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5 Things I Like About DBS Group’s H1 2019 Earnings Update

DBS Group Holdings Ltd (SGX: D05), or DBS for short, is one of the three major banks based out of Singapore, along with United Overseas Bank Ltd (SGX: U11) and Oversea-Chinese Banking Corp Limited (SGX: O39).

The company earlier today announced its 2019 first-half earnings update. Here are five positive things that I think investors should know about its results. But first, let’s run through the company’s numbers.

The results

Here’s a quick summary of some key financial metrics for the first six months of 2019.

Source: DBS Group’s H1 2019 Results Presentation

Overall, we can see that all metrics improved on a year-on-year basis. But there is more to these numbers. Here are the five things I took away from them.

  1. Total income for the first half grew 11% year-on-year to a record high of S$7.3 billion due to non-trade corporate loans, higher net interest margin, record fee income and recovery in trading income. In other words, the growth was broad-based across the different parts of the business.
  2. DBS Group’s Hong Kong business delivered a strong performance (even stronger when we compare it to the group), with total income up 11% year-on-year (on a constant-currency basis) to a record S$1.5 billion (excluding property gains) while net profit grew 13% year-on-year to a record of S$0.76 billion.
  3. Net profit grew even faster than total income, mainly driven by the one percentage point improvement of the cost-to-income ratio to 42%. In other words, the company is improving its efficiency in addition to growing its revenue.
  4. Annualised return on equity (ROE) improved to 13.7% from 12.5% a year ago. This is not surprising given the improvement in the bank’s top and bottom lines.
  5. Last but not least, DBS Group maintained an extremely sound capital position as of 30 June 2019. Its Common Equity Tier 1 capital adequacy ratio (CAR), Tier 1 CAR and Total CAR as at 30 June 2019, were 13.6%, 14.5% and 16.2% respectively. These ratios were well above the respective regulatory requirements of 6.5%, 8% and 10%, indicating that it is well positioned to weather volatility as well as pay out dividends.

Conclusion

Overall, it was a strong performance from DBS Group despite some macroeconomic uncertainty and geopolitical tensions.

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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. Motley Fool has recommended the shares of DBS Group Ltd, Oversea-Chinese Banking Corp Limited and United Overseas Bank Ltd.