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Goh Eng Yeow
Markets Correspondent
When silence is golden
November 26, 2008 Wednesday, 04:10 PM
Goh Eng Yeow examines the fallout from DBS’ recent cost-cutting measures.
MUCH has been written about the job cuts at DBS Group Holdings and the ensuing public debate over the wisdom of such a move. While I don’t intend to add to the debate, I must say that even I'm taken aback by the bank’s latest move – a frank admission to Reuters yesterday that “all DBS employees and especially the senior managers will experience pay cuts in the form of significantly reduced bonuses”. It is probably management’s way of saying that they will feel the pain along the rest of their staff - especially for those that have been axed. But traders sure didn’t read it that way when they reacted to the Reuters story when it came out around mid-day yesterday. Some of them complained that it smacked of a profit warning since the other two banks have kept mum about their staff bonuses. They blamed the Reuters story for the slump in DBS' share price - as it swung from a gain of 39 cents in the morning to a loss of 39 cents in the afternoon - despite a regionwide rally in banking stocks following Citigroup's bailout by the US government. It also makes me wonder if this is the cause for the weakness in DBS shares today. As I write (3.50 pm), DBS is down 10 cents at $9.10. In contrast, United Overseas Bank has risen 54 cents to $12.44 and OCBC is flat at $4.78. Of course, it is good corporate governance to be as transparent as possible to the investing public. But as I noted in the “Bulls and Bears” report published on Monday, while it may be necessary to trim unnecessary costs during a business downturn, it would be wise to execute them quietly and without fanfare, given the crisis of confidence that now abounds in our financial markets. Take job cuts for example. While management regards them as a prudent cost-cutting measure to strengthen the balance sheet, investors may view them as a sign of panic – that matters are taking a turn for the worse. Given the contradictions of views, the less said and written about the issue, the better. It is that time of the business cycle when silence is golden. Tags: business, singapore, stocks 
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I AM SURE DBS had to announce the job cuts. It is a significant event and must be disclosed to shareholders.
In other pre-recession or recession times, banks that retrenched would see their share price go up. This was sign that the company was taking steps to make it profitable.
In our present climate, it shows that the bank is indeed in trouble.
It is very difficult to believe that none of our local banks remain unscathed. SME businesses are having difficulty getting credit in our own local version of a credit squeeze.
I believe many construction firms will go belly up and with it the multitude of subcontractors filling for bankruptcies.
I hope our government will pre-empt any fall out from the credit crisis.
It is a major part of the profitability equation.
In fact, whether to shut down or not is determined by one's variable cost.
In any company, cutting costs (correctly) is like breathing.
If my son tells me that breathing is his major accomplishment of the day, and went on bragging, either it is sunday, or he didn't went to school.
pls dont thk that a simple retrenchment exercise, which from an ROE perspective is a GOOD THING considering falling topline, would cause share correction.
In fact, shareholders should be happy that expenses are being cut as profit margins are getting smaller by the day.
The major correction for DBS would be a combination of questionable NPLs going forward, a balance sheet with off balance sheet derivatives linkages that scare investors, as well as the fact DBS may not be well-managed as a local bank.
In my company, we increase the bonus when profit is good. We decrease or remove bonus when profit is not good.
But you mean in DBS, decreasing bonuses is their way of saying that they feel tha pain of rethrenched staff?
'Cutting bonuses' is just saving face, is a drop in the bucket, and is never a real step in dealing with a financial crisis.
If their only reaction is to cut bonuses just like an ordinary company does, no one will take them seriously.
So that's why their stock price went down.
I'm sure the bosses will say that they are affected too, and reduced bonuses hurts a lot.
But c'mon, who is not hurt?