DBS Group - Maybank Research 2023-03-10: Strengthening Franchise; High Structural ROEs; Rising Dividend Yield.

• 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.
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• 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.
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• 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

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