Safe-haven inflows lift deposits amid Middle East conflict, but risks remain: DBS

[SINGAPORE] The ongoing conflict in the Middle East has supported deposit growth through safe-haven inflows, while market volatility from the war could also lift trading income, DBS said in a bourse filing on Thursday (Mar 26).

However, the lender flagged risks to its business, including liquidity from inflows exerting downward pressure on interest rates in Singapore, as well as market volatility potentially dampening investor sentiment and reducing wealth management activity.

South-east Asia’s largest lender was responding to one of 12 queries raised by shareholders ahead of its annual general meeting (AGM) on Mar 31.

On managing risks from the Middle East conflict, DBS said it has a “robust set” of frameworks and processes in place, including “rigorous” customer selection, risk scenario planning supported by early warning indicators, watch-listing and regular stress testing.

It added: “While the eventual outcome of recent events remains uncertain, our strong general allowance buffers, solid capital position and robust liquidity, together with our proven agility, position us well to navigate the risks and capture opportunities.”

Private credit risks

Another query centred on how DBS intends to approach credit, conduct and reputational risks in the private credit market.

This follows a wave of redemption requests at major US managers that triggered “gating” mechanisms in recent months, limiting withdrawals, amid concerns over private credit managers’ exposure to software companies facing disruption from artificial intelligence.

“While the West has seen rapid expansion in private credit, Asia, where our core markets are, has experienced more muted growth,” said DBS in response. “Hence, our credit exposure to private credit funds is not significant.”

As a distributor of private credit funds, DBS also has “rigorous” onboarding and selection guardrails, and maintains “stringent” sales processes.

These include internal procedures such as operational due diligence conducted by an independent external party, along with internal reviews and ratings based on multiple considerations, before onboarding fund managers or selecting funds for distribution.

“We maintain a robust sales and distribution process for suitable clients,” added DBS. “We have been giving timely updates to investors about their private credit funds, and continue to facilitate redemption requests.”

At its AGM on Mar 31, to be held at the Roselle and Simpor ballrooms at Marina Bay Sands Expo and Convention Centre from 2 pm, DBS will put up four directors – including board chairman Peter Seah – for re-election, among other resolutions.

The nominating committee and board have indicated a preference for Seah to continue as chairman to ensure stability during the leadership transition of chief executive officer Tan Su Shan, who took over from former CEO Piyush Gupta on Mar 28, 2025, said DBS.

“Mr Seah’s deep knowledge of DBS’ strategic priorities, operational and institutional culture will provide invaluable support to Ms Tan in her initial stage of tenure as CEO,” it added, in a separate response to queries from the Securities Investors Association (Singapore).

Shares of DBS were trading 0.2 per cent or S$0.12 higher at S$57.31 as at 2.30 pm on Thursday. Year to date, the lender’s shares are up 1.6 per cent.