Thursday, January 12, 2012


DBS: UOB Kay Hian has earnings preview. Maintains Buy with $16.14 TP. Expect DBS Gto record a healthy loan growth of 3% qoq in 4Q11 due to drawdown of loans previously approved. Loan growth should start slowing down in 1H12, in tandem with the moderation of GDP growth across the region.

Net interest margin expected to be largely unchanged at 1.74% due to a mild pick-up in 3-month SIBOR to 0.39% by end-4Q11.
Expect market sensitive sources of fee income to decline on a sequential basis. Based on statistics for Oct and Nov 11, stock market turnover has dropped 36.6% yoy. Tip a lacklustre qtr for investment banking as DBS did not participate in IPOs completed in 4Q11, which were mostly for small to mid-cap Co’s.

Expect net trading income to be seasonally softer in 4Q11, similar to the trend in 4Q10, especially as liquidity contracted in December. Cost/income ratio should trend slightly higher to 43.9% due to sequentially lower total income. Expect general provision to normalise to a lower quantum given the adequate coverage of 124.4%.

Overall, expect DBS to report a net profit of $758m for 4Q11, flat qoq (3Q11: S$762m, including a gain of $47m to combine DBS Asset Management with Nikko Asset Management and a hefty general provision of $187m). Like DBS for its consistency in execution and financial performance since the new CEO took over the helm, including the recent impeccable growth in fee income.

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