Towards Financial Freedom

DBS - FY13 Earnings Broadly In Line

kiasutrader
Publish date: Mon, 17 Feb 2014, 11:34 AM
DBS' FY13 earnings  were within expectations  although its  4Q13 results were  slightly  dampened  by  lower  non-interest  income  and  higher expenses.  It  remains positive on 2014  prospects and  expects net profit growth to be  driven by healthy  loan growth, stable NIM and a sustained momentum in non-interest income.  Maintain BUY,  with  our TP  revised to SGD19.20 (from SGD19.40).
  • FY13 results in line.  DBS  posted core earnings of SGD802m (-7% q-oq)  for  4Q13,  while  its  FY13  core  net  profit  of  SGD3.50bn  (+4%  y-o-y) was  within  our  (SGD3.59bn)  and  street (SGD3.60bn) estimates.  A final dividend of 30 cents per share was proposed (4Q12: 28 cents).
  • Results  highlights.   In 4Q13, core earnings fell 7% q-o-q,  largely  from: i) lower net fee income (-5% q-o-q) and trading income (-13% q-o-q), and ii)  higher  expenses  (+9%  q-o-q)  from  increased  computerisation  and seasonal  costs.  FY13's  key  positives  include:  i)  strong  broad-based growth  in  non-interest  income  (+21%  y-o-y),  ii)  decent  net  interest income growth (+5% y-o-y)  and  robust  18% y-o-y  jump in  loans, which cushioned  NIM slippage (-8bps y-o-y),  iii) stable NIMs since 4Q12,  and iv)  positive  jaws  of  3ppt,  with  costs  being  well-contained.  These  were partly  offset  by  higher  allowances  (+85%  y-o-y)  as  specific  provisions normalised while general provisions rose in line with strong loan growth. Absolute  NPLs  rose  10%  y-o-y,  with  the  increase  coming  mainly  from South Asia and South-East Asia (+184% y-o-y; 20% of total NPLs).
  • Management  guidance.  Management  expects  stable  NIM  and  loan growth of 8-10% (moderated by a 30-35% drop in mortgage applications) for  2014.  Asset  quality  would  remain  resilient  as  the  tapering  of quantitative easing and measures to cool the property sector are unlikely to  have  a  material  impact  on  customers.  Management  is  comfortable with  its  current strategy  of  diversifying  its  funding  base  by  tapping  into USD  deposits  and  commercial  papers,  as  this  matches  the  short-term nature of its trade finance flows.  It expects  healthy  fee income growth,supported  by  a  robust  pipeline  and  a  sustained  business  momentum, and the CIR to edge up on plans to invest in digital banking. 
  • Maintain BUY. We make no material change to our FY14F net profit, but trim  our FV to SGD19.20  (target P/BV: 1.35x)  from SGD19.40,  on  finetuning our  book value estimates.  DBS' current valuation is undemanding at 1.1x P/BV, which is  -0.5SD  from its  historical mean.  We continue to like the stock's stronger earnings growth prospects relative to its peers.







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Company Profile
DBS is the largest Singapore bank by assets. It also has significant operations in HK.ong Kong.

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Source: OSK
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