Has DBS Group Holding Ltd’s Reputation Taken a Beating Due to 1MDB?

In October, the Monetary Authority of Singapore (MAS) revealed that it will be fining DBS Group Holdings Ltd  (SGX: D05) a total of S$1.0 million for incidences related to the tainted Malaysian sovereign wealth fund, 1MDB.

DBS Group, Singapore’s largest bank, was the only Singapore-based bank that was found to have run afoul of MAS’s regulations when handling 1MDB-related fund flows. MAS’s investigations revealed that DBS had 10 breaches of MAS Notice 626 – Prevention of Money Laundering and Countering the Financing of Terrorism.

The S$1.0 million fine might not be much in the context of DBS Group’s revenue and earnings, which are both in the billions of dollars.

But the reputational damage might have gone further than the fine. In a recent earnings briefing for the third quarter of 2016, DBS Group’s chief executive, Piyush Gupta, was asked about any reputational hits that the bank may have suffered.

Not a proud moment

Reflecting on the MAS fine, Gupta said:

“On the other question around MAS and 1MDB situation, we’re not terribly proud of the sanction. But if you go back and look at what the MAS has cited us, they’re careful to make the point that there is no pervasive or systemic problem with DBS’ processes.

The fact is that this was a very well-orchestrated and very complex set of layering which has been conducted by some people who are very thoughtful about what they were trying to do. And in some of those cases, it is not entirely easy to pick up exactly what is going on.”

Gupta was also challenged on the premise that DBS Group may have pursued expansion at the cost of financial performance. Gupta agreed that DBS Group could have done better in some situations, but he didn’t quite agree that it was due to expansion:

“I don’t think your general premise that part of this is because of accelerated growth is really true. We would always have situations where there’s room to improve and we’re going to continue to keep improving.”

Time will tell if DBS Group is able to recover from reputational hits, if any, that it has been taking as a result of the 1MDB-related kerfuffle.

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.