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DBS Group - OCBC Investment 2016-08-08: Allowances more than doubled

DBS Group - OCBC Investment 2016-08-08: Allowances more than doubled DBS GROUP HOLDINGS LTD D05.SI 

DBS: Allowances more than doubled

  • DBS Group Holdings posted a 6% YoY or 13% QOQ drop in 2Q16 net profit to S$1.05 billion versus consensus estimate of S$1.07b based on a Bloomberg survey. 
  • Net Interest Income came in at S$1.83b, +5% YoY but flat QoQ. 
  • Non- interest Income grew 13% YoY and 5% QoQ. 
  • Net Interest Margin (NIM) improved from 1.75% in 2Q15 and 1.85% in 1Q16 to 1.87% in 2Q16. 
  • Following the disclosure of its exposure to Swiber, its allowances spiked up from S$137m in 2Q15 and S$170m in 1Q16 to S$366m this quarter. Its total oil and gas exposure was S$23b, of which loans amounted to S$19b. Of the total exposure, the services industry accounted for S$7b. 
  • Drilling further down, about S$2.3b was to five companies and one company has weakness. Another S$2.7b was to 90 names and 1/3 of portfolio has weakness. A guess estimate based on these numbers would mean about S$1.4b could be under weakness. 
  • Its commodities portfolio grew S$3b from Dec 2015 to S$15b currently. 
  • Dividend payout is the same at 30 cents for 1H16. 
  • We will provide more information after the analyst briefing. 
  • Meantime, the stock has already fallen sharply since last week following the announcement of its exposure to Swiber, erasing > S$3b from its market capitalisation. 
  • We will be reviewing our earnings and fair value estimates, but at current share price of S$14.83, we are likely to maintain our BUY rating. 
  • Based on current share price and assuming same annual dividend payout of 60 cents, the dividend yield is 4.0%.




Carey Wong OCBC Securities | http://www.ocbcresearch.com/ 2016-08-08
OCBC Securities Analyst Report BUY Maintain BUY 17.50 REVIEW 17.50


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