

Both are up by more than 40% in the last five years. Above is a quick summary. We can see that both metrics have been growing, though not consistently every year.


Given that valuation is generally relative, we will compare DBS Group to the SPDR Straits Times Index ETF  (SGX: ES3) from the perspective of the price-to-book (PB) ratio and price-to-earnings (PE) ratio.


DBS Group is trading at a discount to the benchmark index.

Exposure to weaker economy:

The weak economy is generally bad for banks.

Though it is impossible to quantify all the factors, a weaker economy could translate to fewer jobs and lower income. This will lead to a tightening of purse strings. As customers buy less, they tend to also borrow less. So lower borrowings could means mean less interest income banks

The weaker economy could also lead to higher default rates. A recent example is the Swiber Holdings Limited (SGX: BGK), which could result in hundreds of millions of losses.

It’s impossible to understand all the risks involved:

Businesses make money by taking risks. Yet, banks make money by taking risks that many of us may not fully understand.

There are many types of risks. They include credit risk, interest-rate risk, counterparty risk, forex risk, industry risk, derivative risks, etc…

Put simply, as investors, we can only trust a bank’s management to perform its duty with competence, prudence, and integrity.


In sum, DBS Group has delivered strong business performance in the past few years, yet its valuation has remained low.

This is, perhaps, understandable, given the economy is expected to weaken and risks are plenty.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.