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1 Big Way DBS Group Holdings Ltd is Embracing A Digital Future   

DBS Group Holdings Ltd (SGX: D05), Singapore’s largest bank, is going digital and the results are beginning to show.

For 2016, DBS Group’s total income was $11.5 billion, an increase of 6% from 2015. Interestingly, profit before allowances grew at a faster rate of 10% to end at $6.52 billion. The reason behind this was the slower rate of growth in expenses. DBS Group said that costs were contained due in part to productivity gains from its efforts to digitalise its business.     

Piyush Gupta, the chief executive officer of DBS Group, delved deeper into the bank’s digital efforts during its latest 2016 fourth quarter earnings briefing.

Technology is a core competency

To make his point, Gupta’s focused was around this slide:

2017-03-30 DBS Group Tech Slide 1

Source: DBS Group’s earnings presentation

From DBS Group’s edited transcript of the briefing, this was Gupta said:

“There are two numbers that I want to draw your attention to [on the chart]. One is at the bottom. If you look at our headcount, we actually in-sourced about 500 people this year.”

“The insourcing relates to a change in our technology model. Earlier we were using vendors to do most of our technology. We figured since technology is such a core competency for us, we’ve decided to bring chunks of that in-house.”

While DBS Group insourced 484 headcounts, it also shed 307 headcount. Although the shift is not significant compared to the total headcount of DBS Group, but the shift in priorities is telling. Furthermore, Gupta made a clear statement that technology has become a core competency for DBS Group.

Gupta continued:

“But despite that, our tech costs are coming down. Our tech costs came down by 1%, that’s the red circle. So insourcing the technology, bringing the people on board, is actually allowing us to do technologies [more cheaply]. [And] in addition to [allowing us to create] intellectual property, [insourcing enables us] to [determine] the [pace and priority of] work that we want.”

“It is a fact that as you digitalise and automate, a lot of the low-value mid-office jobs are going to go, and you can see some of the impact of that trickling through already.”

On the above, Gupta highlighted the benefits of digitising and automation where lower value jobs are reduced and costs come down for the bank. The expenses rose at a slower rate for 2016, and it could be something to watch for 2017.

To be sure, Gupta has been vocal on the need for banks to embrace the shift in technology. As the results flow in, DBS Group might be making good on its promise.

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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.