DBS Group Holdings Ltd (SGX: D05) is one of the cool companies in Singapore’s stock market that shares webcasts and/or transcripts of their earnings presentations. In mid-February, the company released its 2016 fourth quarter and full year earnings. I had recently spent time watching the webcast of DBS Group’s earnings presentation and noted down nine things that may interest investors. As a quick background, DBS Group is one of the three major banks based out of Singapore (it is actually the largest) and a leading financial services group in Asia, with 280 branches across 18 markets. With that, here are my notes:…
In mid-February, the company released its 2016 fourth quarter and full year earnings. I had recently spent time watching the webcast of DBS Group’s earnings presentation and noted down nine things that may interest investors.
As a quick background, DBS Group is one of the three major banks based out of Singapore (it is actually the largest) and a leading financial services group in Asia, with 280 branches across 18 markets.
With that, here are my notes:
1. Chng Sok Hui, DBS Group’s chief financial officer, kicked off the meeting with an overview of the bank’s performance. She said that DBS Group achieved a strong performance in 2016, despite a challenging operating environment.
2. Total income grew 6% to $11.5 billion in 2016, in what Chng described as broad-based growth. Cost was contained to a 1% increase due to efforts to digitise the bank and strategic cost management. The combination of higher total income and contained-costs was a 10% increase in profit before allowances. Unfortunately, this double-digit increase was dragged down to negative figures due to higher allowances taken for the bank’s oil and gas portfolio.
3. DBS Group’s net interest margin (NIM) was 1.71% for the fourth quarter of 2016. DBS Group recorded a NIM of 1.8% in 2016, up from 1.77% last year. Chng said that DBS Group expects its 2017 NIM to be higher, moving with expected interest rate hikes from the Federal Reserve in the US.
4. Total loans rose by $18 billion, or 6%, in 2016. An 18% increase in non-trade loans (a $21 billion increase) due to higher regional corporate loan volumes and market share gains in Singapore housing loans helped drive the total loans growth. Trade loans, on the other hand, was $2 billion lower in 2016 compared to 2015. DBS Group expects its loan growth in 2017 to be in the mid-single digit range.
5. DBS Group reported a loan-to-deposit ratio of 87% at end-2016. The Asian banking giant also had a loan coverage ratio of 133%, which is already above the Basel requirement of 100% by 2019. This was up from the 122% recorded a year ago.
6. Fee income for 2016 rose by 8%, led by growth in wealth management, cards, cash management and investment banking. Wealth management income rose 19% from a year ago.
7. For 2016, total Institutional Banking (IBG) income was $5.22 billion while profit before tax was $1.98 billion. Profit before tax was down 34% due to $1.5 billion in allowances related to the oil and gas support services sector.
8. Total Consumer Banking and Wealth Management (CBG) income was $4.3 billion, a new record. Profit before tax was $1.8 billion. Chng said that DBS Group has vaulted into the top five banks in Asia Pacific for assets under management (AUM) in its Wealth Management segment; the bank’s AUM grew 14% to $166 billion.
9. Non-performing loans (NPL) was 1.4% for the fourth quarter of 2016. This was up from 0.9% a year ago and 1.3% in the third quarter. Specific allowances rose from $622 million for the whole of 2015 to $1.49 billion in 2016. Chng said that DBS Group took more specific provisions for exposures in the oil and gas sector.
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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.