DBS Group Holdings Ltd’s Latest Earnings: What Investors Should Know
DBS Group Holdings Ltd (SGX: D05) reported its 2017 first quarter earnings this morning. The reporting period was for 1 March 2017 to 31 March 2017.
As a quick background, DBS Group is one of the three major banks based out of Singapore. It is a leading financial services group in Asia, with 280 branches across 18 markets.
You can catch up with DBS Group’s 2016 fourth quarter earnings here.
The following’s a quick rundown on DBS Group’s total income for the quarter (the “revenue” for a bank):
1. For the first quarter of 2017, net interest income for DBS Group was $1.83 billion, same as a year ago.
2. Net fee and commission income rose by 16% year-on-year to $574 million.
3. Other non-interest income was down 15% to $390 million.
Taken together, the three income streams brought DBS Group $2.89 billion in total income, or 1% above the same quarter last year.
On the expense side:
1. DBS Group’s expenses were down 1% year-on-year to $1.25 billion.
2. Allowances for credit and other losses rose 18% to $200 million.
After deducting expenses and the allowances from total income, DBS Group’s net profit for the first quarter of 2017 was $1.21 billion, a 1% increase from a year ago. For 2016’s first quarter, net profit was $1.2 billion. DBS Group also had one-off gains of $35 million for the first quarter of 2017; including this gain, net profit for the quarter was $1.25 billion, or up 3% from a year ago.
DBS Group ended the quarter with a book value per share of $17.37, up almost 17% from the $16.39 seen a year ago.
DBS Group’s net interest margin for the reporting quarter was 1.74%, down from the 1.85% recorded a year ago. Loans rose by 7% (at constant currency) to offset the decline in the net interest margin. Customer loans were $298 billion for the quarter, while the non-performing loan rate was 1.4%, up from the 1% in 2016’s first quarter.
Meanwhile, net fee and commission income benefitted from increases in wealth management fees and other fees. Elsewhere, other non-interest income fell due to lower trading gains.
For first quarter of 2017, customer deposits totalled $342.5 billion, or 9% higher from a year ago. The loan to deposit ratio was 87.1%, slightly lower than 87.4% from a year ago.
Based on the Monetary Authority of Singapore’s requirements, banks in Singapore must have the minimum of these Capital Adequacy Ratios (CARs): Common Equity Tier 1 (CET1) at 6.5%, Tier 1 at 8%, and Total at 10%. DBS Group can be considered well capitalized as its CARs are comfortably higher at 14.6%, 15.4%, and 16.6% respectively.
For the quarter, Chief Executive Officer Piyush Gupta said:
“We have had a good start to the year.
Earnings were maintained at the quarterly high achieved a year ago as business momentum and productivity gains were sustained, offsetting the impact of a lower net interest margin. Our business pipeline is healthy, consistent with the recent improvement in economic data for key markets.
While asset quality pressures appear to be moderating, we remain vigilant to continued headwinds in the oil and gas support services sector. Our diversified business lines, nimbleness in execution and strong balance sheet put us in good stead for the coming year.”
At its closing share price of $19.86 today, DBS Group traded at 1.14 times book value and has a trailing dividend yield of 3.0%.