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DBS: Record Income and Profit

DBS Group LOGODBS Group Holdings (SGX: D05) reported first-quarter result today. It posted a 2% increase in profit from S$950m to a record S$933m. Total Income for the quarter also set a new record of S$2.32b – a 7% increase from last year. Investors seemed pleased. The shares were up 4.4% to $17.50 at lunchtime.

The bank’s Total Income growth was mainly fuelled by an increase in its Non-Interest Income. It jumped by 21% from S$820m a year ago to S$990m. Quarterly Net Interest Income on the other hand, declined slightly by 1% to S$1.33b.

DBS’s Non-Interest Income growth can be attributed to an increase in its wealth management services, trading gains, stockbroking and investment banking activities as well as a rise in sales of treasury products.

The slight year-on-year fall in quarterly Net Interest Income also brought with it a decline in net interest margins from 1.77% last year to 1.64%. DBS is not alone in seeing net interest margin fall. Overseas-Banking Chinese Corporation (SGX: O39) suffered the same fate in its first quarter.

There’s a slightly brighter note for DBS though, as net interest margins actually improved from 1.62% a quarter ago. Prior to the recently completed quarter, its net interest margin had fallen every quarter for the whole of 2012.

Investors will be pleased to hear that DBS’s loan assets had improved slightly in quality as its non-performing loan ratio decreased from last year’s 1.3% to 1.2%.

Turning to the bank’s balance sheet, DBS remains well capitalised. Its Common Equity Tier 1 capital adequacy ratio (CAR), Tier 1 CAR and Total CAR stands at 12.9%, 12.9% and 15.5% respectively. These are well in excess of MAS’s Basel III requirements of 4.5%, 6% and 10%.

The bank’s Chief Executive Officer, Piyush Gupta commented on the quarter: “After a slower second half in 2012, we started the year on a very solid note. Business momentum is strong, and growth has been broadbased, showing the impact of our investments across all lines of business. We also benefited from favourable market conditions, enabling us to turn in yet another quarter of record earnings.”

Based on its current share price of $17.50, DBS is now selling for 1.3 times its net book value and sport a dividend yield of 3.2% based on last year’s full-year pay-out.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chong Ser Jing doesn’t own shares in any companies mentioned.