- DBS (SGX:D05)’s 1H23 earnings were ahead of MIBG/Street expectations. The Group’s strong franchise is helping asset yields expand in the current higher-for-longer interest rate environment, while keeping funding cost escalations under control.
- - Read this at SGinvestors.io -
- Raise DBS's target price to S$39.36. Maintain BUY.
Scale and franchise driving growth
- Further Fed hikes and higher HIBOR in Hong kong pushed DBS's 2Q23 NIMs +4bps q-o-q (+12bps ex-trading activities). While quarterly data is not available, 1H23 loan yields increased +106bps h-o-h, whilst deposit costs expanded just +88bps. This points to the strength of DBS’s deposit franchise giving it the ability to manage funding costs reasonably. With at least one more Fed hike expected, we raise 2023E NIMs by +7bps.
- - Read this at SGinvestors.io -
- DBS’s focus on large corporates seems to be keeping asset quality supported with NPLs falling -16% y-o-y in 2Q. We have lowered NPL assumptions by 9-10% for 2023-25E, but remain cautious on asset quality going forward.
Higher dividend potential going forward
- Read more at SGinvestors.io.
