DBS Group Holdings Ltd’s Latest Earnings: Satisfying Results, Says the CEO

DBS Group Holdings Ltd (SGX: D05) reported in its first-quarter earnings this morning. The reporting period was for 1 March 2016 to 31 March 2016.

DBS Group is one of the three major banks based out of Singapore along with Oversea-Chinese Banking Corp. Limited (SGX: O39) and United Overseas Bank Ltd (SGX: U11). The group is a leading financial services group in Asia, with 280 branches across 18 markets.  

You can catch up with DBS Group’s fourth-quarter earnings here .

Financial highlights

Here’s a quick rundown on DBS Group’s total income (essentially the “revenue” for a bank):

  1. For the first-quarter of 2016, net interest income for DBS Group rose by 8% year on year to $1.83 billion.  
  2. Net fee and commission income for the reporting quarter increased by 3% year on year to $574 million.
  3. Other non-interest income was down though, retreating by 7% to $458 million.

Taken together, the three income streams brought DBS Group $2.87 billion in total income for the reporting quarter, or 5% above the first quarter of the prior year.

On the expense side of things:

  1. DBS Group’s expenses marched 7% higher year on year to $1.27 billion for the first-quarter.  
  2. Allowances for credit and other losses decreased 6% to $170 million in the first-quarter.   

In summation, DBS Group’s net profit for the first-quarter was $1.2 billion, representing a 6% increase from a year ago. The selfsame figure for the first quarter of 2015 was $1.1 billion (excluding one-off items).

DBS Group ended the reporting quarter with a book value per share of $16.39, up more than 6.3% from the selfsame figure of $15.42 seen a year before.

Operational Highlights

DBS Group’s net interest income rose in the reporting quarter from a higher net interest margin. The net interest margin was 1.85%, up from the net interest margin of 1.69% recorded a year ago.

Meanwhile, net fee and commission income benefitted from increases in wealth management fees and card fees. Elsewhere, other non-interest income fell due to lower treasury activities.

Customer loans for the reporting quarter fell by 2% from a year ago to end with $274.1 billion. The non-performing loan rate was 1.0%, up slightly from 2015’s first-quarter.

For the first-quarter of 2016, average customer deposits was $313.8 billion or 3% lower from the same quarter a year before. The loan to deposit ratio was 87.4%.

Based on regulatory requirements from the Monetary Authority of Singapore, banks in Singapore must have at least the following Capital Adequacy Ratios (CARs) from 1 January 2015: Common Equity Tier 1 (CET1) at 6.5%, Tier 1 at 8% and Total at 10%.

DBS Group can be considered well capitalized as its CARs are comfortably higher than MAS’ requirements at 14.0%, 14.3% and 16% respectively.

Chief Executive Officer Piyush Gupta summarized the reporting quarter with a few words:

“While we have had a succession of record earnings, this quarter’s performance is particularly satisfying because it was achieved in unusually challenging market conditions. We are proud of the depth and quality of the franchise we have systematically built over the past few years. Our continuing investments in regional businesses and efforts to reinforce risk management, together with a robust balance sheet, put us in a strong position to continue supporting customers and delivering consistent shareholder returns.”

Foolish summary

At its opening price of $15.52 this morning, DBS Group traded at around 0.95 times price to book and a trailing dividend yield of 3.9%.

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.