DBS

DBS: 4Q12 net profit was below average estimates, with net profit at $760m, +4% yoy and -11% qoq. Results however brought FY12 net profit to a record $3.8b, +26% yoy. Weaker qoq net profit was partly due to seasonal trends. For the qtr, Net interest Income at $1.29b, was flat yoy and -3% qoq, despite loans rising 4%, as NIM fell 5 b.p to 1.62% due to a decline in corporate loan spreads, yields for investment securities and the average loan-deposit ratio. Non-interest income was little changed as lower investment banking income was offset by higher net gains from fixed assets For FY12, Net interest income grew 10% to $5.29b, as loans expanded 12%, although NIM fell 7 b.p to 1.70% as a result of market liberalisation in China and asset re-pricing in a soft interest rate environment. Non-interest income was little changed at $2.78b as improved crossselling was offset by lower equity capital market activities. Fee income from trade and remittances, wealth management product sales and cards recorded double-digit percentage increases, in line with efforts to grow these businesses. Notably, DBS benefited from strong bond and REIT activity during the year. Asset quality continues to be strong. Non-performing loan rate declined slightly to 1.2%, while allowance coverage of non-performing assets rose to 142%, the highest on record. The loan-deposit ratio was at 87% as deposits rose 10%. DBS also remains well capitalized, with the Tier-1 ratio of 14.0% and total capital adequacy ratio of 17.1% were above regulatory requirements. Grp CEO note that DBS turned in yet another record-breaking year, with ROE at a five-year high at 11.2% for FY12. Grp current;y trades at 1.18x P/b and has declared a final div of 28c, brining full year payout to 56c/share. (3.7% yield) DMG maintains Neutral with $14.80 TP