Summary: DBS Group Holdings Ltd posted stronger-than-expected 1Q13 net earnings of S$950m versus market expectations of S$824m. The key contributors were the strong double-digit increase in Fee and Commission Income, +25% YoY to S$507m, as well as higher Trading Income (+26% YoY to S$410m). Management appears optimistic about its performance, as its investments in Singapore and the region are showing results. It is also confident of a double-digit loans growth for the year. Net Interest Margin (NIM) bucked the downtrend, and rose from 1.62% in 4Q12 to 1.64% in 1Q13. Overall, we adjusted Non-Interest Income higher, but this was mitigated by higher costs and allowances. Using the historical average P/B of 1.3x (2006-2012), we raised our fair value estimate to S$18.28 (previously S$15.94). Maintain BUY.
Sharp increase in 1Q13 earnings
DBS Group Holdings Ltd delivered stronger-than-expected 1Q13 net earnings of S$950m, up 2% YoY and -21% QoQ, and this is sharply ahead of market expectations of S$824m (based on Bloomberg poll). Net Interest Income fell 1% YoY to S$1327m, but higher Non-Interest Income, which rose 21% YoY to S$990m, helped to give total income a boost to S$2317m (+7.5% YoY). The key contributors were the strong double-digit increase in Fee and Commission Income, +25% YoY to S$507m, as well as higher Trading Income (+26% YoY to S$410m). 1Q13 earnings now accounted for 27% of consensus full year earnings estimates.
Management appears optimistic
Management appears optimistic about its performance as its investments, both in Singapore and the region, are starting to pay off. It is also confident of a double-digit loans growth for the year. Loans grew 13% YoY and 6% QoQ to S$223.7b as at end 1Q13. Despite a generally positive review, management also cautioned on some uncertainty in the horizon including recent slowdown in economic data from US and China. Net Interest Margin (NIM) bucked the downtrend and showed an improvement this quarter, up from 1.62% in 4Q12 to 1.64% in 1Q13, partly due to funding from the wholesale market. Meanwhile, there is still no update on its Bank Danamon acquisition. Its Wealth business performed well, aided by a more bullish market, and the cross-selling of treasury products doubled to S$299m or 48% of total treasury income in 1Q13.
Maintain BUY; raised fair value estimate to S$18.28
We adjusted our estimates marginally, but we do not expect a repeat of the strong Fee and Commission and Trading Income for the rest of the quarters in 2013. In addition, we expect costs to remain high. Overall, we adjusted Non-interest Income higher, but this was mitigated by higher costs and allowances. Using the historical average P/B of 1.3x (2006-2012) and average book value for FY13-14, we derive a fair value estimate of S$18.28 (previously S$15.94). Maintain BUY.
DBS Group Holdings Ltd delivered stronger-than-expected 1Q13 net earnings of S$950m, up 2% YoY and -21% QoQ, and this is sharply ahead of market expectations of S$824m (based on Bloomberg poll). Net Interest Income fell 1% YoY to S$1327m, but higher Non-Interest Income, which rose 21% YoY to S$990m, helped to give total income a boost to S$2317m (+7.5% YoY). The key contributors were the strong double-digit increase in Fee and Commission Income, +25% YoY to S$507m, as well as higher Trading Income (+26% YoY to S$410m). 1Q13 earnings now accounted for 27% of consensus full year earnings estimates.
Management appears optimistic
Management appears optimistic about its performance as its investments, both in Singapore and the region, are starting to pay off. It is also confident of a double-digit loans growth for the year. Loans grew 13% YoY and 6% QoQ to S$223.7b as at end 1Q13. Despite a generally positive review, management also cautioned on some uncertainty in the horizon including recent slowdown in economic data from US and China. Net Interest Margin (NIM) bucked the downtrend and showed an improvement this quarter, up from 1.62% in 4Q12 to 1.64% in 1Q13, partly due to funding from the wholesale market. Meanwhile, there is still no update on its Bank Danamon acquisition. Its Wealth business performed well, aided by a more bullish market, and the cross-selling of treasury products doubled to S$299m or 48% of total treasury income in 1Q13.
Maintain BUY; raised fair value estimate to S$18.28
We adjusted our estimates marginally, but we do not expect a repeat of the strong Fee and Commission and Trading Income for the rest of the quarters in 2013. In addition, we expect costs to remain high. Overall, we adjusted Non-interest Income higher, but this was mitigated by higher costs and allowances. Using the historical average P/B of 1.3x (2006-2012) and average book value for FY13-14, we derive a fair value estimate of S$18.28 (previously S$15.94). Maintain BUY.
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