Offering Relatively Lower Risk Growth Visibility

• DBS (SGX:D05) delivered a strong beat against Street and MKE expectations in 1H21. The Group offers the clearest pathway to growth given its gearing towards Singapore and North Asia – which are benefiting from re-opening momentum. Concurrently, lower exposure to SE Asia shields it from resurging COVID, while increasing the likelihood of earlier reserve releases.
• DBS's dividends have been restored to pre-pandemic levels, while its recent bolt on acquisitions, new retail wealth and supply chain financing initiatives together with sustainability financing could provide medium term catalysts for growth.
• We raise DBS's target price to S$35.11. Maintain BUY.

Resilient Operating Conditions Set to Continue

• While PPOP declined 10% q-o-q, this was mostly a result of a high base effect of strong trading. Going forward, we expect momentum to turn positive supported by loan growth and fees.
• DBS is geared towards larger corporates in Singapore and North Asia, where disruptions from COVID are limited and growth from economic re-opening is in a better footing. Management is guiding high single digit loan growth in 2021E and expect momentum to remain supported in 2022E particularly from large corporate and mortgage demand.
• We estimate PPOP to grow at 7% CAGR 2020-23E despite a lower interest rate environment.

Better Asset Quality, Write-back Upside

• New NPA formation fell 47% y-o-y. Moratorium loans are < 1% of total of MAS minimum requirements. Credit charge guidance has been halved vs 1Q21.

Raise DBS Target Price to S$35.11. Maintain BUY

• We raise 2021-23E DBS earnings per share estimates by 1-5% to reflect lower provisions and better loans and fee income.

• DBS has restored its 2Q21 target price for DBS has been raised to S$35.11. Maintain BUY.

Source: Maybank Kim Eng Research - 5 Aug 2021