The Straits Times
www.straitstimes.com
Published on May 03, 2013
DBS shares soar on record Q1 profit
Net profit up 2% to $950m, driven by surge in non-interest income
By Magdalen Ng
DBS Group Holdings' share price soared to its highest since 2008, as the bank reported record first-quarter profits yesterday, boosted by a surge in non-interest income.
For the three months ended March 31, DBS posted a net profit of $950 million, up 2 per cent from a year ago, surpassing analysts' expectations of $824 million according to a Bloomberg survey.
This was on the back of a 7 per cent increase in total income to $2.32 billion.
The results sent DBS' share price soaring by 83 cents, or 5 per cent, to an intra-day peak of $17.59 in trading yesterday, the highest since it closed at $17.67 on May 6, 2008.
Net interest income, however, fell 1 per cent to $1.32 billion, as net interest margins declined 13 basis points to 1.64 per cent from a year ago. The impact of the decreased margins was dampened by a 13 per cent spike in loans from a year ago to $224 billion.
This has prompted chief executive Piyush Gupta to raise his forecast for loans growth from 10 per cent for the full year, to "low double digits".
"We had a one-off large ticket loan in the first quarter but, aside from that, we still grew 4 per cent (from the previous quarter). The pipelines are still very robust," he added.
Non-interest income, which includes fee and commission income, grew 21 per cent from a year ago to $990 million, as the bank expanded its annuity businesses such as wealth management, and trade and transaction services.
Mr Gupta added that during the quarter, there was also strong contribution from market-related fee income such as investment banking and stockbroking fees.
Expenses were up 6 per cent from a year ago to $952 million, but the cost to income ratio declined from 41.7 per cent a year ago to 41.1 per cent.
While asset quality improved, with the non-performing loans ratio down from 1.3 per cent a year ago to 1.2 per cent, the bank's specific allowances for loans were up from nine basis points to 21 basis points.
Mr Gupta said: "Overall, the credit environment is not as good as it was two years ago. We said in the middle of last year that India was beginning to get a bit more tricky, but it is not massive. We do not have large exposures which are in trouble."
Analysts were surprised by the solid set of results posted by South-east Asia's largest lender, and maintained buy calls on the counter.
However, OCBC analyst Carmen Lee noted that, even though estimates for DBS have been adjusted marginally, she does not expect a repeat of the strong fees and commissions, and trading income for the rest of the quarters this year.
Mr Gupta is optimistic about the bank's performance but noted that there are uncertainties ahead, given that the economic data coming out of the United States and China for the past two months seems to be weak.
"How much all of these add up and will you wind up with a massive slowdown over the next quarter or two is tough to call. But our basic approach continues to be 'be resilient and be nimble'. If the core of our business is consistent and solid, and we can be nimble at the margins, we can take advantage."
On whether DBS has plans to make inroads in the Myanmar and Vietnam markets, Mr Gupta said that there is interest, but noted that the two markets are not going to "move the needle for any big bank in the foreseeable future".
"We are reluctant to hold minority positions. We would rather do control transactions - we like being operating managers," he said on the possibility of acquisitions in Vietnam.
He also said that DBS' partners in Malaysia have gained approval from Bank Negara to talk to a couple of interested parties to buy out DBS' stake in Hwang-DBS.
He declined to comment on the status of the acquisition of Bank Danamon, which is still pending regulatory approval from Bank Indonesia.
Earnings per share remained unchanged from a year ago at $1.58, while net asset value per share was up from $12.28 last year to $13.35.
DBS shares closed 76 cents higher at $17.52 yesterday.
songyuan@sph.com.sg
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