DBS Bank registered a double-digit increase in the size of its local Singapore dollar trading book in 2007 by being risk management house bank for most of Singapore's largest corporates, as well as servicing an expanding institutional and retail client base.
The success for Singapore's largest bank has come from an investment in staff and technology, which has allowed it to increase the number and variety of products it can offer as well as the innovation required to satisfy a hungry market. Its Singapore-based structuring team is 150-strong. "We offer an end-to-end service, from structuring and sales through to trading," says SF Wong, managing director and head of advisory sales at DBS. "The structuring and sales teams work very closely with the corporate, private and consumer banking groups to create synergies, enabling us to react quickly to market changes."
The proliferation of products has been tuned to take advantage of prevailing market conditions. "The past 18 months has seen a bullish run in equity markets, necessitating a shift from credit products to open-ended funds, accumulators and other short-term instruments to allow customers to ride the momentum in equities," says Wong.
By virtue of an impressive risk warehousing capacity and expertise at managing large transactions, DBS has been able to secure half the local market for foreign currency, bonds and derivatives. It also claims to capture over 30% of US dollar-Singapore dollar currency trades.
But size has not compromised the bank's ability to spot opportunities quickly. This prowess has been bolstered this year by the set-up of a complex derivatives group, which cuts the turnaround time for product research and development, as well as enhancing product innovation. Further improvements come from a heavy investment in technology, such as its DealOnline foreign exchange platform, a free-to-access internet service for corporates. The service allows clients to get automated forex quotes at any time, and prices trades for 40 currency pairs up to one year ahead.
DBS's drive to raise its profile with corporates comes as their appetite for risk management products has risen both at home and abroad. "We are able to offer a full range of customised solutions and tailored products," says Liang Eng Hwa, managing director of corporate advisory at DBS. "Deal sizes are getting larger and there are also large-scale projects involving Singaporean companies, making risk management increasingly significant. Corporates are willing to take longer-term views on currencies, while on bigger domestic financings the importance of interest rate swaps has increased.
The expansion of its business has led to DBS being the only bank able to do longer-dated swaps, of up to 30 years. "As the cross-border business of our client grows, we have become more innovative to help them hedge currency risk, expanding the range of non-deliverable forwards and swaps, including illiquid currencies," he adds. Additionally, the DBS Asian Currency Index enables institutional investors and larger corporates to trade/hedge 10 Asian currencies against the dollar.
The bank has also established a commodities desk this year, solely for the hedging, margin and trading needs for (physical) gold and silver for Asian clients. The desk is based in Singapore and is open 24 hours a day.
New investment products include the Asia Outperformance Structured Deposit, a Singapore dollar-denominated instrument with payouts linked to the performance of five Asian indexes against the S&P 500 over a four-year, 11-month tenor. The 100% principal-protected product offers a fixed payout of 4.8% after six months, plus four potential annual payouts. In the event that the returns from all the indexes exceed the benchmark, investors will receive 100% principal plus a minimum payout of 3%.
Innovation for corporate clients has come in the form of a six-month weekly ratio pivot accumulator with knock-in. The structured product was designed to help an export-focused company manage local currency operating costs but US dollar receivables and payables for equipment and raw materials. The accumulator allows the client to trade the US dollar-Singapore dollar exchange rate at an enhanced lower forward price if the spot price is at or below a pre-determined pivotal rate, and sell at an enhanced upper forward rate if the spot price rises above that rate.
Established as the premier distributor in Singapore and a top five player in Hong Kong, DBS has plans to expand into new markets. One example is the establishment of a Vietnamese Dong offshore platform, through which it supplies an illiquid currency to clients doing business there. "We will adapt to new trends to retain our positions in Singapore and Hong Kong, but are looking at ways to export technology into other markets such as Indonesia, China and India - anywhere we have a presence," says Wong. "We work with partners and affiliates to offer white-label products and roll out our expertise."
The week on Risk.net, December 2–8, 2017Receive this by email