DBS (Development Bank of Singapore)

[weijian]

I suppose the idea is to enlarge the base, in this case by 10%, so that subsequent effort will be accelerated by 10%.  Doing a one-off large special dividend will do but I suspect the result of a one-off bump in the share price may not be quite as desirable for DBS?

An alternate to enlarge base so that subsequent effort will be accelerated by 10%, the BOD could  bump up the dividend by 10% to achieve the same effect. I believe DBS is 1 of those that does a quarterly "fixed" dividend.

Of course, both moves -  either enlarge base OR bump up fixed dividend - achieve similar capital returns to shareholders. The only difference I see is the different accounting on the share capital/reserves as I mentioned earlier. That is why is puzzling me.

I reckon I am probably overthinking on this! Regardless on the matter of capital returns, DBS is making the right moves to return them.

To recap, just 10months ago, DBS announced a 10:1 bonus issue - which had the effect of increasing its share base by 10% and diluting pro-forma EPS by 10% as well. Everyone loves having more pieces of pizza even though each piece is smaller and so, it probably had the effect of bumping up its share price.

Barely 7 months after the 10:1 bonus, DBS kick started its 3billion SBB program and has spent ~130mil in the last 2weeks. Arguably, the SBB is buying more expensive bonus shares now - bumping up their pro-forma EPS, which had just earlier been diluted. Because they are (probably) buying more expensive shares, they end up buying less and so would have a lower EPS improvement than it could have been.

From the capital allocation perspective of a long term shareholder of DBS (eg. Temasek), it definitely isn't the optimized path. The only optimization is for exiting shareholders who have more shares to sell for a higher price (due to the bonus issue) to a confirmed buyer (SBB program). Not trying to point fingers here.

Nonetheless, DBS OPMIs probably don't care much because their TSR has indeed been world class this year.

[weijian]

3.3% cost of (perpetual) debt looks pretty low and I was wondering why DBS would be redeeming this perpetual securities. So I looked back at the issue doc 5 years ago and it becomes clear - The interest rate resets itself every 5 years with the formula "prevailing 5-year U.S. Dollar Treasury Rate plus 1.915 per cent. per annum".

The current US 5 year treasury is ~4.6%, a far cry from ~1.5% in Feb2020's. So rolling on this debt would mean a ~6.6% cost of debt, which is excessive when you already have "excess capital".

DBS Group Holdings Ltd’s U.S.$1,000,000,000 3.30 per cent. Perpetual Capital Securities First Callable in 2025 issued under the U.S.$30,000,000,000 Global Medium Term Note Programme

The redemption price (the “Redemption Price”) for the Securities will be the Optional Redemption Amount, as set out in the pricing supplement dated 20 February 2020 in respect of the Securities, being an amount equal to U.S$1,000 per Calculation Amount, together with distribution accrued but unpaid (if any) to (but excluding) the Redemption Date

https://links.sgx.com/FileOpen/DBSH%20US...eID=830262

[weijian]

The book equity of DBS as end June 2025 is 68.6bil. With a current market cap of ~150bil, it is close to 2.2x book value! And just about 1year ago, most of us were thinking that 1.5x was "way too expensive" (and active investors should probably start selling at 1.8x)

I think this is even more incredible with the below:

(a) Interest rates are reducing. DBS itself has signaled that 2025 profitability will be lower.

(b) Personally, I think the capital allocation taken by Mgt doesn't accrue a lot of value (issuing bonus shares and then starting a SBB that buys them back at much higher P/Bs just a little while later). Of course, Mr Market doesn't care about what I think.

A rising tide lifts all books. The smaller ones actually rise higher than its own height while tankers like DBS also benefit if the tide is big enough. One has to burn a lot of brain power just to select the right small boat to benefit but a "no brainer" ride on a tanker brings similar benefits as well. In our era of indexing and passive investing, capital flows are a good problem to have I suppose especially if those capital flows into the companies you are vested in.

"A bubble is a bull market that you did not invest in" was an epiphany that knock some sense into me. I recall myself thinking about them a lot many moons ago. I am glad that I don't think about them much these days...

[Shrivathsa]

There is an interesting article in Reuters on this, though the caveat is that they are looking at banks in USA and Europe.

https://www.reuters.com/commentary/break...025-10-08/

The gist of the article is that investors are turning a blind eye to the risks in banks .

Using the same metrics, with DBS ROE expectation of 17% and 2.2 PTB, the implied equity cost is 7.7 which is one of the lowest in the lowest 15 years.

One saving grace is that unlike USA, MAS will not likely allow any risky behaviour by a local bank.

The relentless rise is fascinating, also worrying and of course also enriching, which is what makes it difficult to sell.

The logic in some ways is that if DBS is in trouble, then one better get out of the market.

I know that is not very mathematically sound or value oriented, but that is the logic for me holding it.

[weijian]

So, SRT (Significant Risk Transfers) are just some sort of CDS (credit default swaps) or reinsurance. For those "experienced" enough, CDS was one of the vehicles that accelerated a financial bubble that eventually accumulated to GFC2008. In that particular case, the tail eventually wagged the dog.

Tails are critical to dogs because it helps dogs to maintain their balance and agility. So similarly, SRTs can make the book more efficient. Maybe this is why DBS is traded at such a premium to book?

What are significant risk transfers – and why is DBS reportedly considering them?

DBS is reportedly considering an SRT transaction and in talks with funds that invest in such instruments, after Standard Chartered carried out a similar deal in 2025 tied to US$1.5 billion of trade finance loans, Bloomberg reported on Jan 8. That move allowed Standard Chartered to obtain regulatory capital relief for its Singapore subsidiary.

In simple terms, SRTs function like a form of credit insurance for banks. Under an SRT, a bank transfers a defined portion of the credit risk from a pool of loans – such as trade finance, corporate or small business exposures – to external investors, typically specialist credit funds, insurers or asset managers. The bank retains ownership of the loans and continues servicing them, but passes on part of the potential losses if borrowers default. In return for taking on that risk, investors receive a premium or yield that is typically higher than similarly rated traditional bonds.

For DBS specifically, the lender is “operating from a position of strength”, Kwok noted. As at its latest disclosures for the third quarter ended Sep 30, 2025, DBS reported a Common Equity Tier-1 (CET-1) ratio of 15.1 per cent, which sits “comfortably above MAS minimums”. “This means DBS could use SRT as tools for capital efficiency, flexibility and portfolio steering, not capital repair,” she said.

Historically, SRT issuance has been dominated by European and North American banks, where deep institutional investor bases and longer-established regulatory frameworks have supported more active markets. There are now “early signs of changes” that Asian banks are beginning to adopt SRTs, though uptake is “likely to be gradual and uneven”, Kwok said.

https://www.businesstimes.com.sg/compani...ering-them

[Big Toe]

CDS itself did not bring out the housing crisis in 2008. It is the very lax underwriting standards motivated by insatiable greed. The greed was exhibited by both the banks and the consumers back then.

Closer to our present time line, we see china experiencing somewhat similar housing crisis. Difference is it is a train wreck in slow motion. I did not fully understand the extent of it until I started talking to a larger group of china citizens. I think it will take much longer than expected to be somewhat stable. But on the brighter note, which no-one talks about, the younger couples can finally afford housing.

On to DBS, the last time I checked, DBS do have quite strict underwriting standards.

[weijian]

DBS new CEO Miss Tan Su Shan has just been on the job for a little more than 1 year and she sold 100lots @60sgd.

When she was first appointed, she had ~1.35mil shares, which is similar to her holdings post sale. So it seems she only sold whatever RSU/ESPP that was released in the last year.

NOTIFICATION FORM FOR DIRECTOR/CHIEF EXECUTIVE OFFICER IN RESPECT OF INTERESTS IN SECURITIES

TAN SU SHAN
No. of ordinary voting shares/units held: 1,469,979
No. of ordinary voting shares/units held: 1,369,979

https://links.sgx.com/FileOpen/_FORM1_TS...eID=889298

[Big Toe]

Fun fact:
Source of her shares: Executive deferred remuneration packages.
Vehicle: The DBSH Share Plan.Vesting
Cost: Zero out-of-pocket capital required.

Ironically she was the head of wealth management when she started in 2010
The average price of DBS was $13-$14
With dividends reinvested it would be worth S$128.70 today

Lacking a little conviction, maybe?

[jfc18]

DBS new CEO Miss Tan Su Shan has just been on the job for a little more than 1 year and she sold 100lots @60sgd.

When she was first appointed, she had ~1.35mil shares, which is similar to her holdings post sale. So it seems she only sold whatever RSU/ESPP that was released in the last year.

NOTIFICATION FORM FOR DIRECTOR/CHIEF EXECUTIVE OFFICER IN RESPECT OF INTERESTS IN SECURITIES

TAN SU SHAN
No. of ordinary voting shares/units held: 1,469,979
No. of ordinary voting shares/units held: 1,369,979

https://links.sgx.com/FileOpen/_FORM1_TS...eID=889298

From 2021 to 2025 March when Piyush Gupta stepped down as CEO, he has regularly sold off his DBS shares every year. The share price ranges from $29 to $42. A total of 1.61 million shares were offloaded during that period. Total value was approx $50m.

C-suites sell off their shares all the time. May be for personal reasons. Not necessarily calling for a market top or excessive valuation. Investors who sold along with Piyush Gupta were left sorely dissappointed.

[cmeng_chan]

DBS new CEO Miss Tan Su Shan has just been on the job for a little more than 1 year and she sold 100lots @60sgd.

When she was first appointed, she had ~1.35mil shares, which is similar to her holdings post sale. So it seems she only sold whatever RSU/ESPP that was released in the last year.

NOTIFICATION FORM FOR DIRECTOR/CHIEF EXECUTIVE OFFICER IN RESPECT OF INTERESTS IN SECURITIES

TAN SU SHAN
No. of ordinary voting shares/units held: 1,469,979
No. of ordinary voting shares/units held: 1,369,979

https://links.sgx.com/FileOpen/_FORM1_TS...eID=889298

From 2021 to 2025 March when Piyush Gupta stepped down as CEO, he has regularly sold off his DBS shares every year. The share price ranges from $29 to $42. A total of 1.61 million shares were offloaded during that period. Total value was approx $50m.

C-suites sell off their shares all the time. May be for personal reasons. Not necessarily calling for a market top or excessive valuation. Investors who sold along with Piyush Gupta were left sorely dissappointed.

Another reason the Executives and Directors need to sell some of their holdings to cover for their tax. For stock compensation, I believe its based on the share price at the point of vesting (or ownership transfer to tax payer).

So, if CEO has 500K shares vested today at $60, that will be $30m of income for the year of assessment. Assuming 20% tax bracket, the CEO has to pay additional $6m tax on top of the annual cash salary.  So, selling 100K of shares at $60 will net the amount needed to cover the tax liability exactly.

However, if, say, the share price dropped by 50% over 1 week, that $6m tax amount remain the same.  So, CEO may need to sell 200K shares (double the number) to meet the same tax liability.  Normally, its more financially prudent to secure the tax liability risk at close to the exercise price.  Moreover, CEOs are insiders, so there are restrictions or blackout periods where trade is not allowed (example, quiet period before earnings announcement or before release of major company news).

That is my understanding as I had worked in tech companies where stock compensations are common compensation for rank and file employees. Hence, I don't always view share sales by executives and directors negatively as long as they still hold significantly portions of their holdings.