5 Big Takeaways from DBS Group’s Latest Results

November 9, 2021

While the earnings steamroller continues to chug along in the US, investors would be remiss if they didn’t check in with some of Singapore’s biggest listed stocks.

That’s because last week, the big three Singapore banks all reported their latest earnings numbers. Last to report (on Friday 5 November) was DBS Group Holdings Ltd (SGX: D05) – Singapore’s largest bank.

With DBS continuing to hold on to its title as “the best-performing Singapore bank over the past decade”, investors will – understandably – want to dig deeper to see if this quarter was any indication of why it’s been a consistent outperformer.

So, here are five big takeaways, for any long-term investor, from DBS Group’s latest third-quarter earnings.

1. Net profit up 31%

During the third quarter of 2021, DBS managed to post net profit of S$1.7 billion, which was a 31% year-on-year increase.

That figure was stable quarter over quarter. DBS’s fee income continued to show momentum, up 2% quarter-on-quarter.

Meanwhile net interest income also had a slightly positive impact on the bottom line, rising 1% quarter-on-quarter.

For the nine-month period (January to end-September 2021), net profit hit a record high of S$5.41 billion – up an impressive 46% year-on-year.

Even better, all three quarters were record quarters when viewed as standalone periods.

2. Fee income hits S$888 million

As mentioned earlier, fee income increased 2% quarter-on-quarter to the rather auspicious number of S$888 million for the three months ending 30 September.

This was driven mainly by wealth management, with fees up 8% to S$461 million, and which continues to be a core (and growing) profit centre for DBS.

Elsewhere, transaction service fees expanded by 7% to a record high of S$239 million for third quarter.

All this was partially offset by lower investment banking fees and in-loan related fees.

Overall, fee income increased a rather healthy 11% year-on-year.

3. Net interest income up 1%

On the net interest income (NII) front, NII was actually up 1% quarter-on-quarter. However, that doesn’t hide the fact that NII is substantially lower on a year-on-year basis so far in 2021 as compared to 2020 (see below).

DBS net interest income Q3 2021

Source: DBS Group Q3 2021 CFO earnings presentation

While low interest rates are challenging NII, it’s nevertheless impressive that NII over the past few quarters has stayed stable despite net interest margin (NIM) falling to 1.43%.

4. Loan growth up 2%

That resilience in NII was helped by broad-based loan growth so far this year. More specifically, for the third quarter loan growth was up 2% quarter-on-quarter (or an increase of S$6 billion).

Non-trade corporate loans increased by S$5 billion, making up the bulk of gains, while the quarter’s overall increase was partially offset by a S$2 billion decline in trade loans (see below) – stemming from higher repayments.

CEO Piyush Gupta commented that he expects mid-to-high single-digit loan growth for DBS in 2022, suggesting a rather healthy outlook for next year.

DBS loan growth Q3 2021

Source: DBS Group Q3 2021 CFO earnings presentation

5. Strong capital buffers

DBS maintained its solid capital position in the latest quarter. The bank’s Common Equity Tier-1 (CET1) capital adequacy ratio (CAR) was stable quarter-on-quarter at 14.5%.

Meanwhile, its leverage ratio was 6.8% and was more than twice the regulatory minimum of 3%. There was a slight increase in risk-weighted assets (RWA) during the quarter to S$338 billion.

Maintaining growth and payouts

Overall, it was a solid quarter for DBS and the bank also maintained its quarterly dividend per share (DPS) of 33 Singapore cents.

Ever since the Monetary Authority of Singapore (MAS) lifted the dividend cap, DBS has reverted to its payout just before the Covid-19 pandemic hit.

Having paid out 84 Singapore cents so far in 2021, it’s set to pay S$1.17 in dividends for the whole of 2021. That would give investors a dividend yield of around 3.6% based on its current share price.

For investors in Singapore’s biggest bank, it was another reliable quarter from DBS as we head into the end of 2021.


Disclaimer: ProsperUs Head of Content & Investment Lead Tim Phillips owns shares of DBS Group Holdings Ltd.

Tim Phillips

Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth.

He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer.

In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.

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