DBS Group Holdings Ltd (SGX:D05) will be releasing its first-quarter 2018 results on Monday, 29 April. All eyes will be on DBS as it will set the precedent for the earnings results of the other major banks, which will release their earnings updates a few days later.
Here’s what investors should keep an eye on when DBS provides its earnings report.
Net interest margin
The Federal Reserve’s sudden change in position to a more hawkish view will likely leave interest rates unchanged this year. However, net interest margins for banks in Singapore are still expected to increase in 2019.
In all of 2018, the average net interest margins for the group increased to 1.85% from 1.75% in 2017. More specifically, net interest margin increased to 1.87 in the fourth quarter of 2018.
I am expecting net interest margin in the first quarter of 2019 to increase slightly. Compared to the first quarter of 2018, which saw a net interest margin of 1.83%, investors can expect at least a mid-single-digit percentage points increase year on year.
Loan volume growth increased every quarter in 2018. For the full year, loan volume grew S$21 billion, and more specifically, loan volume in the fourth quarter of 2018 increased by S$5 billion.
As of the end of December 2018, DBS had a total loan book of S$350 billion. In the last earnings update in 2018, CEO Piyush Gupta said that he expects mid-single-digit loan growth for 2019 and continued net interest margin expansion.
It will also be interesting to see the medium-term impact of the additional property cooling measures imposed in July last year on home loan volume.
2018 was a formidable year for DBS. The bank achieved a decade-high return on equity and record income. However, the treasury market was the one blip in its business. Treasury market income declined 21% year on year in 2018, following a 24% decline in 2017.
While treasury markets contribute just a fraction of DBS’s overall business, investors should continue to monitor any developments in this segment.
The Foolish bottom line
DBS will be the first of the trio of major banks listed in Singapore to release results for the first quarter of 2019. It will not only provide investors with an important update on the bank, but also set the precedent for the performances of the other two major banks.
Besides the three key issues mentioned above, investors can also keep an eye on the bank’s fee income, cost-income ratio, and balance-sheet indicators.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore recommends DBS Group Holdings Ltd. Motley Fool Singapore contributor Jeremy Chia owns shares of DBS Group Holdings Ltd.