DBS downplays trade jitters as Q3 results shine

Its chief executive stressed that supply chains are hard to move.

Bloomberg reports that DBS Group CEO Piyush Gupta has downplayed the impact of deepening trade tensions between the US and China as “somewhat overblown” given that the flow of goods and services remain largely intact. 

“The direct impact will not be very material,” Gupta told Bloomberg Television. It’s “very hard to shift supply chains.”

Even with technology, it would take around three to four years just to adjust manufacturing supply chains and the process could take as much as 18 months for lower-end goods like refrigerators and vacuum cleaners, argued Gupta, as he stresses the bigger concern is the potential for the financial market sell-off to create a ‘feedback loop.’

The confidence comes after DBS third quarter profits ballooned 72% to $1.41b despite increasingly dismal market conditions brought about by cooling measures in the property sector and growing economic uncertainties.

The stakes, however, remain high for DBS which ranks as amongst the five biggest trade finance banks in Asia by market share, according to data from Greenwich Associates.

Also read: Trade jitters could slow bank loan growth to 7% by end-2018

Although the bank is at the forefront of growth in Greater China through Dao Heng Bank, DBS' larger exposure to the world's second largest economy puts it at greater risk should trade conflicts escalate. Greater China accounted for 25% of the bank's profit before tax and total assets, according to an earlier report by UOB Kay Hian. 

Despite the risk, the bank continues to push through with its plans to enter China as it has arranged equity capital funding and real estate investment trust (REIT) transactions for Chinese companies outside their home market as Gupta said that the Mainland REIT market could even eclipse the US at some point.

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