DBS share price rebounds after 2Q24 earnings
DBS share price rose 2.45% to close at S$33.65 on 7th August, after the company reported its results and dividends for the second quarter of 2024 (2Q24).
The shares had fallen from an all-time high of S$38.55 to reach S$32.75 on 6th August, with the sell-off in global stocks on US recession concerns.
Let us find out what is driving the improved sentiment towards DBS’ shares.
Summary of DBS 2Q24 earnings
DBS reported its results and dividends for the second quarter of 2024 (2Q24).
- DBS reported a 6.1% year-on-year increase in net profit to S$2.8 billion in 2Q24
- DBS 1H24 net profit of S$5.74bn was 10.4% higher than in 1H23. This represents about 54.5% of the full year consensus estimate of S$10.53bn.
- Dividend per share was increased to 54 cents in 2Q24 from 44 cents in 2Q23, but remains unchanged compared to the previous quarter.
Separately, DBS also announced that its current Chief Executive Officer (CEO) Piyush Gupta will step down in March 2025.
He will be succeeded by Tan Su Shan, 56, who is currently the Global Head of Corporate and Commercial Banking at DBS.
DBS’ loans were flat quarter-on-quarter but rose 2.2% year-on-year.
DBS Commercial book net interest margin (NIM) rose 0.06%-point quarter-on-quarter to 2.83%, after a 0.02%-point gain in 1Q, as it continues to benefit from repricing of fixed-rate assets.
The overall NIM stayed flat at 2.14%, with lower margin from trading.
Fee income growth was driven by credit card which benefited from the integration of Citi from late 3Q23. Wealth management fees dipped slightly but asset under management (AUM) rose S$14bn to S$396bn in this quarter.
Expenses rose 4% quarter-on-quarter due to higher staff costs. Cost-income ratio remained low at 39.6%.
Asset quality remains healthy, and credit costs continue to trend downwards. Credit cost for impaired loans was 8 basis points, compared with 10 basis points in 1Q24.
It recorded ROE of 18.2% with CET-1 ratio at 14.8%.
Beansprout’s take on DBS 2Q24 results
This was a very strong set of results with expansion in net interest margin (NIM) from commercial book and higher fee income.
Management has raised its guidance from that given in 1Q. It is now guiding for net profit to grow at mid- to high-single digit.
It expects net interest income to grow at mid-single digit percent (1H24: +4.7%). We think this could be derived from low single digit growth in loans, and a flat to slight decline in NIM in 2H24.
Non-interest income growth guidance is maintained at mid-to-high teens. A full year integration of Citi and the higher AUM are likely to drive credit card and wealth management income.
Management expects the credit cost on impaired loans to remain benign at 10-15 basis points.
Based on DBS previously guided dividend of 54 cents for 3Q24 and 60 cents for 4Q24, its total dividend of S$2.22 for FY24 translates into yield of 6.6%.
This is above UOB’s dividend yield of 5.9%, and OCBC’s dividend yield of 6.4%.
DBS is currently trading at 1.52x price-to-book.
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