DBS GROUP HOLDINGS LTD
D05.SI
DBS Group - Currency Impact
- 3Q15 net profit beat on strong USD & HKD. Constantcurrency loans were down 1%; deposits up 1% QoQ. Reported total income up 0.8% QoQ, net profit down 4.6% QoQ.
- Regional consumer sentiment & business prospects remain downcast. USD/HKD strength lifted earnings this quarter but were mostly translational. Until economic indicators improve, we think it is too early to jump back into banks.
- With the best of the cycle over, maintain SELL at SGD16.05 TP (1.0x FY15 P/BV). Prefer UOB for sector exposure.
What drove 3Q15?
- Headline 3Q15 results were robust, especially against 3Q14.
- NIMs expanded 3bps QoQ/10bps YoY to 1.78%, aided by repricing and a large pool of SGD CASA.
- Loans climbed 2% QoQ but were down 1% in constant currency.
- By business lines, pretax profit was down 18% QoQ for consumer and wealth management, 5% QoQ for institutional banking and 44% for treasury.
- “Others”, which includes corporate, capital and asset management, rose 143%, mitigating the above.
- Reported 3Q net profit of SGD1,066m (-5% QoQ) beat expectations on better-than-expected non-interest income, lower provisions and MI.
Management positive, but too early to jump in
- We raise EPS by 2-8% for FY15-17 after adjusting for SGD weakness, higher total income and lower overheads.
- While Fed-rate hikes should augur well for DBS (refer to our 14 Oct report, The NIM Enigma) as DBS is sensitive to the repricing interval and management is expecting 5%/7-8% loan/topline growth and stable NIMs.
- We think NIM may be slightly dented by pressure from China and trade loans.
- We are also cautious as restructured NPAs went up 12% QoQ/9% YoY, with increases in the substandard category.
- Maintain SELL at SGD16.05 TP or 1.0x FY15 P/BV, close to 1SD below its mean since 2005.
Ng Li Hiang
Maybank Kim Eng
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http://www.maybank-ke.com.sg/
2015-11-03
Maybank Kim Eng
SGX Stock
Analyst Report
16.05
Up
15.90
