DBS

DBS: 3Q14 net profit of $1.0b (+17% y/y, +4% q/q) topped estimates, with DBS posting its third straight quarterly growth, as both net interest and fee income reached new highs while trading income improved. Net interest income climbed 14% to $1.6b, driven by moderate loan growth (+8.1%) in Singapore and Asean, and higher net interest margin of 1.68% (+8bps y/y, +1bps q/q). Customer deposits rose 7.2% to $305.0b, setting the loan-to-deposit ratio at 85.8% (3Q13: 85%, 2Q14: 86%). Non-interest income rose 23% to $912m, with net fee and commission income up 20% to $555m, led by investment banking (+154%) and wealth management (+39%). Meanwhile, trading income leapt 44% to $271m, boosted by higher treasury gains and customer flows. Overall expenses rose 17% to $1.1b from higher staff and technology costs, although the cost to income ratio was well contained 44.1%. Total provisions notched up 17% to $177m as a spike in specific loan allowances in South-east Asia, India and HK was partially offset by a decline in general allowances. Asset quality remained healthy, with NPL ratio at 0.9% (3Q13: 1.2%, 2Q14: 0.9%), while loan-loss coverage was at a comfortable 160% (3Q13: 136%, 2Q14: 162%). ROE improved to 11.2% (3Q13: 10.5%, 2Q14: 11.0%) and capital adequacy ratios remained stable with fully-loaded CET1 CAR of 12.1% and Tier-1 CAR at 13.4%. Management highlighted that despite some slowdown in the region, DBS continues to see strong earnings momentum in the quarter, fuelled by broad-based growth across businesses. NIM has also been steady, and the recent acquisition of Societe Generale’s Private Bank in Asia will bolster its wealth franchise going forward. DBS trades at 1.27x P/B versus UOB’s 1.36x P/B and OCBC’s 1.34x.