DBS GROUP HOLDINGS LTD (SGX:D05)
DBS Group - Confidence In Sustaining ROE
- DBS's 2Q earnings recovery still expected.
- Limited impact expected from new digital banking licenses.
- Buy rating maintained.
Key takeaways from our recent meeting with management
- DBS GROUP HOLDINGS LTD (SGX:D05)'s 2Q19 earnings recovery is still expected (next results release expected on 29th July), supported by net interest margins expansion on the back of mortgage repricing and benign asset quality trends.
- The bank believes it is well positioned with its strengthened digital platform which it will continue to improve, and expects limited near term impact from the new digital bank licenses MAS will be issuing.
Management remains confident in sustaining ROE
- Management remains confident in sustaining returns on equity ratio (ROE) this year at 12.5%, although the outlook into next year however is less certain, depending on interest rates (Singapore short end rates still holding up so far) and US-China trade negotiations.
- Management also noted the pick up in mortgage competition in Singapore (DBS has lowered its new mortgage pricing by about 10 to 15 basis points), but expects minimal near-term impact on the overall loan book. Loan provisions made last year in the wake of China-US trade tensions is viewed as sufficient at this point and the hence the credit cost guidance of 20bps is unchanged.
- Overall earnings trajectory remains supportive with 50% dividend payout maintained. See DBS's dividend history.
Next quarterly results expected 29 July
- Valuations remain reasonable following the correction in the broad equity market in May.
- Fair value of SGD29.20 implies 1.47x p/b and 11.6x forward PER. ADD on dips.
OCBC Research Team
OCBC Investment Research
|
https://www.iocbc.com/
2019-07-01
SGX Stock
Analyst Report
29.20
UP
29.180
