Highlights

Simons Trading Research

Author: simonsg   |   Latest post: Thu, 28 Apr 2022, 10:32 PM

 

DBS Earnings Highlights - Single-Digit Credit Cost

Author:   |    Publish date:


  • DBS’s guidance that FY21 credit cost will be capped at S$0.5bn and the interim dividend of S$0.33 should keep share price positive in the near term.
  • DBS's 2Q21 earnings were a beat, thanks to lower credit costs and opex. Total income & PPOP were in line. Fee income normalised from a 1Q21 high base. GP writeback of S$85m (1Q21: S$190m) resulted in total impairments of only S$79m (or 8bp) in 2Q21, similar to 1Q21, which saw credit cost of 1bp.

DBS's 2Q21 Net Profit Beat Estimates on the Back of S$85m GP Writebacks

  • DBS (SGX:D05)’s 2Q21 net profit of S$1.7bn (-15% q-o-q, +37% y-o-y) was 6%/18% above our/consensus estimates of S$1.6bn/S$1.5bn.
  • The beat was primarily due to a S$85m writeback of general provisions (GP), resulting in total impairments of only S$79m (- 8bp) in 2Q21. 1H21 net profit formed 57%/58% of our/consensus full-year forecasts.
  • DBS declared interim dividend of S$0.33 per share for 2Q21 (no scrip). We project DBS to declare S$1.08 dividend for the full year of FY21F.

Fee Income Normalised, Albeit Still Resilient; NIM Lower

  • DBS's NIM drifted 4bp lower to 1.45% in 2Q21 (1Q21: 1.49%) as the tail-end of repricing filtered CTI was slightly higher at 43% in 2Q21 (1Q21: 41%).
  • DBS recorded total allowances of S$79m in 2Q21, translating into 8bp credit costs (1Q21: S$10m or 1bp). This was largely due to writeback of general provisions of S$85m. Loan SPs alone were 14bp (S$164m), much lower than 1Q21’s 21bp.

Revision of Management Guidance; Credit Cost Capped at S$0.5bn

  • DBS upgraded its full-year loan growth guidance to high single-digit (previously mid-to-high single-digit). The bank forecasts full-year fee income growth to be in the mid-teens (previously double-digits).
  • Management also not likely to exceed S$0.5bn (previously S$1bn).

Valuation and Recommendation

  • We retain our ADD call and target price of S$28.35 for DBS, still based on GGM.
  • Rerating catalysts are quicker-than-expected regional economic reopening.
  • Downside risks include severe asset quality deterioration from a new round of COVID-19 lockdowns.

Source: CGS-CIMB Research - 5 Aug 2021

Share this
Labels: DBS

Related Stocks

Chart Stock Name Last Change Volume 
DBS 31.20 +0.16 (0.52%) 5,215,100 

  Be the first to like this.
 


TOP ARTICLES

1. Thai Beverage - Sustainable Recovery Outlook; Stay BUY RHB Investment Research Reports
2. Fu Yu Corp - Supply Chain Business Pulling Its Weight RHB Investment Research Reports
3. EC World REIT - in Rough Seas RHB Investment Research Reports
4. CLI Leads Buyback Tally, Wee Investments Ups UOL Stake SGX Market Updates
5. First Resources - Decent Start to the Year RHB Investment Research Reports
APPS
I3 Messenger
Individual or Group chat with anyone on I3investor
 
 

199  204  223  555 

ActiveGainersLosers
Top 10 Active Counters
 NameLastChange 
 Sembcorp Marine 0.098+0.002 
 HSI 18200MBeP.. 0.058+0.001 
 YZJ Shipbldg SGD 0.88+0.055 
 ThaiBev 0.695+0.005 
 Oceanus^ 0.0170.00 
 HSI 19400MBeP.. 0.031+0.011 
 YZJ Fin Hldg 0.41-0.005 
 HSI 21400MBeC.. 0.089-0.007 
 Jiutian Chemical 0.103-0.001 
 HSI 20400MBeC.. 0.152-0.007 
PARTNERS & BROKERS