DBS reported 2Q18 net earnings of S$1.33b, +18% YoY and -12% QoQ, and below market expectations of S$1.44b.

The main reasons for the QoQ decline were mainly due to lower trading income (a difference of S$141m QoQ) and the absence of property disposal gain (in 1Q18 there was a S$86m gain from the sale of a HK property).

Net Interest Income showed good growth, +18% YoY and +5% QoQ. However, Non-interest Income fell 6% YoY and 21% QoQ.

Net Interest Margin (NIM) improved from 1.74% in 2Q17 and 1.83% in 1Q18 to 1.85% in 2Q18. Allowances also fell from S$304m in 2Q17 and S$164m in 1Q18 to S$105m in 2Q18.

As expected, DBS declared a first half dividend of 60 cents (versus 33 cents previously).

The shares will trade ex-dividend on 8 Aug 2018. We will provide more details after the analysts’ briefing later in the morning.

As there were broad-based improvements in 2Q18, except for the decline in trading income for 2Q, we are likely to maintain our BUY rating, but will review our estimates after the briefing.

Source: OCBC Research - 2 Aug 2018