DBS Group Holdings - OCBC Investment 2019-11-11: Decent 3Q, But Softer NIMs Outlook

DBS GROUP HOLDINGS LTD (SGX:D05) | SGinvestors.io DBS GROUP HOLDINGS LTD (SGX:D05)

DBS Group Holdings - Decent 3Q, But Softer NIMs Outlook

  • DBS' 3Q earnings grew 15% from a year ago, driven by solid non interest income growth while net interest margins contracted 1bps q-o-q to 1.9%.
  • Interim dividend of 30 cents was declared, meeting expectations.
  • Muted 2020 management guidance for ~7bps NIM compression, loans growth and credit costs to be similar to 2019.
  • Neutral stance maintained in view of continued pressure on margins and modest growth prospects into 2020.



Solid 3Q

  • DBS GROUP (SGX:D05)'s 3Q earnings +15% y-o-y (+2% q-o-q) to SGD1.63bn. See DBS Announcements.
  • Non interest income was strong, growing +24% y-o-y/+6% q-o-q driven by improved trading and investment securities gains. Fee income growth of 17% y-o-y/+6% q-o-q was also robust, reaching a new high of $814mn.
  • Profit before allowances grew 17% to $2.21bn, also reaching a new high. 3Q net profit excluding one-off charge for revaluation of India deferred tax assets gained 18%.
  • 3Q profit from Hong Kong of SGD334mn fell -15% q-o-q (with -5% q-o-q in pre provision operating profits and higher provisions).
  • Overall group non-performing loan ratio was steady at 1.5% (no change since 4Q18). Costs +9% y-o-y due to staff and technology related costs.
  • For 9M19, net profit increased +13% y-o-y to $4.88bn. Cost income ratio improved one percentage point to 42%, while ROE grew to 13.6% (from 12.4% a year ago).
  • Net interest margin (NIM) contracted -1bp q-o-q to 1.9%, while loans growth was stable at +0.8% q-o-q last quarter.
  • Guidance for 2019E NIM to come below mid-single digit bps increase.
  • Interim dividend of 30cents/share was declared (as expected). CET1 ratio was 13.8%. See DBS Dividend History.


Muted 2020 guidance

  • Management expects NIMs compression of ~7bps, credit costs (9M19 ~29bps) and loans growth to be similar to 2019 (9M19 loan growth ~+2%), and will continue to manage costs prudently.


HOLD maintained.

  • We will be meeting management for post-results discussion and will update further if there are meaningful takeaways. See DBS Share PriceDBS Target Price.





OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2019-11-11
SGX Stock Analyst Report HOLD MAINTAIN HOLD 27.500 SAME 27.500



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