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Delayed Singapore Stock Exchange  -  05/18 05:15:42 am EDT
31.20 SGD   +0.52%
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DBS posts Q3 profit jump, Singapore banks flag recovery

11/05/2021 | 01:18am EDT
FILE PHOTO: A man uses a DBS automated teller machine in Singapore

SINGAPORE (Reuters) - DBS Group expects to report higher profit before allowances next year after Southeast Asia's largest bank beat estimates with a 31% rise in third quarter net profit, aided by growth in fee income and improving asset quality.

Friday's result rounded out a robust quarter for Singapore banks such as OCBC and United Overseas Bank, just as global lenders are rebounding in markets hit by the COVID-19 pandemic and amid improved economic activity.

"Loan growth for the three banks already saw some recovery, and benefits of lower credit costs are already in the bottom line," said Kevin Kwek, a senior analyst at Sanford C. Bernstein. "Significant upside has to come from surprises on robustness of growth, and rates."

Singapore, recovering from last year's record recession, is re-opening its borders with 85% of its population fully vaccinated against the COVID-19 virus. The city-state's economy is expected to grow 6%-7% this year.

The performance of Singapore banks is being powered by a strong showing in their wealth management businesses, while they are also set to benefit from interest rates ticking up from record lows.

DBS reported net profit of S$1.7 billion ($1.26 billion) in July-September versus S$1.30 billion from a year earlier and the S$1.57 billion average forecast from four analysts compiled by Refinitiv.

"Our pipeline as we go forward into next year reflects that the momentum should continue," DBS CEO Piyush Gupta told reporters, adding that the bank is likely to post 6-7% loan growth next year versus 4-5% in a normal pre-pandemic year.

Shares of DBS, trading near record highs, rose 0.2% on Friday, having gained nearly 29% so far this year versus an 18% rise in OCBC and a 20% increase in UOB's shares.

"We were originally planning not to do salary hikes this year but the market situation and conditions compelled us to take salary actions in the middle of the year," Gupta said, highlighting higher costs.

DBS expects its asset quality to stay resilient and total allowances to remain low.

"As the revenue drivers further strengthen and if credit cost stays below normal, the group looks poised to deliver steady growth next year," Krishna Guha, an analyst at Jefferies," said in a report.

DBS wrote back credit allowances of S$70 million in the quarter, helping boost profits, compared with credit charges of S$554 million booked in the year-ago period.

Profit before allowances fell 7% to S$1.89 billion in the quarter. DBS' net interest margin, a key gauge of profitability, dipped to 1.43% from 1.53% a year earlier.

This year, Gupta spearheaded DBS' purchase of a stake in a privately-owned Chinese bank, months after acquiring a distressed Indian lender. DBS has also forayed into new ventures, including a digital exchange, to boost revenue.

($1 = 1.3512 Singapore dollars)

(Reporting by Anshuman Daga; Editing by Chris Reese and Sam Holmes)

By Anshuman Daga

ę Reuters 2021
Stocks mentioned in the article
ChangeLast1st jan.
DBS GROUP HOLDINGS LTD 0.52% 31.2 Delayed Quote.-4.96%
MSCI SINGAPORE (GDTR) 1.85% 5594.11 Real-time Quote.-12.51%
SANFORD LIMITED 0.00% 4.34 End-of-day quote.-10.52%
UNITED OVERSEAS BANK LIMITED 0.91% 28.89 Delayed Quote.6.43%
05/16Temasek hikes stake in e-commerce companies Amazon, Pinduoduo
05/11DBS : Bank extends transition loan facility to Shree Renuka Sugars for replacing fossil fu..
05/11DBS GROUP HOLDINGS LTD : Ex-dividend day for interim dividend
05/05RHB Group Adjusts DBS Group's Price Target to SG$38.10 From SG$42.70, Keeps at Buy
05/03CGS-CIMB Adjusts DBS's Price Target to S$40.20 From S$39.90, Keeps at Add
04/29Singapore Shares End Week Higher, OCBC Climbs 4% Despite Posting 10% Drop in Q1 Profit
04/29DBS Group's Net Profit Plummets 10% in Q1; Shares Climb 4%
04/29TRANSCRIPT : DBS Group Holdings Ltd, Q1 2022 Earnings Call, Apr 29, 2022
04/28Singapore's Top Two Banks, DBS and OCBC, Trade Higher After Earnings
04/28TRANSCRIPT : DBS Group Holdings Ltd, Q1 2022 Earnings Call, Apr 29, 2022
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Analyst Recommendations on DBS GROUP HOLDINGS LTD
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Sales 2022 15 864 M 11 450 M 11 450 M
Net income 2022 7 390 M 5 334 M 5 334 M
Net Debt 2022 - - -
P/E ratio 2022 10,8x
Yield 2022 4,64%
Capitalization 79 882 M 57 655 M 57 655 M
Capi. / Sales 2022 5,04x
Capi. / Sales 2023 4,35x
Nbr of Employees 33 000
Free-Float 98,5%
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Mean consensus BUY
Number of Analysts 20
Last Close Price 31,04 SGD
Average target price 38,76 SGD
Spread / Average Target 24,9%
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Piyush Gupta Chief Executive Officer & Director
Sok Hui Chng Chief Financial Officer
Lim Huat Seah Non-Independent Non-Executive Chairman
Jimmy Ng Group Chief Information Officer & Head-Operations
Chee Kin Lam Joint Secretary, MD & Head-Legal
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