Digital banks kick off new revenue stream
? Two DWBs launched in Singapore – kicking off one of CBA’s new
prospective revenue streams. CBS’s member bureaus will rise from 31 to 36.
? We think that DFBs could add at least c.3-6% in incremental revenue by endFY26F depending on the banks’ ramp-up. DWBs will augment this further.
? Reiterate Add. Growth prospects abound, though earnings accretion may
take time. Meanwhile, ASEAN border reopenings will support growth.
GLDB and ANEXT – 2 new DWBs launched in Singapore
Tw o of the four digital banking licence aw ardees in Singapore (Green Link Digital Bank
[GLDB] by Greenland Financial’s consortium and ANEXT Bank by Ant Group) launched
their digital w holesale banking (DWB) businesses in the past w eek. GLDB w ill focus on
integrating technological solutions to supply chain financing for SMEs, w hile ANEXT aims
to serve local and regional micro and SMEs engaging in cross-border operations for global
expansion. Including the tw o digital full banks (DFBs, Grab and Singtel’s GXS Bank and
Sea Limited’s digital bank) and Trust Bank (rebranded from SC Digital Bank), Credit
Bureau Singapore’s (CBS) count of bureau members w ill rise to 36 once these banks are
approved to commence operations by the Monetary Authority of Singapore.
Earnings upside will depend on products and value proposition
As Credit Bureau Singapore drives the lion’s share of CBA’s revenues (c.44% of FY21
revenue), additional bureau members offer scope for incremental revenue contribution
based on the volume of credit enquiries from these banks and portfolio risk review s the
banks undertake. That said, w e highlight that most of the incremental income w ill stem
from DFBs given their focus on retail banking (potential transaction volumes in the millions)
vs. DWBs (volumes in hundred-thousands). Further, the ramp-up of operations w ill depend
on the types of products offered (e.g. credit cards garner larger volumes compared to
unsecured retail loans or mortgages) and value proposition (e.g. rates, user experience).
Credit cards from DFBs could add c.3-6% revenue upside in FY26F
Our scenario analysis for incremental revenue to CBA from DFBs for new credit enquiries
assumes that the DFBs augment the number of credit and charge card holders in the
industry by c.2-10% by lending to the unbanked and underserved segments. This could
raise CBA’s revenue by c.3-6% by end-FY26F (Figure 1). Credit enquiries for other retail
products and data packets to DWBs (priced at higher rates) could lead to further revenue
streams for CBA. We expect earnings visibility for CBA to emerge only in the medium term
once the banks firm up their grow th strategies.
Reiterate Add with DCF-based TP of S$1.20
Grow th prospects abound for CBA (licencing process to collect and use commercial credit
information from FIs, regulation of buy-now -pay-later providers by MAS), but these
initiatives w ill likely take time to materialise. CBA remains on the lookout for synergistic
M&A. Downside risks: rising inflation, suppressing credit demand (and therefore enquiries)