Towards Financial Freedom
DBS - Sequential loan contraction may dampen interest
Net profit 7% above expectations. DBS reported 3Q12 net profit of S$856m, up 12% YoY, and up 6% QoQ. This is slightly above consensus and our expectations of S$801m and S$800m respectively. Whilst profit before allowances was up a marginal 3% QoQ, a 47% or S$49m QoQ plunge in allowances led to the above-expectations net profit. As such, we do not believe the market will respond positively to the slightly stronger earnings. We will review our earnings forecast and target price after the analyst briefing later today. We do not see any catalyst that will drive DBS share price higher after the ~21% YTD share price rise. Our NEUTRAL recommendation is maintained.
Weak net interest income from NIM squeeze and US$ loan weakness. Net interest income was up 1% QoQ, despite NIM declining 5 bps QoQ to 1.67%, and loans contracting 1% or S$2.7b QoQ. The sequential loan weakness is largely due to the general commerce segment, which recorded a 4.2% or S$1.6b sequential fall - recall that DBS recorded very strong trade finance loans in 2H11, and this recent result suggest that some reversals are taking place. In currency terms, S$ loans expanded 4% QoQ. Underlying US$ loans contracted 2% QoQ, although it was a worse 5% decline in US$ terms. We believe the loan weakness will adversely affect investors' interest in DBS.
Investment income drove fee and commission income. Fee and commission income was up 12% QoQ (+4% YoY), largely driven by investment banking and loan-related activities. Net trading income of S$137m was relatively flat both on a QoQ and YoY basis.
Unchanged cost-income ratio. The cost-income ratio of 45% is close to 2Q12's 44.8%. Expenses rose 3% sequentially due to higher staff and other general expenses and were partially offset by a fall in revenue-related costs.
Source: OSK
Weak net interest income from NIM squeeze and US$ loan weakness. Net interest income was up 1% QoQ, despite NIM declining 5 bps QoQ to 1.67%, and loans contracting 1% or S$2.7b QoQ. The sequential loan weakness is largely due to the general commerce segment, which recorded a 4.2% or S$1.6b sequential fall - recall that DBS recorded very strong trade finance loans in 2H11, and this recent result suggest that some reversals are taking place. In currency terms, S$ loans expanded 4% QoQ. Underlying US$ loans contracted 2% QoQ, although it was a worse 5% decline in US$ terms. We believe the loan weakness will adversely affect investors' interest in DBS.
Investment income drove fee and commission income. Fee and commission income was up 12% QoQ (+4% YoY), largely driven by investment banking and loan-related activities. Net trading income of S$137m was relatively flat both on a QoQ and YoY basis.
Unchanged cost-income ratio. The cost-income ratio of 45% is close to 2Q12's 44.8%. Expenses rose 3% sequentially due to higher staff and other general expenses and were partially offset by a fall in revenue-related costs.
Source: OSK
Related Stocks
| Chart | Stock Name | Last | Change | Volume |
|---|
More articles on Towards Financial Freedom
Duty Free International Ltd. - A duty-free giant in the making
Created by kiasutrader | Oct 17, 2016
Cityneon Holdings - 'Avengers' showcasing in the Land Down Under
Created by kiasutrader | Jun 07, 2016
Discussions
Be the first to like this. Showing 0 of 0 comments
Post a Comment
Featured Posts
Latest Videos
Apps
Top Articles
1
RHB Investment Research Reports
ST Engineering - Rolling Forward Our Valuation; Reiterate BUY
2
SGX Market Dialogues
Kopi-C With GuocoLand’s Group CEO: ‘We Have Twin Engines for Growth’
3
CEO Morning Brief
Singapore Home Sales Set for Worst Year Since Financial Crisis
4
CEO Morning Brief
DBS Posts 300% Growth in Semi-liquid Fund Sales in Greater China
5
CEO Morning Brief
#
Stock
Score
Daily Stocks
Stock Name
Last
Change
Volume
Stock Name
Last
Change
Volume
Stock Name
Last
Change
Volume
Featured Advertisers / Partners
Ride The Bull Short The Bear
CS Tan
4.9 / 5.0
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
