DBS Group Holdings Ltd: Stellar Performance Across All Key Parameters February 12, 2018 1255

PSR Recommendation: BUY Status: Maintained
Target Price: SGD29.30
  • 4Q17 PATMI of S$1.2bn was in line with our estimates.
  • Loan volume, NIMs, loans quality and Non-II results were stellar.
  • Strong momentum in Consumer and SME banking segment in Hong Kong and Singapore.
  • Strong momentum in WM and IB fee income.
  • Maintain BUY rating with unchanged target price of S$29.30


The Positives

+ Stronger NII is driven by strong broad-based loans growth and higher yields. Loans growth was c.7% higher YoY as housing loans continued the strong QoQ growth momentum. DBS share of Singapore mortgage loans edged higher to 30.8% from 28.7% in June 2017. Rates and volume growth for trade assets was robust helped by the strengthening of RMB.

+ Consumer and SME banking in Singapore and Hong Kong gained momentum. 4Q17 WM income was S$534mn (+26.5% YoY) but was 2.2% lower QoQ due to a seasonally weak 4Q. 4Q17 Retail income growth was flat YoY but grew 5.7% QoQ following a generally weak performance from 1Q17 through to 3Q17. SME banking was a bright spot, growing 16.2% YoY and 2.8% QoQ on the strong business expectations and PMI reading in Singapore and continued strength in Chinese consumer sentiment.

+ Provision expense has normalised after the major clean-up in 3Q17. The normalisation of the provision expense in 4Q17 was a pleasant surprise as we had expected a carryover of higher provision expense from the 3Q17 clean-up. We believe the normalisation is an indication that the clean-up in 3Q17 was sufficient to clear the path a stronger asset quality performance in 2018.

+ Annual dividend per share will double in 2018 from the pay-out in 2016! The final one-tier tax exempt dividend was increased to S$0.60 per share from S$0.30 per share in 2016. In addition, a special dividend of S$0.50 per share was also announced. Barring any unforeseen circumstances, the proposed annual dividend moving ahead will be raised to S$1.20 per share, double the annual rate of S$0.60 per share in 2016. The S$1.20 per share dividend represents a c.50% dividend pay-out ratio based on FY18e earnings and a dividend yield of c.4.5% at current share price.     

The Negatives

– CIR expected to be stable at 43%. We had expected CIR to improve slightly in FY18. However, management has guided it to be stable at 43% in FY18. This is due to the integration of Indonesia and Taiwan markets from the ANZ acquisition. Indonesia and Taiwan businesses’ CIR is between 60% and 80%. Excluding these 2 businesses, CIR would have been 42.5%.


In FY18, we expect NIM to be c.1.87% and loans growth to be between 7% and 8%. Given those assumptions, we can expect total income to grow 10%. We expect full year total credit cost to be 26bps and CIR to be 43%.

Valuation: Gordon Growth Model


3-Year Historical Price-to-Book


Notify of
Inline Feedbacks
View all comments

About the author

Profile photo of Jeremy Teong

Jeremy Teong
Investment Analyst
Phillip Securities Research Pte Ltd

Jeremy covers primarily the Banking and Finance sector. He has 6 years’ experience in equities related dealing and research roles.

He graduated with Bachelors of Mechanical Engineering from Nanyang Technological University.

Get access to all the latest market news, reports, technical analysis
by signing up for a free account today!