Singtel shares have climbed 17% this year but its balance sheet could limit its growth ambitions © Bloomberg

Grab hopes it has found a new way of catching a lift. For its profits, that is. One of south-east Asia’s largest ride-hailing start-ups has partnered with the region’s biggest telecoms company in Singapore’s digital banking market. Grab Holdings, in a consortium with Singapore Telecommunications (Singtel), will apply for one of Singapore’s two full digital banking licences. Yet finding a new earnings stream via e-banking is no easy ride.

Both companies face tough times. Growth in Singtel’s core telecoms business has stalled. It posted a net loss of $495m in the third quarter, partly from exceptional costs related to its stake in India’s Bharti Airtel. Grab’s total losses had hit $170m at its Singapore unit, GrabTaxi, by last year.

The partnership does make sense. Singtel and Grab already offer some financial services. The latter expanded into digital payments and loans last year. In south-east Asia more than half the population lack full access to banking services, say Bain. Without Singtel, lossmaking Grab would not qualify for a licence. Singapore’s central bank requires interested companies to have a profitable core business.

Yet even if a licence is granted, traditional banks like UOB and DBS already have a stronghold on most banking clients in fiercely competitive Singapore. And these two are not standing idly by. UOB has had a separate local tie-up with Grab since late 2018, while DBS is working with Grab’s Indonesian rival Gojek on its own digital payment ventures.

Singtel shares have climbed 17 per cent this year but its balance sheet could limit its growth ambitions. Its net debt to ebitda ratio has nearly doubled to three times since 2015, according to S&P.

The city-state’s new digital banks will have to prove a clear path to profitability, and fast, under Singapore’s strict regulators. Pressure to perform could mean risking a repeat of a problem ride-hailing companies face globally — chasing new customers and growth at the expense of profits — in yet another industry.

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