DBS posted 4QFY13 net earnings of S$973m or full year earnings of S$3.672b, below market expectations. Loans growth was broad-based and grew 18% to S$248.6b by end 2013. Net Interest Margin (NIM) improved slightly from 1.60% in 3Q13 to 1.61% in 4Q13. Management has declared final dividend of 30 cents, up from 28 cents previously. This brings total full year dividend to 58 cents. The group continued to enjoy good growth from several of its key businesses; SME (income CAGR of 8% from 2009-2013), Wealth (18% and AUM of about S$69b) and Transactional Banking (21%). Management is expecting loans growth of 8-10% in FY14. Using a more prudent valuation of 1.2x book in view of the present weak market sentiment, we derive a fair value estimate of S$18.08 (versus S$18.28 previously). Maintain BUY.
4Q13 below expectations; raised full year payout to 58 cents
DBS posted 4QFY13 net earnings of S$973m (including one-off item of S$221m from the divestment of its stake in the Bank of Philippine Islands and less S$50m for the DBS Foundation), giving full year net earnings of S$3.672b (or S$3.5b before one-off items). This is slightly below market expectations of S$3.6b, according to Bloomberg. The main variance in our projection versus the actual result was lower Non-interest Income, which came in below our expectations if not for the one-off items. Loans growth was broad-based and grew 18% to S$248.6b by end 2013. Singapore accounted for the bulk or 47%. Net Interest Margin (NIM) improved slightly from 1.60% in 3Q13 to 1.61% in 4Q13. Cost-to-income ratio eased slightly from 44.8% in FY12 to 43.9% in FY13. NPL ratio was stable at 1.1%. For 4Q13, the key improvement in fee and commission income came from Investment Banking (+59%), Wealth Management (+25%) and Cards (+15%). Management has declared final dividend of 30 cents, up from 28 cents previously. This brings total full year dividend to 58 cents. DBS shares will trade ex-dividend on 12 May 2014.
New initiative in digital banking
The group continued to enjoy good growth from several of its key businesses; SME (income CAGR of 8% from 2009-2013), Wealth (18% and AUM of about S$69b) and Transactional Banking (21%). Management is stepping up its investment in digital banking in a collaboration with A*Star and IBM Watson to enhance the customer experience. This is likely to involve investment of about S$200m over three years.
Maintain BUY; lowering fair value estimate to S$18.08
Management is expecting loans growth of 8-10% in FY14. It is also expecting to see a 10-15% correction for the Singapore property market, but shared that stress test on its mortgage book showed that it can withstand a correction of up to 30% in property price. Overall, we have included higher investment costs and adjusted lower our Non-interest Income estimate. Using a more prudent valuation of 1.2x book in view of the present weak market sentiment, we derive a fair value estimate of S$18.08 (versus S$18.28 previously). Maintain BUY.
DBS posted 4QFY13 net earnings of S$973m (including one-off item of S$221m from the divestment of its stake in the Bank of Philippine Islands and less S$50m for the DBS Foundation), giving full year net earnings of S$3.672b (or S$3.5b before one-off items). This is slightly below market expectations of S$3.6b, according to Bloomberg. The main variance in our projection versus the actual result was lower Non-interest Income, which came in below our expectations if not for the one-off items. Loans growth was broad-based and grew 18% to S$248.6b by end 2013. Singapore accounted for the bulk or 47%. Net Interest Margin (NIM) improved slightly from 1.60% in 3Q13 to 1.61% in 4Q13. Cost-to-income ratio eased slightly from 44.8% in FY12 to 43.9% in FY13. NPL ratio was stable at 1.1%. For 4Q13, the key improvement in fee and commission income came from Investment Banking (+59%), Wealth Management (+25%) and Cards (+15%). Management has declared final dividend of 30 cents, up from 28 cents previously. This brings total full year dividend to 58 cents. DBS shares will trade ex-dividend on 12 May 2014.
New initiative in digital banking
The group continued to enjoy good growth from several of its key businesses; SME (income CAGR of 8% from 2009-2013), Wealth (18% and AUM of about S$69b) and Transactional Banking (21%). Management is stepping up its investment in digital banking in a collaboration with A*Star and IBM Watson to enhance the customer experience. This is likely to involve investment of about S$200m over three years.
Maintain BUY; lowering fair value estimate to S$18.08
Management is expecting loans growth of 8-10% in FY14. It is also expecting to see a 10-15% correction for the Singapore property market, but shared that stress test on its mortgage book showed that it can withstand a correction of up to 30% in property price. Overall, we have included higher investment costs and adjusted lower our Non-interest Income estimate. Using a more prudent valuation of 1.2x book in view of the present weak market sentiment, we derive a fair value estimate of S$18.08 (versus S$18.28 previously). Maintain BUY.
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