DBS

DBS: 2Q11 results generally in line.
Net profit at $735m, +2.4% yoy, compares with Dow Jones consensus of $718m.
Sequentially, net profit falls 8.9%, hurt by a 15% yoy and 19% qoq decline in non interest income to $639m, though with sluggish capital markets over the last few months a decline in market-related trading income and investment banking revenue was largely expected.
Net interest margin declines to 1.80% from 1.84% last year but is flat qoq, showing signs that it may be bottoming out.
The bank's core business remains robust with net interest income +12% yoy, +6.9% qoq at $1.2b, supported by a 15% increase in lending volume.
One encouraging spot from the results is HK’s 2Q earnings, which more than doubled yoy to $143m.
Total expenses rose 11% yoy, largely driven by higher staff cost. This translated to a higher cost-income ratio at 43.4%, from 40.5% qoq, and 39.5% yoy.
Provisioning charges at $137m was down 33% yoy, as well as NPL ratio at 1.5%, down from 2.3% yoy.
Interim div of 28cts, unchg yoy.
BVPS rose marginally qoq to $11.69, translating to a valuation of 1.31x P/B, vs historical avg at 1.45x P/B.