Results in line with our estimates but below the consensus.

Key positives: NIM has stabilised, credit quality stays strong, ample liquidity (75% SGD LDR), strong loan growth.

Remains our preferred pick. Well-positioned to benefit from a rising interest rate environment. Maintain BUY.

4Q13 met our expectations

DBS reported 4Q13 core PATMI of SGD802m (-7.0% QoQ, +5.5% YoY), in line with our expectations for SGD803m but below the consensus estimate of SGD821m. FY13 core PATMI of SGD3,672m (-3.6%) was driven by higher fee and commission income (+19.4%) and stronger loan growth (18.1%), lifting net interest income by 5.4% to SGD5.6b. We fine tune our FY14E-16E forecasts by 1% after incorporating FY13 data.

Encouraging operating trends

4Q13 NIM of 1.61% (+1bp QoQ, -1bp YoY) took FY13 NIM to 1.62%. Loan growth surpassed expectations, at 18.1% for 2013 vs our forecast of 15.0%. On constant currency terms, loans grew 16% YoY. Loans were mainly driven by trade loans to Rest of Greater China, Singapore corporate loans. Asset quality stayed resilient: Gross NPL ratio of 1.1% as at end-2013 (Sep 2013: 1.2%, Jun 2013: 1.2%). Balance sheet remained strong and liquid: 13.7% CET1 (Sep 2013: 13.3%, Dec 2012: 13.5%) with 75.3% SGD loan-deposit ratio (LDR). DBS Hong Kong posted stronger 4Q13 PATMI of SGD216m (+37% QoQ, +29% YoY), taking FY13 earnings to SGD821m (+18%).

Remains our preferred pick

In our view, DBS is the best positioned among the three Singapore banks under our coverage to take advantage of a rising interest rate environment. Reiterate BUY and TP of SGD19.60 (previously SGD19.70), based on 14x FY14E EPS.  

Source: Maybank Kim Eng Research - 17 Feb 2014