- DBS (SGX:D05)’s strong execution since 2010 has structurally shifted their sustainable ROEs higher. This should support a higher trading multiple going forward, in our view.
- In the near term, NIMs are set to remain higher for longer, although y-o-y growth could taper. A revival of wealth management fees could help partially offset this.
- - Read this at SGinvestors.io -
- Maintain BUY rating for DBS with lower target price of S$39.12.
Slower NII, but NoII tailwind?
- In 2022, DBS’s NIMs expanded +30bps y-o-y – the highest on record. This was thanks to the massive rate hikes by the Fed and regional central banks where the Group’s asset yields rose around +78bps y-o-y, whereas funding costs expanded just +52bps. Its superior funding franchise helped, but here, CASA has eroded to 60% of deposits from 76% a year ago.
- - Read this at SGinvestors.io -
- On the other hand, continued strong inflows (AUMs +S$9bn 4Q22) is creating a significant latest capacity for fees to rebound, particularly from wealth management (typically ~40% of fees). We think improved clarity on inflation direction may catalyse this, likely in 2H.
Strong franchise with structurally higher ROE
- Read more at SGinvestors.io.
