DBS Cashes In On Record Half-Year Profit

DBS_Bank_Logo.svgSouth-East Asia’s largest bank by assets DBS (SGX: D05) announced that it had made a profit of S$1.84b for the first six months of the year, setting a new record for itself for half-year earnings.

DBS’s first-quarter results can be found here, Let’s see how it fared in the second quarter.

The bank’s quarterly total income rose 19% year-on-year to S$2.31b, driven by a growth in both net interest income as well as non-interest income.

Net interest income inched up by 4% to S$1.38b compared to a year ago as DBS saw higher loan and deposit volumes that made up for a year-on-year 10 basis point decline in net interest margin to 1.62%.

Non-interest income, which is comprised of fee income, trading income and ‘other’ income, soared by 49% to S$927m. The main contributor to non-interest income growth was the trading income component, which increased by more than 150% to S$336m. Quarterly fee income also saw healthy year-on-year growth of 26% to S$477m that was largely driven by an increase in wealth management fees.

DBS’s total income growth outpaced the rise in its expenses (a 13% increase to S$987m compared to a year ago) but a 144% year-on-year increase in loss-allowances to S$245m meant that the bank’s profit couldn’t grow as fast as its total income. DBS ended the quarter with a 10% rise in profit to S$887m.

For any bank, the strength of its balance sheet is of paramount importance to investors and on that front, DBS had a healthy showing.

DBS’s loan-portfolio for the quarter remained solid, with a non-performing-loan (NPL) ratio of only 1.2%, a drop of 0.1 percentage-points from a year ago.

The bank’s capital adequacy ratios, which measure how much ‘cushion’ a bank has for potential losses, are also “comfortably above regulatory requirements”. The higher the ratio, the thicker the cushion.

Its Common Equity Tier 1 ratio is at 12.9%, Tier 1 ratio is at 12.9%, and Total Capital Adequacy ratio is at 15.5%. The Monetary Authority of Singapore’s requirements for these ratios are 4.5%, 6% and 10% respectively.

DBS has also declared a dividend of 28 cents for the first half of 2013, unchanged from last year.

Piyush Gupta, the Chief Executive Officer of DBS, commented on the bank’s results: “DBS turned in record half-year earnings, notwithstanding a normalising credit cost environment. While we expect some slowdown in the region in the short term, Asia’s long-term growth story is intact.

The bank’s strong second quarter showing is testament to the strength and resilience of our franchise and we will be watchful and disciplined as we continue to entrench our position as a leading Asian bank.”

The market seems to like what it’s seeing with DBS as its shares are up by 2.4% to S$17.10 at the time of writing. At that price, shares of DBS are trading at 1.3 times its book value, and carry a forward annualised-dividend yield of 3.3% based on the half-year pay-out of 28 cents.

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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.