DBS - OCBC Investment 2022-04-29: 1Q22 Results In Line


DBS - 1Q22 Results In Line

  • DBS's 1Q22 net profit of S$1.8b declined 10% y-o-y, but gained 29% q-o-q driven by higher net interest margin (NIM) and loan growth.
  • Business momentum remained healthy, although fee income declined due to weaker wealth management and investment banking.
  • Management remains comfortable with its portfolio, which looks resilient in recent stress tests.
  • Rising rates ahead should benefit net interest income in coming quarters, although higher macro risks and market volatility may continue to weigh on fee income.

DBS's 1Q22 Result Highlights

  • DBS (SGX:D05)'s 1Q22 net profit was the second highest on record, coming in at S$1.8b, which declined 10% y-o-y but gained 29% q-o-q driven by higher NIM (+3 basis points (bps) q-o-q, first increase in three years) and loan growth (+2% q-o-q/+8% y-o-y). Profit before allowances grew 30% q-o-q. Return on equity was 13.1%.
  • Total income of S$3.8b fell 3% y-o-y but gained 14% q-o-q from broad based growth. Performance was affected by higher base effects for wealth management and treasury markets. Overall business momentum remained healthy, with higher loan growth although wealth management and investment banking income declined from a year ago, following higher market volatilites.
  • DBS's net interest income grew 4% y-o-y, as loans grew 8% y-o-y which helped to offset 3bps NIM decline y-o-y. On a quarterly basis, 1Q22 NIM increased 3bps to 1.46%. Non trade corporate loans grew 2% led by Singapore and Hong Kong with growth across broad range of industries. Housing and wealth management loans were stable from previous quarter. Trade loans grew 5%, amidst higher commodity prices.
  • Fee income declined due to lower wealth and investment banking - Net fee income moderated 7% y-o-y to S$891m, weighed by weaker wealth management and investment banking.
    • Wealth management fees declined 21% y-o-y to S$408m as lower investment product sales were mitigated by higher bancassurance income.
    • Investment banking fees fell 12% to S$43m, dragged by lower fixed income activities.
    • Other fee income activities were brighter spots in the results, which included 21% growth in loan related fees to S$144m and higher card fees (+11% y-o-y) of S$187m as travel and consumer spending picked up with further economic re-opening. Transaction fees gained 4% to a new high of S$240m.
  • Other non interest income fell 16% y-o-y due to lower trading income and investment gains.
  • Expenses declined 2% q-o-q (+4% y-o-y) as higher staff costs were more than mitigated by cuts in other operating expenses. Cost-income ratio of 44% improved from 4Q21’s 51% and 41% in 1Q21.
  • Asset quality was stable with non-performing loans (NPL) ratio maintained at 1.3%. Specific allowances of 15 bps of loans was in line with earlier quarters when significant repayments were excluded, and was partially offset by a writeback of general allowances of S$112m. General provision reserves remained prudent, with S$0.2b buffer above MAS requirement. No further guidance on credit costs was provided.
  • Healthy balance sheet positions the bank well amidst an environment of heightened macro-economic risks and geopolitical concerns this year.
  • Common Equity Tier 1 (CET1) ratio closed the quarter at 14%. 1Q22 quarterly dividend per share of S$0.36 was declared (unchanged q-o-q), with ex-date of 11 May 2022 and cash dividend payment of 25 May 2022.

DBS - 2022 Outlook

OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2022-04-29
SGX Stock Analyst Report HOLD MAINTAIN HOLD 40.000 SAME 40.000