DBS Group Holdings Ltd Annual Report 2016 Reimagine Banking World’s Best Digital Bank Living, Breathing Asia Reimagine What makes DBS the World’s Best Digital Bank? Banking It starts with reimagining banking. From Singapore’s favourite mobile wallet to World’s Best India’s first paperless, branchless, signatureless mobile-only bank. A first-in-its-class social network Digital Bank for SMEs to hackathons across Asia and fintech internships in DBS. These are just some of the reasons we have been recognised as the World’s Best Digital Bank. Our digital transformation pervades every part of the bank. We are driven by one relentless purpose, which is to live and breathe innovation to Make Banking Joyful. About us About this report DBS is a leading financial services group The Board is responsible for the in Asia, with over 280 branches across preparation of this Annual Report. 18 markets. Headquartered and listed in It is prepared in accordance with the Singapore, we have a growing presence following regulations, frameworks in the three key Asian axes of growth: and guidelines: Greater China, Southeast Asia and South Asia. Our “AA-” and “Aa1” credit ratings • The Banking (Corporate Governance) are among the highest in the world. Regulations 2005, and all material We have also been recognised for our aspects of the Guidelines on Corporate leadership in the region, having been Governance for Financial Holding named “Asia’s Best Bank” by several Companies, Banks, Direct Insurers, publications including The Banker, Reinsurers and Captive Insurers issued Global Finance, IFR Asia and Euromoney on 3 April 2013 by the Monetary since 2012. Authority of Singapore. In addition, we have been named “Safest • The International Integrated Reporting Bank in Asia” by Global Finance for eight <IR> Framework issued in December 2014. consecutive years from 2009 to 2016. • The Global Reporting Initiative (GRI) G4 Sustainability Reporting Guidelines issued in May 2013. This positions us well to meet the Singapore Exchange sustainability reporting requirements as well as The Association of Banks in Singapore Guidelines on Responsible Financing that will take effect in 2017. View our report online Our Annual Report, accounts and other • The Enhanced Disclosure Task Force information about DBS can be found at recommendations to enhance banks’ www.dbs.com risk disclosures issued in October 2012. We have implemented most of the recommendations, including those pertaining to expected credit loss approaches issued in November 2015. Overview 2 Who we are 4 Board of Directors This section provides information on 6 Group Management Committee who we are and our leadership team. 8 Letter from the Chairman and CEO It also contains messages from the 12 World’s Best Digital Bank Chairman and CEO. 20 CEO reflections Business Model 22 How we create value – our business model 24 How we use our resources This section discusses our business 27 How we distribute value created model and provides details on how 28 Material matters we use our resources and distribute 30 What our stakeholders are telling us value to our stakeholders. Performance 32 CFO statement 38 Our 2016 priorities This section provides information 42 Institutional Banking on our financials, 2016 priorities and 44 Consumer Banking/Wealth Management performance by customer segments. Governance and 48 Corporate governance 64 Remuneration report Risk Management 70 Summary of disclosures 74 CRO statement This section details our commitment 77 Risk management to sound and effective governance, 103 Capital management and planning risk management and sustainability. 108 Sustainability Financial Reports 120 Financial statements 183 Directors’ statement 187 Independent auditor’s report 193 Five-year summary Annexure 194 Further information on Board of Directors 199 Further information on Group Management Committee 201 Main subsidiaries and associated companies 202 International banking offices 204 Awards and accolades won Shareholder Information 206 Share price 207 Financial calendar 208 Shareholding statistics 210 Notice of Annual General Meeting Proxy form | 1 Who we are DBS is a commercial bank Present in 18 markets globally, headquartered and listed in including six priority markets in Asia Singapore. As one of Asia’s leading banks, we understand the intricacies of the region’s markets, and provide a full range of services in consumer banking, wealth management and institutional banking. To continue China staying at the forefront of the industry, we are reimagining Taiwan Hong Kong banking, using digital technology India and innovation to extend our reach, enhance our efficiencies and create tomorrow’s solutions. We are proud to be recognised not only as Asia’s Safest and Singapore Best Bank, but also World’s Best Digital Bank. Indonesia Total Assets (SGD) Over Singapore 482 bn 200,000 66% Institutional Banking Customers of group income Income (SGD) Over Greater China 11.5 bn 7 mil* 25% Net Profit (SGD) Consumer Banking/Wealth of group income Management Customers South, Southeast Asia 4.24 bn Over and Rest of the World 22,000 9% * As at February 2017 Employees of group income 2 | DBS Annual Report 2016 World’s Best Digital Bank Euromoney Awards for Excellence 2016 “ Leaders in digital banking talk about the difference between digitising aspects of a bank and creating a truly digital financial institution. DBS is doing this better than any other bank. It is demonstrably the case that digital innovation pervades every part of DBS, from consumer to corporate, SMEs to transaction banking and even the DBS Foundation.” Clive Horwood Editor of Euromoney Magazine Asia’s Safest, Asia’s Best Safest Bank Asia’s Most Valuable in Asia Best Bank Banking Brand by Global Finance by Euromoney 2016 in ASEAN and Singapore 2016 by Brand Finance 2016 Who we are | 3 Board of Directors Peter Seah Ho Tian Yee The Board is committed to helping the bank achieve long-term success. The Board provides direction to management by setting the Group’s Nihal Kaviratne strategy and overseeing its implementation. It ensures Piyush Gupta risks and rewards are appropriately balanced. Deep banking Bart Broadman knowledge Ow Foong Pheng and experience Two-thirds of the Board are seasoned bankers, while the rest have extensive industry experience ranging from Andre Sekulic consumer goods to accounting. Euleen Goh Board independence A majority of our directors including the Chairman are non-executive and independent directors. Danny Teoh Gender diversity Two of nine directors are female. 4 | DBS Annual Report 2016 Board of Directors | 5 Group Management Committee Chng Sok Hui* Piyush Gupta* Jerry Chen Finance Eng-Kwok Seat Moey cer Taiwan Neil Ge Chief Executive Offi Capital Markets China The Group Management Committee executes the strategy and long-term goals of the Group. It drives business performance and organisational synergies. It is also responsible for protecting and enhancing our brand and reputation. David Gledhill* Technology & Operations Lam Chee Kin Sim S Lim* Andrew Ng* Legal, Compliance Lee Yan Hong Singapore Treasury & Markets & Secretariat Human Resources Average years of experience of the Group Management Committee. About one-third of our Group Management Committee members are women. Karen Ngui Strategic Marketing Jimmy Ng & Communications Sebastian Paredes* Elbert Pattijn* Shee Tse Koon Audit Hong Kong Risk Management Strategy & Planning Those marked by * are also in the Group Executive Committee. For more information on the Group Management Committee, please refer to pages 199 to 200. Jeanette Wong* Surojit Shome Tan Su Shan* Institutional Banking India Paulus Sutisna Consumer Banking/ Indonesia Wealth Management 6 | DBS Annual Report 2016 Group Management Committee | 7 Letter from the Chairman and CEO Much of the heavy lifting is at the back We encourage this by creating immersion end, where the bank has spent the past programmes which involve experiential few years re-architecting our technology learning and experimentation, such as infrastructure. Today, we have a common hackathons, where employees from across SGD11.5 bn platform of services and APIs which enables the bank work with start-ups to develop “ We made good us to integrate best-in-breed technologies, solutions to business challenges. Since 2015, Total income allowing us to move faster on the front end. we have also run over 1,000 experiments Our total income rose to a record progress on our As we move forward, we aim to adopt the in the bank. on higher loan volumes, improved strategy, delivering practices of global technology companies net interest margin and broad-based known for their ability to constantly We also conduct our own incubator/ non-interest income growth. strong operating experiment, automatically scale and rapidly accelerator programmes, where digital performance and cost bring new features to market. Like them, start-ups turn their concepts into prototypes. the bank is embracing microservices and Over 400 start-ups were engaged in 2016 effi ciencies, as well cloud technology, which will enable us as part of these programmes. as solid returns.” to be nimbler and more fintech-like. We have invested in creating the supporting 43% Embedding ourselves in the infrastructure for a start-up culture. Many of Cost-income ratio Chairman Peter Seah customer’s journey our offices regionally have been designed to help foster innovation. This is done through Our cost-income ratio fell from 45% to 43% To become more customer-centric, we have an open office concept and dedicated spaces as past investments to digitalise the bank made it a priority to embed ourselves in such as social hubs for networking as well together with cost management initiatives the customer’s journey. This means thinking as innovation and journey “laboratories”. In yielded faster productivity gains. about banking not as a separate activity, but 2015, we established DBS Academy learning as one that should be seamlessly interwoven centres in Singapore, Indonesia and Taiwan into a customer’s everyday life. To do so, we DBS’ earnings resilience is the payoff from • Offi cially launched a 15-year regional to conduct immersive programmes.