Published April 14, 2009

DBS needs tough new boss in tough market

By SIOW LI SEN

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AS DBS boss Richard Stanley was laid to rest yesterday, the stock rallied in line with the surge in the broader market. DBS ended 3.8 per cent up and is the second best performing bank stock among the three local banks year- to-date and on a 12-month basis. Investors were said to be showing their faith in DBS chairman Koh Boon Hwee running the bank. They probably also took comfort from Finance Minister Tharman Shanmugaratnam's statements that DBS need not rush to replace Mr Stanley.

When Mr Stanley went on medical leave in January after he was diagnosed with leukaemia, it would have been inappropriate for DBS to even hint that it was looking at a possible successor.

But the bank really has no time to lose in looking for a new chief executive as there is a sense that things are on hold - although in the last four months that Mr Koh, a non- banker, has been at the helm and with the economy in the grip of the steepest recession Singapore has known, it is not clear what a chief executive would have done differently.

Asked last week about the bank's first-quarter performance compared to the previous one, Mr Koh said that the first quarter of each year is characterised by a holiday season and that, in the real economy, this is a slow period.

He was speaking to reporters after the bank's annual shareholders meeting. He did add, however, that DBS would take advantage of the current economic conditions to boost market share as the major international banks retreat.

Earlier, in reply to a shareholder question on whether the bank needed to boost its management strength, Mr Koh said that, at times like these, the bank would be prudent in hiring.

On the other hand, Citibank Singapore country officer Jonathan Larsen yesterday said that the bank had a very good start to the year so far with growth overall. He made those remarks to reporters in a briefing on the bank's 2008 results.

Standard Chartered Bank Singapore chief executive Lim Cheng Teck last month too said that the bank is gaining market share, making new loans and still hiring despite the tough market conditions.

Mr Lim attributed Stanchart's positive performance to a flight to quality as the bank is among the less than a handful of UK banks that has not needed government funds.

According to him, business in January this year improved, compared with a year ago.

That makes two foreign banks giving pretty optimistic outlooks and forging ahead while DBS seems to be guiding to gloomy first-quarter results.

With such divergent remarks, are these banks operating in the same market?

To be fair, DBS, as South-east Asia's largest bank, will naturally be hit by much higher bad loans as the recession bites.

So being gung ho is probably the wrong way to go for its employees, especially without a chief executive to back them up.

In its search for a new boss, DBS might want to consider internal candidates.

DBS's main markets, Singapore and Hong Kong, don't really require an international banker from one of the global banks. Instead, a banker who understands local conditions and consumer preferences would help the bank retain customers.

Preferably, the person should be confident, backed by experience in going after new loans, and not just standing by customers in these tough times.

It is not clear, however, who among the senior management team is a bold leader and whether that person could get the support of the rest if promoted over them.

As for external candidates, DBS's challenge is to find the right person who can hit the ground running.