DBS GROUP HOLDINGS LTD (SGX:D05)
DBS 3Q21 - Running Like A Finely-Tuned Engine
- DBS’ 3Q21 results were above expectations. It registered broad-based growth in loans and fee income. Asset quality remained stable and DBS was able to write-back general provisions of S$138m.
- Management continues to grow new platforms LVB, SZRCB and China securities JV. It has also established DBS Finnovation to potentially unlock the value of its digital initiatives.
- We expect DBS's dividend yield to improve from 3.6% in 2021 to 4.3% in 2022. Maintain BUY.
DBS' 3Q21 RESULTS
- DBS (SGX:D05) reported net profit of S$1,700m for 3Q21 (+31% y-o-y), which is above our forecast of S$1,622m.
- Broad-based loan growth. Loans expanded 9% y-o-y and 2% q-o-q, driven by drawdowns for non-trade corporate loans in Singapore and Greater China, continued strong bookings for residential mortgages and wealth management loans. NIM compressed 10bp y-o-y and 2bp q-o-q to 1.43% due to lower interest rates.
- Broad-based growth in fee income. Fees and commissions grew 11% y-o-y. Wealth management fees increased 16% y-o-y due to higher customer activities across a range of investment products. Transaction services increased 18% y-o-y due to cash management and trade finance. Cards grew 13% y-o-y due to recovery in consumer spending. Higher trading gains were offset by lower investment gains.
- Investing to secure and protect future growth. Operating expenses increased 8% y-o-y due to increases in base salaries carried out mid-year and investments for future growth. Excluding Lakshmi Vilas Bank (LVB) and the Job Support Scheme, underlying operating expenses grew 2% y-o-y.
- Third consecutive quarter of write-back. NPL ratio was unchanged at 1.5%. Specific provisions dropped 59% q-o-q to S$68m due to repayment for NPL in the oil & gas sector. General provisions of S$138m were written back as portfolio quality improves. DBS’s reserve for general provisions of S$3.9b is S$0.6b above MAS’ minimum requirement.
- DBS declared a dividend of S$0.33 for 3Q21. Scrip dividend scheme is not applicable to the interim dividend.
DBS' Guidance For 2022.
- Management guided mid-to-high single Finnovation could be held directly under DBS Group Holdings. DBS could bring in strategic investors for these new digital businesses, which would help them IPOs.
DBS - Valuation & Recommendation
- We raise our 2022 net Gordon Growth Model (ROE: 11.7%, COE: 7.75%, Growth: 1.5%).
- See
Jonathan KOH
UOB Kay Hian Research
|
https://research.uobkayhian.com/
2021-11-08
SGX Stock
Analyst Report
37.00
UP
35.800
