• Growing Wealth, SME and Transaction banking
• Organic and acquisition growth
• DBS remains our top banking pick

Organic and external growth from several areas

Recently, DBS has been in the news. First, there was the acquisition of the Asian private banking business of Societe General in Singapore and Hong Kong for US$220m with assets under management (AUM) of US$12.6b (S$16b) as of 31 Dec 2013 – which will complement its Wealth strategy. More importantly, this acquisition will lift DBS to become one of the key players in Wealth business in Asia. Apart from Wealth, the group has also shared about its global transaction business and SME strategies. For the former, it remains confident of its prospects despite rising concern about a slowdown in China. About 60% of its transaction services revenue is from multinational clients. For its SME, total income grew 12% per year from FY11-FY13, and despite Singapore being a somewhat matured market, income from Singapore grew 17% for the same period.

Is China a big concern?

With the recent market concern about the potential slowdown in China, the CSI 300 Index fell almost 11% YTD at the year’s low, but has since rebounded (-3% currently). DBS’s share price has similarly tumbled 8.5% YTD to a year’s low of S$15.65. With China’s just announced effort to boost its economy, having recently announced its first stimulus of 2014 (tax cuts for small and micro businesses, railway construction, etc.), we expect that the economy is likely to achieve the official growth projection of 7.5% for this year.

1Q14 results on 30 Apr; maintain BUY

DBS is releasing its 1Q14 results on 30 Apr 2014. We are expecting 1Q net earnings of S$871m, down 8% YoY and 11% QoQ. We expect softer Non-interest Income to be the main drag, down 16% QoQ, while Net Interest Income is likely to remain flat QoQ. This will be partly mitigated by marginally lower operating expenses and lower allowances. However, we are retaining our overall full year earnings estimate of S$3785m for FY14. DBS remains our top pick in the banking sector and we expect the share price has already captured most of the negatives linked to the Singapore property market. We reiterate our BUY rating and S$18.08 fair value.

Source: OCBC Research - 15 Apr 2014