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

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.

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.

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.

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

OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2019-11-11

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