DBS GROUP HOLDINGS LTD - Phillip Securities 2018-02-12: Stellar Performance Across All Key Parameters

DBS GROUP HOLDINGS LTD - Phillip Securities 2018-02-12: Stellar Performance Across All Key Parameters DBS GROUP HOLDINGS LTD D05.SI

DBS GROUP HOLDINGS LTD - Stellar Performance Across All Key Parameters

  • 4Q17 PATMI of S$1.2bn was in line with our estimates.
  • Loan volume, NIMs, loans quality and Non-II results were stellar.
  • Strong momentum in Consumer and SME banking segment in Hong Kong and Singapore.
  • Strong momentum in Wealth Management and Investment Banking fee income.
  • Maintain BUY rating with unchanged target price of S$29.30.

The Positives

➕ Stronger NII is driven by strong broad-based loans growth and higher yields. 

  • Loans growth was c.7% higher y-o-y as housing loans continued the strong q-o-q growth momentum. DBS share of Singapore mortgage loans edged higher to 30.8% from 28.7% in June 2017. 
  • Rates and volume growth for trade assets was robust helped by the strengthening of RMB.

➕ Consumer and SME banking in Singapore and Hong Kong gained momentum. 

  • 4Q17 Wealth Management income was S$534mn (+26.5% y-o-y) but was 2.2% lower q-o-q due to a seasonally weak 4Q.
  • 4Q17 Retail income growth was flat y-o-y but grew 5.7% q-o-q following a generally weak performance from 1Q17 through to 3Q17. SME banking was a bright spot, growing 16.2% YoY and 2.8% q-o-q on the strong business expectations and PMI reading in Singapore and continued strength in Chinese consumer sentiment.

➕ Provision expense has normalised after the major clean-up in 3Q17. 

  • The normalisation of the provision expense in 4Q17 was a pleasant surprise as we had expected a carryover of higher provision expense from the 3Q17 clean-up. 
  • We believe the normalisation is an indication that the clean-up in 3Q17 was sufficient to clear the path a stronger asset quality performance in 2018.

➕ Annual dividend per share will double in 2018 from the pay-out in 2016! 

  • The final one-tier tax exempt dividend was increased to S$0.60 per share from S$0.30 per share in 2016. In addition, a special dividend of S$0.50 per share was also announced. 
  • Barring any unforeseen circumstances, the proposed annual dividend moving ahead will be raised to S$1.20 per share, double the annual rate of S$0.60 per share in 2016. 
  • The S$1.20 per share dividend represents a c.50% dividend pay-out ratio based on FY18e earnings and a dividend yield of c.4.5% at current DBS share price

The Negatives

 ➖ Cost-to-Income Ratio expected to be stable at 43%. 

  • We had expected Cost-to-Income ratio to improve slightly in FY18. However management has guided it to be stable at 43% in FY18. This is due to the integration of Indonesia and Taiwan markets from the ANZ acquisition.
  • Indonesia and Taiwan businesses’ Cost-to-Income ratio is between 60% and 80%. Excluding these 2 businesses, Cost-to-Income ratio would have been 42.5%.


  • In FY18, we expect NIM to be c.1.87% and loans growth to be between 7% and 8%. Given those assumptions, we can expect total income to grow 10%. 
  • We expect full year total credit cost to be 26bps and Cost-to-Income ratio to be 43%.

Investment Actions 

  • Maintain BUY rating with unchanged target price of S$29.30.

Jeremy Teong Phillip Securities | https://www.stocksbnb.com/ 2018-02-12
Phillip Securities SGX Stock Analyst Report BUY Maintain BUY 29.300 Same 29.300