new creating value from digitalisation · 2018. 3. 22. · 1 creating value from digitalisation...
TRANSCRIPT
1
Creating value from
digitalisation
Chng Sok Hui
Chief Financial Officer
March 2018
The presentations contain future-oriented statements, including statements regarding the
Group’s vision and growth strategy in the light of anticipated trends as well as economic
and market conditions. Such statements necessarily involve risks and uncertainties,
which may cause actual performance in future periods to differ from projections.
Agenda
Our digital strategy01
Changing the way we run our business – Making
Banking Joyful04
Digital segment demonstrates clearly superior financial
and operating metrics03
Robust and well-tested methodology to understand
customer behaviour and measure financial impact02
2
EMBED
OURSELVES
IN CUSTOMER
JOURNEYBECOME DIGITAL TO
THE CORE
CREATE A
24,000-PERSON
START-UP
Driving the transformation: Making Banking Joyful
Make DBS ‘Invisible’
The three pillars driving the digital transformation to
Make Banking Joyful
3
World’s Best Digital Bank
2016
Top of the Digital Class
2017
Global recognition
for pervasiveness
of transformation
Our digital business model: 5 key capabilities
ECOSYSTEMS: Pipes to Platforms
DATA: Be insights driven
TRANSACT
• Eliminate paper, create instant
fulfilment
• Decrease cost
ACQUIRE
• Increase customer acquisition
through wider distribution
• Lower acquisition cost
ENGAGE
• Drive ‘sticky’ customer
behaviours, cross-sell through
contextual marketing
• Increase income per customer
The five key capabilities of our digital banking model
4
Today:Then:
50%
50%
Traditional KPIs
Strategic priorities
Shareholders
Achieve
sustainable
growth
Customers
Position DBS as
bank of choice
Employees
Position DBS
as employer
of choice
Geographies Regional
businesses
Enablers
40% Traditional KPIs
20% Making Banking Joyful
40% Strategic priorities
Shareholders
Achieve
sustainable
growth
Customers
Position DBS as
bank of choice
Employees
Position DBS
as employer
of choice
Drive digitally:
• Acquire
• Transact
• Engage
Joyful customers
& employees by
focusing on journeys,
experiences
Capture value
created from
digitalisation
GeographiesRegional
businessesEnablers
Regulators Society
Regulators Society
5
You manage what you measure:
The balanced scorecard and management process
5
Cost-Income
Ratio
Income
(S$m)
Digital has accelerated income growth and lowered structural costs,
boosting operating leverage
Cost-Income Ratio
Productivity gains from digitalisation
Income growth
Lift from digital
6
1 Corporate Bank, Private Bank, Markets, and Others
Pre-empt disruptorsConsumer and SME
(Singapore,
Hong Kong)
Disrupt incumbentsConsumer and SME
(Growth Markets)
Digitalise for profitabilityOther Businesses1
Measuring the
digital value created in:Our agenda
7
Unbundling the bank
2017 income: S$11.9bn
44%,
S$5.2bn52%,
S$6.2bn
5%,
S$0.5bn
44% of the bank: High performing and rapidly digitalising business
Consumer and SME (Singapore, Hong Kong)
• Rapidly transforming to digital
• Gaining market share, creating new income streams
• #1 in Singapore in mortgage, auto loans, cards1
S$5.2bn
2017 income: S$11.9bn Pre-empt disruptors
38% (2015)
44% (2017)
12% CAGR
vs Group: 5%
49%2015
44%2017
Cost-income ratioIncome
22%2015
23%2017
ROE
• Jewel in the crown
• Likely to grow income at double-digit
• Has potential to contribute ~50% of the bank’s income in 5 years
8
Agenda
Our digital strategy01
Changing the way we run our business – Making
Banking Joyful04
Digital segment demonstrates clearly superior financial
and operating metrics03
Robust and well-tested methodology to understand
customer behaviour and measure financial impact02
9
First bank to develop methodology to measure digital value creation
Consumer and SME (Singapore, Hong Kong)
We have been progressively helping
our customers adopt Digital behaviours
The Digital segment is growing faster,
with superior ROE
Digital
• 27% CAGR
• 27% ROE
Traditional
• -4% CAGR
• 18% ROE
44%• 12% CAGR
• 23% ROE
CAGR refers to 2015-2017 income
2017 ROE adjusted for accelerated provisioning in SME; without adjustments, 2017 ROE is 20% overall, 15% for Traditional segment and 23% for Digital segment
2017 income
49%
(2015)
63%
(2017)
Two distinct segments based on
customer behaviour
• Digital (D): predominantly online /
mobile interactions
• Traditional (T): predominantly offline
interactions
10
For each customer, all
associated income and
all associated costs are
completely and
accurately attributed
Robust, well-tested methodology based on customer behaviour
Three behavioural criteria for “Digital customers”
Product purchase
or segment
upgrade via
digital channels
More than 50% of
financial
transactions via
digital channels
More than 50%
of non-financial
transactions via
digital channels
1 2 3
• Account opening
• iWealth
• DBS Remit
• Pay bills online
• Add / delete payee
• Change personal
details
OR OR
Customers must re-qualify on a rolling 12-month basis
11
Consumer and SME (Singapore, Hong Kong)
P&L for Digital and Traditional segments based on customer view
Traditional
Income
Profit
CIR
Cost• Direct
• Indirect
• Overheads
Digital
Income
Profit
CIR
Cost• Direct
• Indirect
• Overheads
• Digital and Traditional customers
identified based on banking behaviour
• Complete attribution of all income
streams and costs
• Full reconciliation to Group financial
statements
• Granular data to ensure methodology rigour
• Time-tested over three years
End-to-end P&L constructed
following a set of principles
12
Agenda
Our digital strategy01
Changing the way we run our business – Making
Banking Joyful04
Digital segment demonstrates clearly superior
financial and operating metrics03
Robust and well-tested methodology to understand
customer behaviour and measure financial impact02
13
Superior returns from Digital segment
2017 profit and loss (S$bn) Total T D Digital is material
Customers (m) 6.0 3.5 2.5
42% of customers contribute
63% of income and 72% of
profit before allowances
Income 5.2 1.9 3.3
Costs 2.3 1.1 1.2
Profit before allowances 2.9 0.8 2.1
Key indicators Digital is more valuable
Income per customer (S$’000) 0.9 0.6 1.3 2X income per customer
Cost-income ratio (%) 44 58 36 22pp lower CIR
Return on equity (%) 23 18 27 9pp higher ROE
2017 ROE adjusted for accelerated provisioning in SME; without adjustments, 2017 ROE is 20% overall, 15% for Traditional segment and 23% for Digital segment 14
Key indicators Differential over T Digital increasingly valuable
Income per customer (S$’000) 1.1 1.3 2X 2X Higher income per customer
Cost-income ratio (%) 40 36 -18pp -22pp Lower CIR
Return on equity (%) 25 27 +8pp +9pp Higher ROE
Consistently superior returns from Digital segment over time
Consumer and SME (Singapore, Hong Kong)
2015 2017 2015 2017
Profit and loss (S$bn) D D Share of total (%) Digital increasingly material
Customers (m) 1.9 2.5 33 42
Income 2.0 3.3 49 63
Costs 0.8 1.2 40 51
Profit before allowances 1.2 2.1 58 72
Strong growth momentum
– driven by customer
migration and uplift in
income per customer
15
33
49
58
37
55
64
42
63
72
0 10 20 30 40 50 60 70 80
Profit before
allowances
Customers
Digital share (%)
Income
42% of customers contribute 72% of profit before allowances
2015
2017
2016
+14pp
Digital share of customers, income and profit before allowances
+14pp
+9pp
16
Agenda
Our digital strategy01
Changing the way we run our business – Making
Banking Joyful04
Digital segment demonstrates clearly superior financial
and operating metrics03
Robust and well-tested methodology to understand
customer behaviour and measure financial impact02
17
We have changed the way we run our business
Acquire
Transact
Engage
• Create instant fulfilment – making it easier for customers to use our
services
• Decrease cost
• Making it easier for customers to buy our products: wider distribution
• Lower acquisition cost
• Deliver the right offers, at the right time to increase traction through
contextual marketing
• Increase income per customer
18
Acquire: KPIs set and tracked across products to drive results
Online deposit account openingIncrease digital share of:
• New account opening
• Banker’s guarantee
• Loans
Increase subscriptions:
• IDEAL – online banking platform
ExamplesKPIs
Consumer
SME
Online deposit account openingIncrease digital acquisition share:
• Deposits
• Cards
• Loans
• Equity
• Unit trusts
• General insurance
45%
11%
2014 2017
Digital share of deposits onboarding
34pp
60%
27%
20172014
33pp
Digital share of deposits onboarding
For SME, digital share of deposits onboarding refers to IBG 4 addressable base (excluding niche segments) in Singapore and Hong Kong; IBG 3 excluded due to dedicated RM model 19
Transact: KPIs set and tracked to drive results
Migrate transactions to digital:
• Cash
• Trade
• FX
Design for “no-ops”:
• Cash and trade processing
• Loan creation, disbursements and servicing
• Account opening and maintenance
ExampleKPIs
Cross-border payments: Customer-initiatedMigrate transactions to digital:
• Deposits
• Remittance
• Loans
• Equity
• Unit trusts
Consumer
SME
2017201620152014
0.5
1.7
6.3
0.4
2.9
0.4 0.3
D
T
4.5
Volume of transactions (m)
20
Engage: KPIs set and tracked to drive results
Contextual marketing: Drive cross-sell and up-sellIncrease number of:
• Digitally engaged customers
• BusinessClass members and activities
• Visits to DBS websites
Increase share of:
• Internet banking login frequency
• Mobile banking usage
Examples to drive ‘stickiness’KPIs
Omni: Instant points redemption, budget tracking, etc.Increase number of:
• Digitally engaged customers
• 30-day, 90-day active customers
Improve customer satisfaction:
• Internet banking
• Mobile banking (digibank)
2.5xAverage spend
per Omni user
~S$1bnIncremental deposits
31Campaigns
Consumer
SME
21
SME
Digital customers: Highly engaged; multiple times more transactions…
3
58
17x
DT
Customer-initiated transactions per customer, 2017
Offline channel
Online channel
8x
402
53
DT
Consumer
For Consumer, financial transactions include fund transfers, remittances, bill payments, deposits, cheques, and investments and insurance, excludes ATM; non-financial transactions
include call centre and other account services.
For SME, financial transactions include FAST, MEPS, RTGS, TT, GIRO, cash, cheques, ACT, PRIME, trade, factorpro, DOL, etc. excludes H2H due to bulky volumes; non-financial
transactions include IDEAL enquiries and Bizcare
Customers (’000)3,390 2,456 92 90
22
Consumer: Consistently higher income from broad-based engagement
Income per customer 2x 2x2x
2015 2016 2017
Deposit balance
Loan balance
Investment balance
Products
Multiple over T
1.7x Other lending
Mortgages
D
826
403
2.7x
T
Deposits
Wealth & others
1.4x
3.5x
2.4x
Credit cards
Income per customer excludes lump-sum income not tracked at customer level
2017
2.0x
3.8x
1.4x
1.7x
23
SME: Consistently higher income from broad-based engagement
2x 2x2x
2.7x
1.4x
4.1x
3.1x
Trade finance
Cash
management
D
5,164
Loans
T
11,852
Treasury
Deposit balance
Loan balance
Products 1.7x
2.8x
1.3x
2017
Income per customer
2015 2016 2017Multiple over T
Income per customer excludes lump-sum income not tracked at customer level 24
• Existing Digital customers (D): Faster income growth
• Newly migrated Digital customers (T to D): Also show faster income growth
Digital customers: Consistently faster growth in income per customer
% of customers
Consumer SME
Relative income growth for same customer cohort, 2017 v 2016
56 37 760 32 8
Moderately slower than overall Faster than overallSlower than overall
T D T to D
Total
Deposits
Mortgages
Credit cards
Other lending
Wealth and others
T D T to D
Total
Loans
Trade finance
Treasury
Cash
management
1 2 1 2
2
1
25
Upside in Digital customer base to drive progressively lower CIR
Consumer and SME (Singapore, Hong Kong)
43
Aspiration2017
<40
3339
2015 2017
50-60
Aspiration
Cost-income ratio (%)Digital share of customers (%)
Customer base as of Jun 2017; other 2017 figures annualised based on 1H17, where applicable 26