DBS reduces CEO's variable compensation by 30% following a series of digital upheavals.

• In 2023, the company's net profit increased by 26% to a record SG$10.3 billion, surpassing the previous year's SG$8.19 billion.
• The Singaporean bank's fourth quarter net profit was SG$2.39 billion, a 2% increase from the previous year's profit of SG$2.34 billion.
• DBS reduced the variable compensation for its senior management to "keep them accountable" for several digital disruptions that year.
• Piyush Gupta, the CEO, received a larger 30% salary reduction, totaling SG$4.14 million.

In 2023, DBS Group recorded a record profit, but reduced the variable compensation of its senior management to hold them responsible for several digital disruptions that year.

The bank announced that Chief Executive Piyush Gupta received a larger bonus but had his variable pay reduced by 30%, resulting in a loss of 4.14 million Singapore dollars ($3.08 million).

In 2023, the company's net profit increased by 26% to a record SG$10.3 billion, surpassing the previous year's SG$8.19 billion.

LSEG's data showed that Southeast Asia's largest bank exceeded analysts' expectations with a 2% increase in its fourth quarter net profit, which was SG$2.39 billion, compared to SG$2.34 billion a year ago.

In 2024, DBS is forecasting its full-year net income interest to remain the same as the previous year, while being the first of three major Singapore banks to report fourth quarter earnings.

DBS Chief Executive Officer Piyush Gupta stated that although interest rates are predicted to decrease and geopolitical tensions remain, our franchise strengths will enable us to maintain our performance in the upcoming year.

China exposure

In an interview with CNBC, Piyush discussed the bank's long-term prospects in the Chinese economy following the earnings release.

We at DBS take a long-term perspective when making investments, considering cycles rather than short-term gains, as we are committed to staying in the game. Our view of the Chinese economy in the long run is optimistic.

Gupta stated that the majority of DBS's exposure to China is through outbound activities, which support activities outside of the mainland, particularly in the property sector.

The lender's total exposure to Chinese real estate companies, including Singapore and Hong Kong companies operating in China, was previously estimated at approximately SG$14 billion ($10.4 billion), according to Gupta.

The majority of that activity is not in China; it occurs outside of China.

Earnings breakdown

In 2023, the Singapore bank experienced an increase in profits due to higher interest rates. However, bank profits may decrease in the second half of the year as global central banks begin to reduce interest rates. An environment with higher interest rates typically leads to increased net interest income for banks.

In the fourth quarter, the net interest margin, a key indicator of lending profitability, was 2.13%, slightly higher than the 2.05% recorded in the same quarter the previous year.

In December, the U.S. Federal Reserve adopted a more dovish stance, and markets are now anticipating rate cuts by summer. According to the CME FedWatch tool, the first 25-basis-point rate cut in 2024 could occur as early as May.

The central bank kept its benchmark borrowing rate between 5.25%-5.5% at the first Fed meeting of the year in January.

In 2023, DBS distributed a final dividend of 54 cents per share, resulting in a total of SG$1.92, which is a 28% increase from the SG$1.50 distributed in the previous year.

The bank proposed a 1-for-10 bonus share issue, and the bonus shares will be eligible for dividend payments from the first interim dividend of the financial year ending Dec. 31, 2024.

The ordinary dividend for the enlarged share base in 2024 will be SG$2.16 per share, which is a 24% increase from the 2023 figure, as announced by DBS.

The stock's dividend yield will be 7.5% based on its closing price on Feb. 6.

Digital disruptions

The bank announced that its senior management's variable pay was collectively reduced by 21% from the previous year due to a series of digital disruptions during the year.

IG's market strategist, Jun Rong Yeap, stated that the reduction in compensation could potentially be welcomed by investors.

By implementing cuts, companies may be able to reduce some of their compliance, operational, and resiliency costs, which could ultimately minimize their overall financial impact.

On the day, DBS shares experienced a 3% increase, reaching their highest point in nearly a month.

In March 2023, DBS experienced a 10-hour disruption of its digital services, preventing users from accessing online banking and making trades through its brokerage. The Monetary Authority of Singapore deemed the outage unacceptable and stated that the lender had not met expectations.

There was another outage in October.

— CNBC’s Lim Hui Jie contributed to this report.

The CEO and senior management's variable compensation was reduced by DBS due to digital disruptions.