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CEO Interviews - stephenkhoo - 01-14-2012 12:55 PM
Here is his interview
![[Image: piyushgupta.jpg]](http://luckymodena.servepics.com/pics/news/piyushgupta.jpg)
MR PIYUSH Gupta, 51, is the chief executive of DBS Group Holdings. -- ST PHOTO: TED CHEN
By Robin Chan
MR PIYUSH Gupta is many things - a banker, an entrepreneur, and even a bird- watcher, when he can find the time.
But now you can add repairman to that list because the high-flying Indian-born banker has spent the last two years doing a big clean-up job at DBS Bank.
He has turned a bank that had been struggling with confidence - after five CEOs in 10 years and having slashed 900 jobs amid the financial crisis - into one that has achieved record profit in the first nine months of this year, and seven straight quarters of profit.
Background story
FLYING BLIND
'We didn't know which customers were profitable and which were not. We didn't know which branch was profitable and which was not. We had different technology platforms in different countries.'
DBS chief Piyush Gupta on the management information systems when he first joined the bank
Background story
A 'HARDCORE, COMMERCIAL BANKER'
MR PIYUSH Gupta, 51, is the chief executive of DBS Group Holdings. An avid bird-watcher, the Indian-born, now Singaporean banker is a self-described 'hardcore, commercial banker' who has dabbled in everything across a commercial bank.
Before joining DBS, he was Citigroup's CEO for South-east Asia, Australia and New Zealand.
He began his career with Citibank in India in 1982, rising to hold a slew of senior management roles across Citi's corporate and consumer banking businesses, including head of strategic planning for emerging markets and regional director for global transaction services for Asia-Pacific.
He has also served as Citi's country officer for Indonesia, Malaysia and Singapore.
He is a strong believer in innovation although his forays have not always been successful. In 1997, he tried to create an e-commerce product when he was running Citi's transaction business for Asia, but it did not get any traction from customers.
Three years later, he left Citi to build a start-up Internet firm, Go4i.com, in India with the Hindustan Times, which bombed during the dot.com bust.
Mr Gupta has a Bachelor of Arts degree in economics from St Stephen's College at India's Delhi University and an MBA from the Indian Institute of Management, Ahmedabad.
He is married with two children.
Background story
Q & A
How would you describe yourself as a banker?
I think there are a couple of things that make me slightly different from the banking leadership today. One is that most of the global banking leadership is increasingly coming from an investment banking and markets background.
I did not. I'm a hardcore, commercial banker, and in fact I've grown up with operations, technology, cash, trade, lending, just the hardcore grunt work of banking.
So I have really rolled up my sleeves and dirtied my hands in the grind of banking. I think that makes me a little bit different from several banking leaders.
What influences do you draw on as a CEO, and do you have any particular role models over the course of your career?
Frankly, not really. I had a couple of bosses who helped in my thinking, but it was early in my career. I don't have major influences from individuals.
If I have been influenced by anything, it has been by the Citi culture - one of entrepreneurship and individual accountability. You can't spend 27 years without being influenced by how the whole culture works and how the whole system works. That has probably been my biggest influence.
What is your view on the outlook for the banking industry and when do you expect a significant pickup in growth again?
I think we are in an extended period of slow growth. The US and Europe are going to be stuck in the 1 to 2 per cent growth rate range for the next five to seven years. The amount of over-leveraging in the system and the deleveraging that is required just won't happen in any shorter period than that.
While Asia is getting more resilient from a macro-economic standpoint and Asian demand is getting to be more self-driven, at the end of the day we are still impacted by the West. Therefore, if the US and Europe are in the 1 to 2 per cent range, then Asia can't grow 7 to 8 per cent, it will grow 4, 5 or 6 per cent. And that's assuming China manages its transition smoothly.
If Asia grows 5 to 6 per cent, it means the banking sector, in the medium term, will be a lot more moderated in its growth.
On top of that you have the Basel III impact, so you get higher capital, tighter liquidity, and more conservative banking.
So I just think the industry over the next five years will grow at a more moderate pace than the last five years.
And so when you hear that Stanchart is talking about growing its Singapore revenues from US$1.7 billion (S$2.2 billion) to US$3 billion by 2014, how do you respond to that?
Frankly I wouldn't know how to do it. Ray Ferguson (Stanchart Singapore CEO) is probably a better banker than I am, because he can do that.
In my view, where the world and the global economy are going, and with the overall pace of growth in the region, I think to try and describe a high teens compound growth rate over the next four years is going to be extremely difficult for anybody.
You have dismissed the idea of three local banks becoming two banks. You don't see it as a possibility at all?
I won't say it is impossible. But first of all, think about how compelling is it? There is so much overlap between the three local banks... the only way you could make it work is to make it a cost play, which means taking out people. And in the environment we are in and the prospective environment over the next five years, you really won't think a strategy that revolves around getting rid of people and scaling down, and cutting jobs is a workable strategy. Given the issues in Singapore and where we are, it is not clear that that is what makes sense for the country.
The other issue is: Are Singapore banks suffering today because of a lack of scale? And again I don't think so. Once you have $25 billion to $30 billion in market cap, you've got balance sheets of $250 billion. All three of us are in the top 50 to 75 banks in the world. You are not a small, two-bit player. When you are bank number 60 or 70 in the world, you have scale. So, nothing is impossible, but is it compelling? The answer is probably no.
In a recent interview, two years and one month after he took over as chief executive of Singapore's largest bank, the straight-talking ex-Citibanker told The Straits Times about the rude surprise he got on his first day on the job.
He was aghast that a bank of the standing of DBS lacked the very basic and fundamental processes required of it.
'My concerns were around things like how independent DBS was from Singapore Inc, what would the culture of DBS be, and frankly all of those turned out to be better than I had anticipated them to be,' he recalled.
'But the thing that surprised me on the downside was the fact that a lot of processes and systems which you would expect a large, professional organisation like DBS to already have established and ingrained were not in place,' said Mr Gupta, 51, arms folded and eyes peering through a pair of oval-shaped, wire-framed spectacles.
'It was quite clear to me that the reason DBS had been through a series of unfortunate episodes over the last decade was it had never fundamentally put in place the framework processes you need to manage a large, multi-country commercial bank.'
In the area of management information systems (MIS), 'we were flying blind on a number of things', he said.
'We didn't know which customers were profitable and which were not. We didn't know which branch was profitable and which was not. We had different technology platforms in different countries. We just did things differently in every country and every office and so on.'
The bank's corporate treasury division, which manages the bank's cash flow, also left much to be desired.
'We didn't have a good balance sheet management and corporate treasury function, it was embedded in sales and trading.'
The challenge was daunting, but the self-described 'hardcore, commercial banker' showed that he is not afraid to roll up his sleeves and do the dirty work.
He formed commando-type teams, groups of 10 to 20 people sourced from around the bank, with some new hires thrown in, to sort everything out. They put in common standards and processes throughout the bank, rewrote policy manuals and rectified errors.
'Thinking about how to do it wasn't straightforward. And then obviously supporting the teams and working with them to actually go through the process of putting them into place is challenging,' he said.
And two years later, the bank is still only 'maybe 75 per cent' of the way there.
'We have some more way to go before we can really feel comfortable that we have the process architecture that any of the large global banks would typically be expected to have.'
Still, Mr Gupta looks back on his first two years on the job with relish.
'The last couple of years have been quite exhilarating and satisfying. We have really been able to move the bank quite substantively over the last couple of years... marching in a more disciplined way towards a new direction,' he said.
'From a strategy standpoint and from managing better, managing in a more disciplined way, managing more professionally, I just think we've come a long, long way.'
The bank's management now understands the credit risk and market risk better, he claimed, and it also has much more standardised processes across all its markets.
In the space of just 15 months, DBS rolled out a single technology platform in 12 locations in which the bank operates.
'We've gone back and reconciled our books. We found some errors that go back to 10 years. We cleaned up all of that.
'So we just have a lot more confidence in the stability of the overall banking operation at this stage.'
Myth-buster
THE forthright banker also wanted to dismiss any misconceptions about his two-year tenure, whether it is over his hiring of only Citibankers, or a supposed strained relationship with chairman Peter Seah.
'Out of the 135 senior vice-presidents and managing directors we've hired since I've come on board, I think eight or something are from Citi. As a percentage, it is inconsequential.'
Some of the ex-Citibankers are Ms Tan Su Shan and Mr Lim Say Boon, who are heading an aggressive expansion in private wealth management.
Mr Gupta is also adamant that he did not know most of the few senior Citibankers that DBS has hired.
'Most of them have actually been through a search process. So I'm just a little wary of the suggestion that I'm packing this place with Citi people.'
He also dismissed rumours that he does not get along well with Mr Seah, known to be a tough, details-oriented boss.
'Peter and I just have very similar instincts on banking. That is very helpful because I don't have to wind up in a situation where I am thinking very differently from him. I don't know if it is just because of personality or because we both learnt our banking at Citi,' he said of Mr Seah, who was with Citi from 1969 to 1977.
Mr Gupta added that the latter, whose name is synonymous with the now defunct Overseas Union Bank, has also left him to run the bank independently.
'He'll come for two to three hours, two to three times a week. I bounce a lot of things off him. He is very helpful, has a lot of experience around the region as well, not just Singapore, a sense of what will fly.'
He takes time too to give credit to the man who hired him - ex-DBS chairman Koh Boon Hwee - for doing a lot of the 'heavy lifting' before he came on board, by laying the groundwork for technology development, and also for putting in place the senior management team, which he said had not always been 'as unified and harmonious' as it is now.
While DBS has clocked up an impressive string of results, analysts have raised red flags over his aggressive expansion into China, which is at risk of a hard landing, and an asset bubble bust.
But Mr Gupta turns the question around.
'If you have got to be in the banking business, then where should a bank be exposed?
'We are convinced over the next 10 to 20 years, that we are better off allocating capital to Asia than to Europe and the US. And if you don't bet on China, India, Indonesia and a couple of other countries in Asean, what is left in Asia?'
And in any case, he added, the bank's absolute exposure to China is 'not material'.
'Our total China book, if you will, is 5 to 6 per cent of our total banking book. That's not over the top, that is not going to sink the ship.'
It is also diversified. Half is in trade financing, and another significant portion of the exposure is to property with very low loan-to-value ratios, he said.
'So if you were to think about China and exclude our strategic agenda, you just think about it: 6 per cent of DBS Bank, half in trade finance, the other half is highly secured. We have not gone in like cowboys and shot everybody.'
Looking back, Mr Gupta has also been struck by the 'unusual position' of DBS in Singapore with an incredibly high penetration rate of 4.3 million accounts from a population of five million people.
It means the bank has a social role to play and is held to a higher standard by the public, he has learnt.
That struck home most acutely during the large-scale IT failure in 2010, from which DBS incurred a charge of $230 million from the Monetary Authority of Singapore that was lifted late last year.
'Relative to any of the other banks in the world which all had a series of outages in the last two years, the kind of attention that you guys and the public gave us was just over the top,' he said.
But the incident motivated him to accelerate the scaling up of the bank's resiliency programmes from two years to one year.
And it is that position in Singapore that also makes DBS continue to operate two million accounts, mainly from POSB.
'That doesn't make us any money,' he said. 'We do it because of our social responsibility.'
Asia's leading bank
MR GUPTA has big ambitions for DBS.
For starters, he expects to be here for 10 years, longer than all of his last five predecessors combined - before offering the caveat 'unless they fire me'.
'When I joined, one of my conversations with the board was how long do you think you will do it for? And I said if I really want to do a meaningful job with a leading bank, then I need 10 years to do it... My thinking was you are talking in terms of a decade rather than two to three years.'
Those hoping for a big acquisition or a substantially different approach may be disappointed, but Mr Gupta is okay with that.
'We are pretty clear about what businesses we want to build. Banking is a long-term game, so we are not of the view of going in and out of businesses.'
That means the bank will continue to grow organically, building on its franchises in Greater China, South-east Asia and India.
The only thing that may change significantly is in India, if the bank were to be allowed to branch out there under regulation changes. DBS currently has a cap of 16 branches in India.
And he is determined to build DBS into the top Asian bank over the next decade.
'We are in the right place, right time, we have the right Asian geographic footprint to be Asia's leading bank in the next decade. I am actually very bullish about our possibilities of doing that as well. I am very upbeat after the progress we have made in the last two years and that gives me confidence that we know how to get it done.'
And if he does succeed in becoming the CEO of Asia's top bank, it will be yet another name he can add to his ever- growing list.
chanckr@sph.com.sg
RE: DBS CEO Interview - stephenkhoo - 01-14-2012 01:00 PM
oops.... guess what..... few days after this was published more than 2000 accounts were hacked! sadly..... is this a coincidence or is there a syndicate eying our big banks or is this a conspiracy theory of using this fraud to show its effectiveness and response? whatever the talk is people's trust has been eroded and the next question is, what next?
we have a spate of failures... flood, smrt breakdown, more delayed flights ( crowded airspace and taxi area ), banking fraud....
RE: DBS CEO Interview - stephenkhoo - 01-16-2012 11:39 PM
this reminds me of my ex GM of BNY his name is Jai Arya. I would say he is a pretty good boss for those who worked under him. He is from the same school as this guy and probably they know each other. One thing about Jai Arya is he is very sharp and is exact in his words, he does not come across as the type that is sociable or easy to click with but if you work under him you come to realise he is a nice guy after all. I write more about him next time when I recollect the events.
RE: DBS CEO Interview - stephenkhoo - 01-26-2012 12:13 PM
Striving in the uncertain digital future
Published on Jan 25, 2012
By Ho Ching
AS A small, open society in a highly interconnected world, Singapore will be buffeted by the deep global changes taking place around us.
On the demographic front, it took the world 120 years (1804-1924) to double from one billion to two billion people. But it took less than the last 15 years for it to increase by another billion, from six billion to seven billion.
It is a big and fast-growing world of people, all hungry for a better life for themselves and their children. This creates enormous pressure on resources, and thus the challenges of sustainability and global warming.
We are living much longer too. Up till the 1950s, people lived until their early 50s. Today, the 60s are the new 40s. We live longer, thanks to better education, better nutrition and better health care. Globally, among those over 60, the number of those who are 80 years old and older is growing the fastest - at the rate of 4 per cent a year. So we not only are living longer, we are having more and more old folks above 80 years old.
At the younger end, the fertility rate is plummeting globally. In Britain, it took 130 years to go from a fertility rate of five to a rate of two. But mothers in developing countries today can expect to have three children, when their mothers had six or more. Sometime between 2020 and 2050, the world's fertility rate as a whole will fall below the replacement rate of 2.1. So the issue of replacement fertility is not just a Singapore issue.
Singapore's fertility rate is 1.2 - even less than China's 1.6, with its one-child policy. Our birth rate is a far cry from in 1966, when the KK Women's and Children's Hospital delivered nearly 40,000 babies in one year, a world record, and continued to deliver the most number of babies at a single medical facility for a decade. With life expectancy at over 80 years old, and our low fertility rate, we are not only ageing rapidly, but our numbers will also shrink, with fewer and fewer young people to look after more and more older folks.
This means more resources to support the expanding base of the elderly, with the burden falling on a shrinking base of younger people. In the United States, the government spends 2.4 times more on elderly retirement benefits than it does on children, including their education.
The old Bismarckian approach of state-funded pensions will not be sustainable in a growing and greying world.
Social security systems like those in the US or Germany, which depend on the working population to contribute to a common pool to fund the retirees, just cannot carry on for long. They will have to go through difficult and painful reform, much like what Greece is going through today. Two-thirds of private sector pensions in the US have already shifted to defined contributions plans much like our Central Provident Fund system, where our retirement benefits depend on what we put into our individual retirement accounts.
But the most important trend is the dramatic digitalised world.
Human society has gone through three major shifts: from small nomadic families wandering vast prehistoric plains, to larger agricultural communities clustered around fertile land and water, to the large thriving cities of the past two centuries, amplified by the industrial revolution.
In 1800, just over 200 years ago, only 3 per cent of the world lived in urban cities and towns.
A century later, in 1900, 14 per cent of the world lived in cities. The great industrial revolution led to mass urbanisation, as well as the globalisation of manufacturing and commerce.
In a village where everyone knows everyone and almost everyone is related by birth or marriage, norms of behaviour are passed down through the generations, to respect your elders and value folk wisdom. The stories that grandpa told of the giant killer wave must be remembered.
Come the industrial revolution, and youngsters migrated to cities, where no one knows you. You are anonymous among tens of thousands of strangers from a polyglot of other cultures and beliefs. It is scary for some, but mostly a heady brew of freedom for others. There were no accepted rules of behaviour or engagement.
Take for instance, the case of milk - precious milk for children. Mothers bought milk marketed as wholesome and fed it to their babies, slowly poisoning and killing them. It took thousands of sick children and infant deaths before lawmakers intervened. This is not China in 2008. This is New York City in 1858.
How did this happen?
Fast-growing New York saw dairymen padding their milk supply with water and flour. Some even used swill milk from cows that were fed alcoholic mash from nearby whisky distilleries. Some cows were so diseased from their alcoholic diet that their teeth rotted, their tails fell off, and their udders were ulcerated. To remove and thicken the swill, dairymen would add plaster, starch, eggs and molasses. Up to 8,000 children died every year from swill milk, until a crusader and newspapers ran a campaign to close the distillery dairies. This was New York City in 1858.
Likewise, China faced a sudden surge of movement into cities as the country urbanised at a rate of 30 million people a year - that is more than one Taiwan a year. China essentially went through a modern industrial revolution within 30 years. And so, the New York experience was repeated, as the rural society adapted to become an industrial community.
In such a raw frontier environment, we can no longer rely on shame and families to police proper codes of conduct. As new examples of misbehaviour surface, societies evolved new systems and codified laws to police and manage the temptations of freedom. New rules of engagement had to be established among the new disparate and disconnected groups of community - standards for industrial- scale milk producers, protection for workers, and so on.
By 2050, two-thirds of the world will live in urban areas. These megacities are where people can go through life without much social interaction if they so wish. People are connected, and yet may be totally disconnected. Schools, families, jobs are where people connect, yet people can remain anonymous and disconnected.
This change will be more dramatic in the large emerging or growing economies like China, India and Brazil, because of their much-faster pace of urbanisation. As rural populations migrate into urban settings, new codes of conduct will have to evolve, as values and social norms are enforced on the margins by codified laws.
Last year, the number of active Facebook users crossed the 800 million mark, making it the third-largest 'nation' in the world. One in nine people in the world has a Facebook account. Niche marketing can target the world, unhindered by traditional national boundaries.
World of Warcraft garnered 11 million gamers in 2008, who logged on regularly to a virtual world to fight each other and kill monsters. It is the size of a megacity, of players gathered from across the world.
This mega Facebook nation or mega World of Warcraft city is connected in ways that were unimaginable a generation ago. Yet there is a paradox as well.
People know like-minded people halfway around the world, yet remain disconnected from their immediate neighbours, not even knowing their names, and perhaps feeling disconnected from their own families.
Teachers of today have to teach our kids to protect themselves from the dark side of the Internet, learning how to deal with cyberbullies - not just physical bullies. The cloak of anonymity on the Internet is heady freedom. It can create unimaginable havoc.
Take the case of Korean hip-hop megastar Daniel Lee - stage name Tablo, with the group Epik High. Daniel spent more than six months in 2010 defending himself against false allegations about his academic credentials from Stanford University spread by an anonymous group. The scandal affected not just the artist and his band, but his friends, family and officials at his alma mater. Lee became so distraught that he did not trust the medical staff at a hospital when his first child was born. Lee has since filed charges against 20 of his attackers, but could not move against the leading agitator, a 57-year-old Korean-American living in the US, a complete stranger just out to make mischief.
This anonymity can encourage bad behaviour; over time, we must evolve new rules of engagement and behaviour in our cybercommunity.
But until then, who will be the accepted guardian of public good in this borderless Internet world? How will we stop extreme harassment, which in some cases leads to suicide?
Disconnected individuals can self-radicalise. Extreme views develop, fanned by like-minded malcontents. Generation C, or the connected generation, can be deeply disconnected.
How do we connect as a people, a community or a country? How do we evolve shared values? Can the Internet disenfranchise a big segment of our population? How do we police and punish cross-border crimes of identity theft, harassment or espionage?
Our young today will shape those values, norms and laws of tomorrow's connected and disconnected world.
Humankind has not fully adapted to the great urban transition. Yet we are already in the throes of a digital age of global connectedness and disconnectedness.
It took many generations to have recognised codes of behaviour in order to protect the village green, and not have everyone rush their sheep over to graze the green bare.
Will our next generation get onto an unsustainable path or will they know how to break out, just as late Chinese leader Deng Xiaoping made the courageous decision to break out from an unsustainable system?
There are no easy answers.
We can only continue equipping our next generation with the best gift we can give them: education and thinking.
Education in values and character, education in knowledge and critical thinking. Wisdom they will have to acquire to know when they have to make calculations for the larger good and for the longer term, instead of just optimising themselves as individuals at the expense of society as a whole.
With the Internet, knowledge takes on a different dimension. We need to transform knowledge into wisdom. We can be clever without being wise. Can we be wise enough to know how to separate the fluff from the substance, to discern the difference between the trifling and the fundamental essentials, and to have the courage to make the hard choices?
There are no models for the world to follow. We, teachers and parents, as well as our students and next generations, will have to cross the river by feeling for the stones.
Modern Singapore will be 50 years old in another three years. We will have to wait for another 50 years before we know if we have educated or nurtured a people through more than three generations.
The writer is executive director and chief executive of Temasek Holdings. This is an edited excerpt of a speech earlier this month at the Academy of Principals' Start of School Year Tea.