Highlights

THE SINGAPOREAN INVESTOR

Author: ljunyuan   |   Latest post: Fri, 12 Aug 2022, 10:30 AM

 

DBS Group Holdings' 1H FY2022 Results - My Review

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DBS Group Holdings' 1H FY2022 Results - My Review

After UOB (you can read my review about the bank’s 1H FY2022 results here), and OCBC (you can read my review about the bank’s 1H FY2022 results here), DBS Group Holdings Limited (SGX:D05), or DBS for short, is the third and last Singapore-listed bank to make available its results for the first half of the financial year 2022 ended 30 June 2022 early this morning (04 August.)

As a shareholder of Singapore’s largest bank, I have studied the documents posted and in today’s post, you’ll read about my review of its key financial results and statistics, along with its dividend payout to shareholders for the period under review.

Let’s begin:

Key Financial Results (1H FY2021 vs. 1H FY2022, and Q2 FY2021 vs. Q2 FY2022)

In this section, you’ll find the Singapore bank’s results both on a year-on-year (y-o-y) basis (i.e. 1H FY2021 vs. 1H FY2022), as well as on a quarter-on-quarter (q-o-q) basis (i.e. Q2 FY2021 vs. Q2 FY2022):

1H FY2021 vs. 1H FY2022:

1H FY20211H FY2022Variance (%)
– Net Interest
Income (S$’mil)
$4,196m$4,641m+10.6%
– Net Fee &
Commission Income
(S$’mil)
$1,821m$1,659m-8.9%
– Other Non-Interest
Income (S$’mil)
$1,426m$1,239m-13.1%
Total Income
(S$’mil)
$7,443m$7,539m+1.3%
Total Expenses
(S$’mil)
$3,130m$3,302m+5.5%
Net Profit Attributable
to Shareholders
(S$’mil)
$3,712m$3,616m-2.6%

My forecast for the 3 Singapore-listed banks’ results on a y-o-y basis was as follows – an improvement in its net interest income (due to Fed’s recent interest rate hike announcements) offset by dips in its net fee and commission income, as well as in its other non-interest income due to the economic headwinds. Also, I opined that if the bank’s net profit attributable to shareholders is able to match that recorded last year, it will be considered as a good set of results (at least to me.)

In that regard, how did DBS fare for the first half of FY2022 compared against the same time period last year? Its net interest income, as expected, climbed by 10.6% on the back of loan (by 7% in constant currency terms) and deposit (by 9%) growth, along with a higher net interest margin (by 5 basis points compared to a year ago.)

At the same time, its net fee and commission income fell by 8.9% due to a decline in wealth management and investment banking fees as a result of poor market conditions – however, this was offset by improvements in card, loans-related, and transaction service fees. Its non-interest income also declined (by 13.1%) due to a fall in investment gains from less favourable market opportunities – both of them within my expectations.

The 5.5% increase in its total expenses was driven by higher staff costs.

Finally, while its net profit attributable to shareholders edged down by 2.6% due to an increase in allowances for credit and other losses (by 13.5% from S$89m in 1H FY2021 to S$101m in 1H FY2022) – which missed my expectation slightly, but still a pretty resilient one considering the statistic reported last year was a record breaking one.

Q2 FY2021 vs. Q2 FY2022:

Q2 FY2021Q2 FY2022Variance (%)
– Net Interest
Income (S$’mil)
$2,089m$2,454m+17.5%
– Net Fee &
Commission Income
(S$’mil)
$868m$768m-11.5%
– Other Non-Interest
Income (S$’mil)
$632m$570m-9.8%
Total Income
(S$’mil)
$3,589m$3,792m+5.7%
Total Expenses
(S$’mil)
$1,543m$1,658m+7.5%
Net Profit Attributable
to Shareholders
(S$’mil)
$1,703m$1,815m+6.6%

DBS’ net interest income saw a 17.5% q-o-q improvement due to an accelerated expansion in net interest margin (due to a 13 basis point increase in its net interest margin, and loans growing by 7%.)

Its net fee and commission income fell by 11.5% due to lower contributions from wealth management and investment banking, but offset by increases in other fee activities. Its other non-interest income also saw a 9.8% decline due to weaker market conditions.

The 7.5% increase in total expenses was due to higher staff costs.

Finally, its net profit attributable to shareholders improved by 6.6% mainly attributed to a 41.8% plunge in allowances for credit and other losses.

As far as the bank’s q-o-q results are concerned, its within my expectation.

Key Financial Ratios (Q1 FY2022 vs. Q2 FY2022)

Moving on, let us take a look at some of the key financial ratios (these are the ratios I focus on whenever I evaluate a bank’s results), where I will be comparing the ratios reported for the current quarter under review (i.e. Q2 FY2022 ended 30 June 2022) against that reported in the previous quarter 3 months ago (i.e. Q1 FY2022 ended 31 March 2022) to find out whether it has strengthened or deteriorated:

Q1 FY2022Q2 FY2022Difference (in
Percentage Points – pp)
Net Interest
Margin (%)
1.46%1.58%+0.12pp
Return on
Assets (%)
1.04%0.99%-0.05pp
Return on
Equity (%)
13.1%13.4%+0.3pp
Non-Performing
Loans Ratio (%)
1.3%1.3%

My Observations: Apart from a 0.12pp improvement in its net interest margin (which was very much expected due to Fed’s recent interest rate hike announcements), the other key financial ratios remained more or less the same compared to the previous quarter.

Dividend Payout to Shareholders

DBS is the only Singapore-listed bank whose management declares a dividend payout on a quarterly basis (with the management of the other 2 Singapore banks in UOB and OCBC declaring a dividend payout on a half-yearly basis) – for the current quarter under review (i.e. Q2 FY2022), the DBS’ management have continued to declare a dividend payout of 36.0 cents/share – a 9.1% increase from the 33.0 cents/share declared in the same time period last year (i.e. Q2 FY2021.)

Together with the 36.0 cents/share declared in the first quarter, its total dividend payout for the first half of the current financial year 2022 amounts to 72.0 cents/share – a 41.2% jump from the 51.0 cents/share paid out in the same time last year (i.e. 1H FY2021) – however, do take note that the huge jump this year was because in the first quarter last year, its dividend payout was still capped by the Monetary Authority of Singapore (MAS) to pay out no more than 60.0% of the amount declared in FY2019 for prudence in light of the Covid-19 pandemic, but the cap has been lifted from the second quarter.

Finally, if you are a shareholder of DBS, here are the important dates regarding its upcoming dividend payout:

Ex-Date: 15 Aug 2022
Record Date: 16 Aug 2022
Payout Date: 26 Aug 2022

Closing Thoughts

On the whole, DBS’ latest results was well-within my expectations – where improvements in its net interest income was offset by declines in its net fee and commission income, as well as in its other non-interest income – both on a y-o-y, as well as on a q-o-q basis.

Some of you may be concerned by the slight dip in its net profit attributable to shareholders on a y-o-y basis, but do note that its coming on the back of a record breaking feat (in this particular statistic) in the same time period last year (i.e. 1H FY2022.) And given the current economic situation we are in right now, it is still a very strong one (at least to me.)

In terms of its key financial ratios, they remain more or less the same compared to the previous quarter (apart from its net interest margin, which saw a 0.12pp jump as a result of Fed’s interest rate hike announcements – and this is within my expectations.)

Dividend-wise was also within my expectation, at 36.0 cents/share – given the current economic headwinds, I personally feel its good to see the bank continuing its dividend payout of 36.0 cents/share every quarter.

With that, I have come to the end of my review of DBS Group Holdings’ latest results for the first half of the financial year 2022. As always, I do hope you’ve found the contents presented above useful, and at the same time, take note that all the opinions you’ve read above are purely mine, and they do not represent and buy or sell calls for the bank’s shares. You’re strongly encouraged to do your own due diligence before you make any investment decisions.

Related Documents

Disclaimer: At the time of writing, I am a shareholder of DBS Group Holdings Limited.

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