DBS Group - OCBC Investment 2020-02-13: Record Profits, Dividends Lifted

DBS GROUP HOLDINGS LTD (SGX:D05)

DBS Group - Record Profits, Dividends Lifted

DBS Group's FY19 full year earnings grew +14%, reaching a record SGD6.39bn.
4Q19 earnings gained 14% to SGD1.51bn, driven by fee income and loan growth.
Quarterly dividend per share lifted from 30 cents to 33 cents. Annualised payout raised to $1.32/share.
Single digit revenue impact likely from the Covid-19 for early 2020, assuming outbreak is controlled by summer.

DBS Group (SGX:D05) released a solid set of FY19 results, with full year earnings gaining +14% from a year ago, reaching a record SGD6.39bn. Total income gained 10% to $14.5bn, supported by broad based business momentum, while cost income ratio was improved by 1ppt to 43%. ROE ratio rose to 13.2% (from 12.1% a year ago and 3Q’s 13.8%). CET1 ratio was strong at 14.1%.
4Q earnings was driven by lower provisions and fee income growth, although fee income growth momentum slowed q-o-q while remaining positive y-o-y - 4Q19 earnings gained 14% y-o-y/-7% q-o-q to SGD1.51bn, while total income grew 7% y-o-y to SGD3.46bn, driven by +17%yoy/-9% q-o-q fee income (wealth management and loan related fees fell -20% and -28% q-o-q respectively) and loan growth. Loan growth of +3.6% y-o-y /1% q-o-q was modest, while net interest margins (NIMs) slipped 4bps q-o-q to 1.86%.
Non interest income of SGD1.04bn grew 13%/-24% q-o-q. Opex was inline, with CIR of 43%. Asset quality remained benign as guided by management, with total credit costs of 14bps and NPLs declining 3% q-o-q. NPL ratio stable at 1.49%, 84% coverage. 4Q ROE felt o 12.1%, vs 3Q’s 13.4%.

Dividends were lifted, affirming our recent Singapore Banks sector update where we highlighted a supportive dividend outlook -see report: Singapore Banks - Guidance Looks On Track. Quarterly dividend per share has been lifted from 30 cents to 33 cents, bringing annualised payout to $1.32/share (vs FY19 full year payout of $1.23/share).
See DBS Dividend History.

Management expects loan growth and credit costs to be similar to 2019, net interest margins to continue softening ~7bps and is committed to continue managing costs.
Assuming the Covid-19 viral outbreak is managed by summer, revenue impact is estimated broadly at 1- 2% and SPs may be raised a few bps.

HOLD rating maintained on a modest growth outlook, although dividends should remain a steady support given its solid balance sheet. We expect share price performance ahead to be influenced by the HK/China outlook (given its relatively higher exposure to the region vs sector average), asset quality trends, NIMs, and dividend policy.
See DBS Share Price; DBS Target Price; DBS Analyst Reports; DBS Dividend History; DBS Announcements; DBS Latest News.

OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2020-02-13

SGX Stock Analyst Report HOLD MAINTAIN HOLD 27.500 SAME 27.500