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Is DBS ready to rumble?

Bank could learn a few lessons from the legendary boxer, especially as it's embroiled in another scandal

Even as the world mourned the death of Muhammad Ali in June, fans were left with a deep mystery that marked his career.

It was 1965, and he had thrown a punch that knocked out his opponent Sonny Liston, ending the fight in 2min 12sec.

Or did he? Even Ali doubted himself, with the crowd claiming Liston had dived over a "phantom punch" from Ali.

But the mystery would not diminish his status as a legendary heavyweight boxer, and his prowess offers lessons for an Asian heavyweight bank such as DBS.

This writer can hardly claim to be a fan of Ali but has found some vivid analogies between him and DBS, even as it finds itself embroiled in yet another debacle so close to the year end.

ROUNDED UP

A number of its staff and former employees in Hong Kong were this month rounded up by the anti-corruption agency there relating to investigations into alleged conspiracy with unauthorised telemarketers to make wrongful use of customers' data to sell high-interest loans.

It joined four other financial institutions in being probed for alleged transgressions to circumvent cold-calling rules, with the Independent Commission Against Corruption (ICAC) this week saying 29 staff and former employees of these five organisations had been nabbed.

From one unnamed bank, ICAC arrested three managers and 18 current and former direct sales staff. It was quite the sucker-punch, with the Monetary Authority of Singapore (MAS) effectively saying DBS should ensure its staff behave themselves in other markets.

As more details come to light, investors should be told how long such alleged practices had gone on.

These details matter in determining how deep the problems are for the Hong Kong operations, and whether sales expectations had been so crippling that bankers could not keep up with the ambitions.

This blow followed another to the head this year from Swiber, to which DBS had such a significant exposure of about $700 million that partly led to compressing its third-quarter profit growth to zero.

It more than doubled its total allowance in the third quarter after setting aside money for its exposure to the oil-and-gas contractor in the second quarter, when Swiber applied for judicial management after a U-turn on the bankruptcy route.

What muddied the situation was DBS's role in building orders for Swiber bonds and how it managed its relationship as one who structured Swiber bonds, one who held Swiber bonds, and one who marketed the Swiber bonds to private banking clients, including its own.

Ongoing investigations into Swiber may throw up remaining questions on the level of trust between DBS and its long-term client, and if that caused less vigilance at a time of slumping oil prices and rising leverage.

They may also show where DBS stood in Swiber's decision to redeem Swiber bonds just months before the company succumbed to pressures as working capital dried up.

DBS was also fined $1 million over control lapses relating to anti-money laundering.

This pertained to 1MDB-related fund flows. To be clear, these incidents are not related and are mostly historical.

DBS has been quite upfront with disclosures on the issues and in the case of the ICAC probe, had offered results of its internal investigations to the authorities that led to arrests.

The incidents also do not point to a discernible trend of pervasive weakness in its systems. DBS has, in fact, beaten analysts' expectations in three out of four of its quarterly results this year.

But these are not insignificant events. Together, the jab-hook-uppercut has made a bright bruise on its reputation.

DBS, with its sure efforts in reshaping the digital nature of the bank, should be floating with nimbleness to adapt to the changing environment for risk and bad behaviour, so it isn't caught out by surprises.

For in the midst of great, disruptive change brought by technology, its big moves on big data is of tremendous value. DBS was crowned the world's best digital bank by Euromoney this year.

It should be moving like Ali. But against such baggage, critics could say for now, this is a phantom punch.

DBS will be expanding into Indonesia next year as it combines its digibank strategy with the customer assets acquired from ANZ this year.

But even as it now has more heft in expanding into a burgeoning Asean market, the bank will have to navigate a difficult market that also looks attractive to many competitors.

DBS has hired Standard Chartered Bank's former head of Indonesia and has taken him on to chart strategy. But DBS will have to cap extreme exuberance over Indonesia, if it is to dig its heels deeper into this market.

CREDIBILITY


Though Ali won in 1965, there was less glory behind the punch as the focus was on his opponent's loss of credibility.

Nine years later, in a gruelling eight-round match with George Foreman, Ali claimed the coveted heavyweight championship with a deft knock-out blow.

He earned respect. Sure, Ali danced. But he also leaned on the rope to stay out of reach, pulling back till Foreman ran out of steam.

"That was no phantom punch!" yelled the commentator, as the crowd whooped over Ali's rousing five-punch finish.

The fans know this day as the Rumble In The Jungle, or that matchless event establishing Ali as the butterfly, the bee, the greatest, the king.

DBS, with its ambition to be a champion in Asian banking, is a force to be reckoned with. And expectations are building for a knock-out in the years ahead.

But spectators also look for a fight that builds a legend, and 2016 has been less than triumphant for DBS, slowed by bouts of shadow boxing.

This commentary appeared in The Business Times yesterday.

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