DBS

DBS: 3Q13 net income inched up 1% y/y to $862m, slightly above the $839m consensus. Net interest income reached a record and fee income from annuity businesses maintained at recent highs, which helped offset the higher general and specific allowances. However net profit fell 3% q/q, as the uncertain market outlook resulted in a paring of treasury activities. Liquidity buffers were also enhanced for contingencies. Net interest income rose 6% y/y to a record $1.41b. Loans expanded 19% to $242b as trade loans, corporate borrowing and secured consumer loans increased. Net interest margin fell 7 bps to 1.6% from lower loan spreads and yields on invmt securities. Non-interest income increased 11% to $744m. Fee income grew 9% to $462m, led by higher contributions from trade and transaction services, wealth mgt and cards. Trading income was 45% higher at $188m from higher trading gains and cross selling. Income from treasury customer flows was 4% higher at $228m. Total allowances tripled to $151m. General allowances increased nearly 4-fold to $57m on the back of faster loan growth. Specific allowances, which had been exceptionally low at 7 bps last yr, doubled to 15 bps or $93m. Nevertheless, asset quality remained healthy. NPL unchg from previous quarter at 1.2%. Allowance coverage of non-performing assets also maintained at recent quarter’s levels at 136%. LDR was stable from the previous quarter at 89%. Core equity Tier 1 ratio of 13.3% and total capital adequacy ratio of 15.9% were each 0.4% higher than the previous quarter’s level, due to updates to internal credit ratings and a reduction in market risk positions. DBS ended 3Q13 with NAV per share of $13.26, which translates to 1.26x P/B, based on yday’s closing price of $16.74.