Saturday, 15 June 2024

DBS Q1 net profit up 15% to $2.17B, ROE increases to 19.4%, reaching new highs

5 min read

DBS Group’s net profit for first-quarter 2024 rose 15% from a year ago to a record SGD 2.96 billion ($2.17 billion) while return on equity reached 19.4%.

Total income grew 13% to a new high of SGD 5.56 billion ($4 billion) as net interest margin was stable at 2.14%, fee income crossed SGD 1 billion ($735.4 million) for the first time and treasury customer sales reached a record. The cost-income ratio was little changed at 37% and profit before allowances rose 14% to SGD 3.48 billion ($2.5 billion). Asset quality remained resilient with NPL ratio at 1.1% and specific allowances at 10 basis points of loans.

Compared to the previous quarter, net profit was 24% higher. Total income grew 11% from the record fee income and treasury customer sales, as well as higher markets trading income. Expenses declined 6%, partly due to non-recurring items in the previous quarter.

Quarter-on-quarter performance

Commercial book net interest income was stable from the previous quarter at SGD 3.65 billion ($2.68 billion). Net interest margin rose two basis points to 2.77% as fixed-rate asset repricing was moderated by a lower Hibor.

Loans grew 1% or SGD 6 billion ($4.4 billion) in constant-currency terms to SGD 425 billion ($312.5 billion). The increase was due to non-trade corporate loans which rose 3% or SGD 7 billion ($5 billion). Trade loans and consumer loans were little changed.

Deposits rose 1% or SGD 7 billion ($5 billion) in constant-currency terms to SGD 547 billion ($402 billion). CASA outflows, which slowed from the previous year, was offset by an increase in fixed deposits.

Commercial book net fee income rose 20% to a record SGD 1.04 billion ($764 million). Wealth management fees grew 45% to SGD 536 million ($394 million) from a continued strengthening of market sentiment and from seasonal factors. Loan-related fees increased 30% to SGD 185 million ($136 million) while transaction service fees rose 6% to SGD 231 million ($169 million). The increases were moderated by a 38% decline in investment banking fees due to slower capital market activities and by a 3% decline in card fees from seasonal factors.

Commercial book other non-interest income grew 59% to SGD 621 million ($456.8 million) led by treasury customer sales which rose to a new high.

Markets trading income more than doubled to SGD 246 million ($180.9 million).

Expenses of SGD 2.08 billion ($1.53 billion) were 6% lower than the previous quarter, which had included non-recurring items.

Profit before allowances rose 24% to SGD 3.48 billion ($2.56 billion)

Year-on-year performance

Commercial book net interest income increased 8%. Net interest margin rose eight basis points from higher interest rates. Loans grew 1% from higher non-trade corporate loans and the consolidation of Citi Taiwan. Deposits were 3% higher.

Net fee income grew 23%. The growth was led by a 47% increase in wealth management fees from stronger market sentiment and an increase in assets under management. Card fees rose 33% from higher spending while loan-related fees grew 30%. The consolidation of Citi Taiwan benefitted wealth management and card fees.

Commercial book other non-interest income grew 44% led by an increase in treasury customer sales.

Markets trading income declined 9% from higher funding costs.

Expenses rose 10%, with Citi Taiwan accounting for five percentage points of the increase. The cost-income ratio of 37% was little changed.

Profit before allowances rose 14% from a year ago.

Balance sheet

Liquidity remained healthy. The liquidity coverage ratio of 144% and net stable funding ratio of 116% were both well above regulatory requirements.

Asset quality remained resilient. Non-performing assets rose 3% from the previous quarter to SGD 5.22 billion ($3.8 billion) with the NPL ratio unchanged at 1.1%. New non-performing asset formation was partially offset by repayments and write-offs. Specific allowances were 19% lower at SGD 113 million ($83.1 million) or 10 basis points of loans. General allowances of SGD 22 million ($16.18 million) were taken. Allowance coverage stood at 125% and at 223% after considering collateral.

The common equity tier-1 ratio rose 0.1 percentage points from the previous quarter to 14.7% as profit accretion was partly offset by higher risk weighted assets. The leverage ratio of 6.5% was more than twice the regulatory minimum of 3%.

The board declared a dividend of SGD 0.54 ($0.40) per share for the first quarter over the enlarged post-bonus share base.

Piyush Gupta, CEO, DBS said: “Our record earnings have given us a strong start to the year. We had broad-based business momentum as loans grew and both fee income and treasury customer sales reached new highs. While geopolitical tensions persist, macroeconomic conditions remain resilient and our franchise is well positioned to capture business opportunities. We are optimistic that total income and earnings will be better than previously guided and we will be able to deliver another year of strong shareholder returns.”

Re-disseminated by The Asian Banker

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