DBS Earnings Beat in Q3 2023: Key Highlights for Investors

November 6, 2023

DBS Group Holdings Ltd (SGX: D05), Southeast Asia’s largest bank, recently announced its financial results for Q3 2023, delivering a robust performance that outstripped consensus estimates.

DBS is the second Singapore bank to release its Q3 2023 earnings, following a strong set of earnings released by United Overseas Bank (SGX: U11).

Here are several interesting highlights from DBS’ latest earnings report.

1. Earnings beat

DBS’s core net profit for Q3 2023 hit S$2.63 billion, marking a slight 2% quarter-on-quarter decrease but an impressive 18% increase year-over-year. This performance edged past the Bloomberg consensus estimate by 7%, demonstrating the bank’s ability to outperform market expectations.

2. Dividend growth

In a show of confidence, DBS declared an interim dividend per share (DPS) of 48 Singapore cents, up from 36 cents in the same quarter the previous year, aligning with forecasts and reinforcing its commitment to shareholder returns.

3. NIM expansion and rising fees

The bank’s net interest margin (NIM) – a key profitability indicator – expanded by 3 basis points sequentially to 2.19%. Meanwhile, fee income remained robust, thanks to an uptick in wealth management fees, driven by higher sales of bancassurance and investment products, and strong card fee income, bolstered by increased spending and the integration of Citi Taiwan.

4. Rising operational expense

On the expenditure front, the bank witnessed an increase in operational expenses, primarily attributed to the consolidation of Citi Taiwan and associated staff costs. This uptick reflects the bank’s strategic investments for long-term growth.

5. Credit cost concerns

DBS showed prudence in setting aside a higher buffer for potential loan losses. The Q3 2023 saw an unexpected rise in credit costs, reaching around 20 basis points, partly due to specific provisions required for an anti-money-laundering case in Singapore.

6. 2024 outlook: cautious yet optimistic

DBS has provided guidance for 2024, anticipating net interest income to hover around 2023 levels. The bank expects sustained fee income momentum, particularly from wealth management and card segments. However, it also cautioned investors about potential headwinds due to macroeconomic slowdown and geopolitical risks, forecasting total allowances to normalise between 17 to 20 basis points of loans.

DBS’ steady earnings offer stability to long-term investors

DBS’s Q3 2023 earnings beat provides a measure of reassurance to investors about the bank’s resilience and operational efficiency in uncertain times. While DBS navigates a challenging landscape, its strategic positioning and prudent management appear to set the stage for continued stability. The bank’s guidance also suggests a balance of positive income drivers against the backdrop of uncertain loan growth and allowances. Investors, however should be aware of the risks associated with drastic U.S. Fed fund rate cuts, which could significantly affect NIMs. Conversely, a faster return to a risk-on sentiment could pose an upside risk, particularly for DBS’s wealth management income.

Disclaimer: ProsperUs Head of Content & Investment Lead Billy Toh doesn’t own shares of any companies mentioned.

Billy Toh

Billy is deeply committed to making investment accessible and understandable to everyone, a principle that drives his engagement with the capital markets and his long-term investment strategies. He is currently the Head of Content & Investment Lead for Prosperus and a SGX Academy Trainer. His extensive experience spans roles as an economist at RHB Investment Bank, focusing on the Thailand and Philippines markets, and as a financial journalist at The Edge Malaysia. Additionally, his background includes valuable time spent in an asset management firm. Outside of finance, Billy enjoys meaningful conversations over coffee, keeps fit as a fitness enthusiast, and has a keen interest in technology.

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