3Q14 net earnings came in at S$1.01b, up 17% YoY. Net Interest Margin improved from 1.60% in 3Q13 and 1.67% in 2Q14 to 1.68% in 3Q14. Non-interest Income grew 23% YoY or 21% QoQ to S$912m, giving total 3Q income of S$2.51b. Investment Banking did well and saw a more than doubling in earnings to S$94m (YoY), while Wealth Management jumped 39% to S$142m. After a slower 3Q, management is now guiding for 7-7.5% loans growth in 2014, followed by 8-10% growth in 2015. It is also expecting NIM to stabilize at current level. For Investment Banking, the indication is that its pipeline remains healthy. Overall, we are expecting an almost 10% earnings growth in FY14, followed by 6% in FY15. We are raising our fair value estimate from S$19.90 to S$21.10. DBS remains a BUY and is our top pick in the sector.
3Q earnings came in ahead of market expectations
DBS concluded the banking sector’s result season with a stronger-than-expected set of earnings. 3Q14 net earnings of S$1.01b, up 17% YoY, were better than Bloomberg’s poll of S$975m. Net Interest Margin (NIM) improved to 1.68% in 3Q14, up from 1.60% in 3Q13 and 1.67% in 2Q14. Loans grew 8% (from a year ago) to S$262b. Net Interest Income rose 14% YoY or 3% QoQ to S$1.60b in 3Q14. Non-interest Income improved 23% YoY or 21% QoQ to S$912m, giving total 3Q income of S$2.51b. For Fee Income, Investment Banking did well and saw a more than doubling in earnings to S$94m (YoY), while Wealth Management jumped 39% YoY to S$142m. Total AUM for HNW amounted to S$77b (pre-Societe Generale Private Banking Asia) or S$89b (post).
Guiding for 8-10% loans growth in 2015
After a slower 3Q, management is now guiding for 7-7.5% loans growth in 2014, followed by 8-10% growth in 2015. Growth will remain board-based, and despite the softness in the local property market, it expects its Singapore mortgage book to grow by S$3.7b-S$3.8b in 2014. It is also expecting NIM to stabilize at around current level. On the Investment Banking side, which saw a strong 3Q, the indication is that its pipeline remains healthy. It is also seeing traction from its growing corporate relationships in China for more corporate activities. Cost-to-income ratio is likely to stay near current level of 45%. Staff headcount has increased 9% YoY to 20,678 by 3Q14.
DBS remains our top pick in the sector; BUY
We have revised up our estimates, mainly on the Non-interest Income side to reflect the healthy guidance from management. Overall, we are expecting almost 10% growth in FY14 followed by 6% in FY15. Using the same valuation metric, but on a blended basis as we head into the final quarter, our fair value estimate moves up from S$19.90 to S$21.10. DBS remains a BUY and is our top pick in the sector.
DBS concluded the banking sector’s result season with a stronger-than-expected set of earnings. 3Q14 net earnings of S$1.01b, up 17% YoY, were better than Bloomberg’s poll of S$975m. Net Interest Margin (NIM) improved to 1.68% in 3Q14, up from 1.60% in 3Q13 and 1.67% in 2Q14. Loans grew 8% (from a year ago) to S$262b. Net Interest Income rose 14% YoY or 3% QoQ to S$1.60b in 3Q14. Non-interest Income improved 23% YoY or 21% QoQ to S$912m, giving total 3Q income of S$2.51b. For Fee Income, Investment Banking did well and saw a more than doubling in earnings to S$94m (YoY), while Wealth Management jumped 39% YoY to S$142m. Total AUM for HNW amounted to S$77b (pre-Societe Generale Private Banking Asia) or S$89b (post).
Guiding for 8-10% loans growth in 2015
After a slower 3Q, management is now guiding for 7-7.5% loans growth in 2014, followed by 8-10% growth in 2015. Growth will remain board-based, and despite the softness in the local property market, it expects its Singapore mortgage book to grow by S$3.7b-S$3.8b in 2014. It is also expecting NIM to stabilize at around current level. On the Investment Banking side, which saw a strong 3Q, the indication is that its pipeline remains healthy. It is also seeing traction from its growing corporate relationships in China for more corporate activities. Cost-to-income ratio is likely to stay near current level of 45%. Staff headcount has increased 9% YoY to 20,678 by 3Q14.
DBS remains our top pick in the sector; BUY
We have revised up our estimates, mainly on the Non-interest Income side to reflect the healthy guidance from management. Overall, we are expecting almost 10% growth in FY14 followed by 6% in FY15. Using the same valuation metric, but on a blended basis as we head into the final quarter, our fair value estimate moves up from S$19.90 to S$21.10. DBS remains a BUY and is our top pick in the sector.
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