DBS Chief Executive’s pay cut over digital disruptions, Bank posts strong Q4 earnings

Mr Piyush Gupta, CEO of DBS, the largest bank in Singapore, experienced a 30% reduction in his variable pay for 2023. Announced on Wednesday (7 Feb), alongside the bank’s quarterly earnings statement, this reduction amounted to a significant S$4.14 million (US$3.08 million).

The pay cut extended beyond Mr Gupta, with other members of the group management committee collectively facing a 21% decrease in their variable compensation. This decision, aimed at holding the leadership accountable, was in response to a series of digital disruptions throughout the year, impacting the bank’s customers.

DBS faced multiple service interruptions in the past year, including a service disruption on 29 March, during which customers were unable to use digital banking services for over 12 hours, a 6½-hour outage on 5 May due to human error, a 12-hour disruption in March from software bugs, significant outages on 14 October affecting online banking and ATM withdrawals, and a brief disruption on 20 October caused by a cooling issue at a data centre.

These incidents led the Monetary Authority of Singapore (MAS) to impose strict operational restrictions on DBS. These included a six-month suspension on new business acquisitions, a pause in non-essential IT changes, and a requirement to maintain the current size of the bank’s branch and ATM network in Singapore.

Furthermore, DBS has committed S$80 million to its technology uplift and resilience roadmap. This investment is intended to pre-empt service disruptions, provide alternate channels during outages, and reduce incident recovery times.

Despite these challenges, DBS showed resilience in the fourth quarter of 2023, reporting a 2% increase in net profit and maintaining its guidance for net interest income in 2024 at levels similar to the previous year. Mr. Gupta expressed confidence in the bank’s ability to sustain its performance, despite lower interest rates and ongoing geopolitical tensions.

DBS expects a return on equity (ROE) of 15% to 17% for 2024, along with double-digit growth in fee income. However, the full-year net interest margin (NIM) is anticipated to be slightly below the 2.13% reported in the fourth quarter.

The bank reported a substantial increase in its October-December net profit, reaching S$2.39 billion (US$1.78 billion), up from S$2.34 billion a year earlier. This growth exceeded the mean estimate of S$2.37 billion from industry analysts.

DBS also announced a final dividend of 54 cents per share and a 1-for-10 bonus issue. Its full-year annual profit jumped 26% to S$10.3 billion from S$8.19 billion in 2022, with return on equity rising to a record 18%.

In a significant CSR move, DBS allocated S$100 million from this year’s profits as an inaugural contribution to its S$1 billion, 10-year commitment to support vulnerable communities. The first initiative under this pledge is a S$30 million partnership with Singapore’s Ministry of Social and Family Development to assist underprivileged families.

Following guidelines from Singapore’s National Wages Council, junior employees across the group, representing half of the total headcount, will receive a one-time bonus. An aggregate payment of S$15 million has been set aside for this purpose in the 2023 expenses.