Published September 9, 2008
Why so reticent in forecast for Greater China, DBS?
By SIOW LI SEN

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LAST Friday, DBS met reporters from Hong Kong, Taiwan and Singapore in Taipei as part of the official launch of DBS Taiwan - the latest addition to South-east Asia's largest bank. For about an hour, the reporters grilled chief executive Richard Stanley and chairman Koh Boon Hwee on the expected contribution from DBS Taiwan as well as how the group's Greater China market is doing.
These are, after all, pertinent questions. DBS has invested some NT$4 billion (S$180 million) in DBS Taiwan - not an insignificant amount. DBS disclosed ambitious targets for DBS Taiwan: a doubling of revenues, assets and customer size in three years' time, and to become among the top five foreign banks there. The group bought the former Bowa Bank in February and DBS Taiwan currently ranks No 7 or 8 among the more than 20 foreign banks in Taiwan.
Shareholders would want to know when a return can be expected. After all, to add more customers and revenues is probably the easiest part of the plan. Banking is like a lot of other businesses; cut prices and you get the customer. It's being able to turn a profit after spending big on marketing campaigns, dishing out freebies and zero-interest- rate loans that is the tough part.
But Mr Stanley declined to give any indication of when and how much Taiwan or Greater China would contribute to the group. He refused to be drawn into speculation in any way, not even rough percentages. DBS Taiwan general manager Jerry Chen did say that the bank could be profitable next year but he let on that that would depend on the amount of investment put in.
It was only after one journalist had asked about the 10-year time frame set by former DBS vice-chairman Frank Wong for Greater China to become profitable that Mr Stanley disclosed that China had already become profitable. But again no figures of any kind. Why the reticence? Is the situation so dire that he did not want to be caught out down the road for the wrong outlook?
According to the latest BT-UniSIM quarterly survey of business activity, business sales and profits in Singapore took a big hit in the second quarter amid a sharp economic slowdown, and GDP growth in the third quarter of this year could slow further to 1.4 per cent.
The survey of 138 local and foreign companies found that all the indicators for Q2 were down from a year ago.
In particular, the business prospects net balance - the difference between the proportion of companies that expect better times and that of those expecting worse - plunged 81 points to negative 25 per cent from Q2 last year. This was also lower than the minus 17 per cent seen a quarter ago.
DBS chairman Mr Koh, however, sees opportunities amid the gloom. 'The best time to expand, if I take a contrarian view, is when things appear most difficult,' he said. 'The lending capacity of many international banks is curtailed; the opportunities present themselves to many Asian banks, not just DBS,' he said.
Back in 2003, Jackson Tai, Mr Stanley's predecessor, said something similar. Mr Tai said opportunities abound and 'we're seeing foreign banks abandoning Asia'.
Last Friday, Mr Koh let on that in addition to Taiwan, DBS is expanding its presence in China, India, Indonesia and Vietnam at a time when the global credit squeeze is impacting Asia, with equity and property markets all in retreat.
Mr Stanley even offered that some may wonder if he had stepped into a perfect storm by joining DBS in May at such a challenging time, but he feels that the long-term growth of Asia is on track.
Describing the current financial turmoil as the 'worst crisis I have seen', he said the underlying momentum of Asian economies would help mitigate the spreading global credit woes.
Let's hope it's not the perfect storm. In the movie about the October 1991 storm of the century, the fishing crew of six did not make it.