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3 Negative Things Investors Should Know About DBS Group Holdings Ltd’s 2017 Second Quarter Performance

DBS Group Holdings Ltd (SGX: D05) is Singapore’s largest bank by total assets.

Recently, I went through the bank’s 2017 second quarter results and found both positive and negative things. In a previous article, I shared the good developments. In this article, I would like to share the negatives:

1. Higher non-performing loan (NPL) ratio

In the second quarter of 2017, DBS’s total non-performing loans was S$4.47 billion, up from S$4.36 billion in the first quarter of 2017, and S$3.26 billion in the second quarter of 2016. This caused its NPL ratio to end at 1.5 in the reporting quarter, up from 1.4 and 1.1 in the first quarter of 2017 and second quarter of 2016, respectively.

The bank saw its NPL ratio increase (on a year-on-year and sequential basis) in a number of its geographical segments, namely, Hong Kong, South and Southeast Asia, and the Rest of the World.

2. Lower net interest margin (NPI)

The chart below shows DBS’s net interest margin (the black line) and net interest income (the pink bars) since the first quarter of 2016:


Source: DBS 2017 second quarter earnings presentation

We can see that the bank’s net interest margin has been down-trending since the first quarter of 2016, although there was a slight pick-up in the first quarter of 2017.

3. Lower return on equity for the first half of 2017

In the first half of 2017, DBS generated a return on equity (ROE) of 10.6%, which was down from 11% a year ago.

There are strong positives in DBS Group’s 2017 second quarter earnings updates. But, investors should not ignore the negatives as well when considering the bank’s overall performance.

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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 Lawrence Nga doesn’t own shares in any companies mentioned. The Motley Fool Singapore has a recommendation for DBS Group.