Banker looking beyond the horizon

By Jiang Xueqing in Shanghai (China Daily) Updated: 2015-08-07 10:11

Has the recent volatility in the Chinese capital market affected your business?

You should take a 12-month view of the stock market. It went up 150 percent and came down 35 percent. That is still more than 100 percent up in 12 months. We have a long-term view of the thing. Like every sensible banker, we look at the short-term consequences of movements and make sure we are aligning our strategies.

How do you assess the prospects of your business in China in conjunction with the market and the economy?

We are bullish on China and it is a long-term perspective. From a structural sense, we will continue to invest in the country and participate in its growth. In a cyclical sense, China is going through a slowdown. We are thoughtful about slowing the pace in the down cycles and improving the pace in the up cycles.

Today, for every $2 of business we do onshore, we do $1 of business offshore. If China slows, but more Chinese companies expand internationally, we can do a lot more business with them in the international markets during that period.

How will DBS take advantage of the Belt and Road Initiative to further promote the expansion of Chinese companies to other countries?

The 21st Century Maritime Silk Road initiative plays to our strength. If you look at the infrastructure needs around Southeast Asia, there are significant infrastructure gaps and needs. Therefore, large opportunities exist for a number of projects to be done by many of the Chinese companies.

We think that we are very strong in introducing companies to partners so that they can raise capital for a project and to help in the management and working capital financing of these projects. This is something that we will do quite actively.

DBS has been devoted to providing financial services to small and medium-sized enterprises. With China's economic downturn and restructuring, nonperforming loans are on the rise at SMEs. How will DBS continue to support SMEs and tighten its loan risk controls?

That is the challenge of SME financing - it tends to be positively correlated to GDP cycles. When the economy slows, SME cost-credit will go up.

That is why it is important to price for risk. When you build your business model, you price it at a level where you can afford to take a long-term, average cost of credit.

Sometimes, you are expected to do SME financing but don't want the NPLs or the cost of credit to go up in a poor credit environment. That is impossible.

If you want to do the business, you have to realize the realities. Within that, banks can do a lot.

We have early warning signals and have appropriate feet on the street that can actually go and check the supply chain of the SMEs. We also work very closely with SMEs on liquidity solutions.