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DBS opens 2% higher after posting better-than-expected Q2 earnings

DBS shares rose 2% in the first few minutes of trading on Thursday, after the group’s Q2 net profit beat analyst estimates.

DBS share price: What’s the latest?

DBS Group Holdings (SGX: D05) saw its share price rally past the S$20 mark on Thursday 06 August 2020, after the company reported lower profits for the second quarter of fiscal 2020.

As at 09:05 SGT on Tuesday, DBS Group shares are trading at S$20.23 each on the IG platform – a 2% increase from the previous day’s close.

IG’s market analysis shows that ‘sells’ form 52% of all trades on the DBS counter so far this week. Additionally, 82% of client accounts also currently hold ‘buy’ (long) positions on the stock, indicating an expectation for DBS’ share price to rise in the immediate term.

As of 30 July 2020, the stock has a 12-month consensus share price target of S$20.55 per share from six analysts, alongside an average rating of ‘buy’ – based on a Refinitiv poll of 18 brokers.

DBS’ net profit fell 26% in H1 2020

The money lender announced its earnings for the six months ended 30 June 2020 before the market opened on Thursday.

It reported a net profit of S$1.25 billion for Q2 2020, 22% lower than that of Q2 2019’s S$1.6 billion. This figure surpassed Refinitiv analyst expectations for a 25.9% net profit drop to S$1.187 billion.

On a half-year basis, net profit came in at S$2.41 billion for the first half of 2020, 26% lower than that of H1 2019.

Total income remained flat for the June ending quarter at S$3.73 billion, compared with S$3.71 billion in Q2 2019.

Breaking down by income segment, net interest income decreased 5% year-on-year to S$2.3 billion, fee income declined 11% year-on-year to S$681 billion, while other non-interest income rose 45% to S$742 million, led by gains on fixed-income investments.

General provisions against bad loans rose 240% to S$849 million in this quarter, up from S$251 million in the same period a year ago.

The non-performing loan rate in the second quarter was unchanged from a year ago at 1.5%, and an improvement from the previous quarter’s 1.6%.

Are you looking to buy long or short sell the DBS stock without trading the underlying asset? Start today by opening a live or demo IG account.

DBS lowers dividends by 40% to S$0.18 per share for Q2

The group also proposed an interim one-time tax-exempt dividend of S$0.18 per share, 40% below the amount of S$0.30 paid a year prior, in which the scrip dividend scheme will be applicable.

The lower dividends were also offered in line with the Monetary Authority of Singapore’s recent dividend guidance for Singapore banks. The total estimated dividend payable is S$457 million.

The issue price for new shares to be allotted to shareholders who have elected to receive the Q2 2020 interim dividend in scrip shall be the average of the closing prices of each DBS Group Holdings ordinary share on the SGX-ST on 14 and 17 August 2020.

The second quarter dividend is expected to be paid out to shareholders ‘on or about’ 05 October 2020.

DBS expects loan growth to remain ‘resilient’ for the rest of 2020

Looking ahead, the group says its operating trends for the rest of 2020 are still in line with the guidance provided in Q1 2020.

In terms of specific outlook areas, DBS expects loan growth to remain ‘resilient’ at 5%, led by non-trade corporate loans.

It also expects that full-year net interest margin to be around 1.6%.

Additionally, DBS noted that several fee income streams have been improving since the lows recorded in April 2020 with Singapore’s Covid-19 lockdowns now eased.

Cards and bancassurance, for instance, rebounded in June 2020, but still remain below pre-Covid-19 levels, while wealth management investment income rebounded strongly from its April trough to pre-pandemic levels.

In terms of credit outlook, the group says its guidance for total allowances of S$3 billion to S$5 billion over the next two years will be maintained. It added that it is also ‘not seeing much non-performing loan formation and special provisions in 2Q other than for unsecured consumer credit’.

DBS CEO Piyush Gupta commented: ‘The strong operating performance we reported amidst severe macroeconomic headwinds in the first half attests to the resilience of our franchise. Our solid balance sheet was further fortified by a significant increase in allowance reserves, strong liquidity inflows and healthy earnings.

‘Notwithstanding the uncertainties, we are in a good position to continue supporting customers and the community through the difficult months ahead of us.’

How to trade DBS with IG

Are you feeling bullish or bearish on DBS Group Holdings? Either way you can buy (long) or sell (short) the asset using derivatives like CFDs offered on IG's industry-leading trading platform in a few easy steps:

  1. Create a live or demo IG Trading Account, or log in to your existing account
  2. Enter <DBS Group Holdings Ltd> in the search bar and select the instrument
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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