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DBS Group 4Q21 - UOB Kay Hian 2022-02-15: Asset Quality & Dividend Surprise Are Upsides

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

DBS Group 4Q21 - Asset Quality & Dividend Surprise Are Upsides

  • DBS’s 4Q21 results were in line with our expectations. Loan growth at 9.9% was the highest in seven years. NPL ratio receded from 1.5% to 1.3% due to full repayment of two significant NPLs.
  • DBS's quarterly dividend increased 9% q-o-q to S$0.36.
  • We expect four rate hikes each in 2022 and 2023. We expect NIM to expand 15bp and 13bp respectively to 1.61% in 2023 and 1.74% in 2024. We expect dividend yield to improve from 3.9% in 2022 to 4.2% in 2023.



DBS's 4Q21 earnings

  • DBS Group (SGX:D05) reported net profit of S$1,393m for 4Q21, up 37% y-o-y but down 18% q-o-q. The results were in line with our net profit forecast of S$1,490m.
  • Fastest loan growth in seven years. Loan growth was 9.9% y-o-y and 0.9% q-o-q in 4Q21. On a constant-currency basis, non-trade corporate loans expanded S$5b q-o-q, driven by Singapore and Hong Kong. Consumer loans grew S$2b q-o-q with expansion from housing loans and wealth management loans. NIM was stable at 1.43%.
  • Non-interest income seasonally softer. Non-interest income dropped 21% q-o-q in 4Q21 due to seasonally lower net trading income and less gains from investment securities. Fees grew 9.1% y-o-y but eased 8.9% q-o-q. Contributions from loans-related fees and wealth management dropped sequentially by 27% and 18% q-o-q.
  • Cost/income ratio seasonally higher at 50.7%. Operating expenses increased 5.8% y-o-y due to government grant available in the previous year. Underlying operating expenses were stable despite base salary increments carried out mid-year.


Asset quality improved.

  • NPL balance contracted 11.7% q-o-q due to full repayment of two significant NPLs in the transportation, storage & communications sector in Singapore in 4Q21. NPL ratio declined from 1.5% to 1.3%. Specific provision was a paltry S$67m (4Q20: S$363m) and DBS wrote-back general provisions of S$34m (3Q21: S$138m).
  • DBS is rewarding shareholders with more dividends. DBS's board has proposed dividend of S$0.36 for 4Q21, representing an increase of 9% q-o-q.


DBS's guidance for 2022.

  • Management maintained guidance of mid-to-high single in Shenzhen Rural Commercial Bank (SZRCB) and Citi Consumer Taiwan (completion in mid-2023). SZRCB contributed associate income of S$26m in 2H21. Management expects these new businesses to add S$1.2-1.3b to total income and S$0.5b to net profit per year.


DBS - Earnings forecast and recommendation






Jonathan KOH CFA UOB Kay Hian Research | https://research.uobkayhian.com/ 2022-02-15
SGX Stock Analyst Report BUY MAINTAIN BUY 40.00 DOWN 40.280



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