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
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http://www.ocbcresearch.com/
2016-08-08
OCBC Securities
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