DBS - OCBC Investment 2022-11-03: 3Q22 Beat, Lock In Some Gains

DBS - 3Q22 Beat, Lock In Some Gains

Published:
DBS GROUP HOLDINGS LTD (SGX:D05) | SGinvestors.ioDBS GROUP HOLDINGS LTD (SGX:D05)
  • While we continue expect DBS to benefit from higher rates in the coming quarters, with more limited potential upside of DBS' share price to our fair value and higher macro uncertainties expected in 2023, we advise locking in some profits.
  • - Read this at SGinvestors.io -
  • Constructive 2023 outlook, while cognizant of macro headwinds from a potential US recession and slowdown in Asia.
  • Decarbonisation targets were set for 9 sectors by 2030 and 2040, with eventual zero emissions to be achieved by 2050.

DBS's 3Q22 Updates

  • DBS's 3Q22 net profit grew 23% q-o-q to of S$2.24b, beating consensus expectations of S$1.96b. 3Q22 net profit marked a new high and lifted return on equity (ROE) to a record 16.3%. Total income increased 20% q-o-q driven by net interest margin (NIM) expansion and sustained business momentum.
  • - Read this at SGinvestors.io -
  • 3Q22 loans was up 1% from previous quarter, with non-trade corporate loans leading growth at 3% but some offset seen with 10% decrease in trade loans due to maturing exposures. Customer loans increased almost S$1b driven by higher housing loans.
  • Fee income of S$923m was largely stable for the quarter (vs 2Q22’s S$917m), with weakness in wealth management (-4.2% q-o-q, S$323m) offset by higher card and loan related fees.
  • Operating expenses increased 9% q-o-q on higher staff cost, bringing cost/income ratio to 40.2% (vs 2Q22’s 43.7%), in line with guidance of improvement towards 40% level. Profit before allowance of S$2.72b grew 27% q-o-q.
  • Asset quality remained benign with 3Q22 credit cost of 16bps. 3Q22 specific provision was low at 2bps of loans (~S$25m), general provision of S$153m was taken for the quarter. Non-performing loan (NPL) ratio improved to 1.2% as new non-performing asset (NPA) formation remained low and was more than offset by loan upgrades and repayments. Management added S$350 to gross provisioning (GP) overlays although NPA formation remained low. Allowance coverage is above 100% and 200% including collateral.
  • CET1 closed the quarter at 13.8%. 3Q22 dividend of 36cents/share was declared by DBS.
  • For 9M22, DBS's net profit of S$5.9b grew 8% y-o-y to S$5.85b. With expense growth of 7%, profit before allowances increased 12% to S$6.96b. Fee income appears to be stabilising, although wealth management and capital markets remain challenged due to market conditions.
  • Year-to-date, net new money inflows for wealth management doubled from a year ago to S$15b. Card fees remain a brighter spot as travel demand normalises. 9M22 loan growth ~4% in constant currency terms, on track towards its full-year target of mid-single digit growth.

Constructive 2023 outlook, although cognizant of macro risks from a potential US recession and Asia slowdown

  • Read more at SGinvestors.io.




Above is the excerpt from report by OCBC Investment Research.
Clients of OCBC Securities may be the first to access the full report in PDF @ https://www.iocbc.com/.




OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2022-11-03



Read also OCBC's most recent report:
2024-03-20 DBS Group - Share Price Outperformance.

Previous report by OCBC:
2024-02-07 DBS Group - Record Profits; Strong Dividend Yield Angle.

Price targets by 5 other brokers at DBS Target Prices.

Listing of research reports at DBS Analyst Reports.

Relevant links:
DBS Share Price History,
DBS Announcements,
DBS Dividends & Corporate Actions,
DBS News Articles





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