DBS's Gupta Aims to Lift Return on Equity to 12% Within 3 Years

DBS Group Holdings Ltd. Chief Executive Officer Piyush Gupta, seeking to lift a stock that’s trailed the bank’s main rivals in 2010, said he’s given himself three years to boost return on equity to above 12 percent.

Southeast Asia’s largest bank, based in Singapore, posted return on equity of 10.2 percent for the first nine months of the year. Gupta said he plans to raise that in part by building businesses that cater to wealthy individuals and small companies, and by expanding in China, India and Indonesia.

Bolstering return on equity may prompt investors to re- evaluate the stock, said Gupta, who joined DBS in November 2009 after a 27-year tenure at Citigroup Inc. DBS trades at a lower price-to-book valuation than its two Singapore-based rivals after its shares dropped 8.6 percent this year, data compiled by Bloomberg show.

“The market is already figuring we have a game plan,” Gupta said in an interview in Singapore on Nov. 10. “If they start seeing the milestones on execution toward the game plan, I think we’ll start getting some stock price pick-up.”

DBS trades at 1.23 times book value, compared with 1.36 times for United Overseas Bank Ltd. and 1.67 for Oversea-Chinese Banking Corp., according to data compiled by Bloomberg. Last year, DBS’s return on equity, a measure of how well it used reinvested earnings to generate more profit, was 8.44 percent.

Recruitment Plans

The lender will hire 1,500 people this year and in 2011 as it seeks to boost revenue from its wealth management operations and units serving small- and mid-sized companies, Gupta said. He also plans to have 50 branches each in China, India and Indonesia within three years.

In private banking, which serves clients with at least S$1.5 million ($1.2 million) in disposable wealth, DBS aims for “double-digit” percentage growth of new assets annually from emerging markets over the next few years, the bank said in an e- mail. DBS targets increasing its managed assets to $50 billion from $35 billion in three years, it said.

Gupta also aims to generate about 40 percent of DBS’s revenue from Singapore in five years, down from about two-thirds now, according to a plan unveiled in February. Greater China would account for 30 percent, and South Asia and the rest of Southeast Asia may contribute another 30 percent, DBS has said.

The lender plans to focus on corporate and affluent customers in China and India, where regulatory restrictions curtail the bank’s ability to grow through acquisitions, Gupta said at the time. Still, the CEO isn’t ruling out making purchases in Asia’s two fastest-growing major economies if the restrictions on shareholding limits are eased.

‘Move the Needle’

“You don’t need large national-sized opportunities” in the two nations, he said this week. “All we need to do is find an appropriate regional bank, regional player, regional target, and that would move the needle significantly for somebody like us. But the time has not come.”

DBS currently has 16 branches and sub-branches in China, 12 outlets in India, and 40 branches in Indonesia.

Gupta, who had been New York-based Citigroup’s CEO for the Southeast Asia-Pacific region before being hired by DBS in September 2009, is confident boosting the return-on-equity level will help win back investors.

“That’s really the trick to getting the stock price where you want it to be,” Gupta said this week. “I don’t think you need to go and do something big and visible for the market to suddenly wake up.”

To contact the reporter on this story: Joyce Koh in Singapore at jkoh38@bloomberg.net

To contact the editor responsible for this story: Philip Lagerkranser in Hong Kong at lagerkranser@bloomberg.net

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