Monday, April 27, 2015


DBS: 1Q15 results ahead of forecasts, with core net profit of $1.13b (+10% y/y, +35% q/q) versus consensus estimate of $1.05b. This was led by a strong show in net interest income of $1.69b (+14% y/y), driven by loan growth (+11%) from corporate borrowings and secured consumer loans, but partially offset by a decline in trade loans.

Net interest margin came in at 1.69% (+3ppt y/y, -2 ppt q/q), as the effect of higher SGD rates on non-trade loan margins was weighed by tighter trade loan pricing plus a larger deployment of USD to lower-yielding money markets. Customer deposits rose 8% to $324.5m, setting the loan-to-deposit ratio at 86.5% (1Q14: 84%, 4Q14: 86.9%).

Non-interest income crossed $1b for the first time, at $1.05b (+8%), as higher fee and commission income of $560m (+10%) was led by wealth management (+43%) and fees from credit and debit cards (+23%), reflecting a continuing strengthening of the wealth management and consumer banking franchises. The group also recorded investments gains of $103m (+171%) from government securities.

Overall expenses rose 13% to $1.2b, in line with income growth, with cost-to-income ratio well contained at 43.2% (1Q14: 42.5%). Total provisions were up 20% to $181m, but similar to recent quarters.

Asset quality remained healthy, with NPL ratio of 0.9% (1Q14: 1.0%, 4Q14: 0.9%), while loan-loss coverage was near its a historical high of 161%.

ROE was stable at 12.2% (1Q14: 12.3%, 4Q14: 9.0%) and capital adequacy ratios remained stable with fully-loaded CET1 CAR of 13.4% and Tier-1 CAR at 13.4%.

Management highlighted that DBS started the year on a solid footing, with strong all-round performance yet again. Despite a slowdown in trade volumes, the bank’s 1Q earnings reached a record high, which is testament to the strength and resilience of the DBS franchise.

DBS trades at 1.37x P/B versus UOB’s 1.45x P/B and OCBC’s 1.45x.

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