DBS maintains dividend rate despite a 29% drop in Q1 2020 profit
The financial services group’s share price rose 1.1% to S$20 per share - a two-month high - despite a 29% decline in Q1 net profit.
How did DBS fare in the first quarter of 2020?
Singapore money lender DBS Group reported a net profit of S$1.17 billion for the three months ended 31 March 2020 (Q1 2020), a 29% decline from a year ago. This is slightly above the S$1.13 billion estimates given by Refinitiv analysts.
Southeast Asia’s largest financial services institution attributed this drop in income to higher loan-loss provisions that it has ‘pre-emptively set aside’ for potential loan risks in light of the Covid-19 pandemic.
This latest charge – equating to a further S$703 million – raised the amount of general allowance reserves for this quarter by 29% to S$3.23 billion, as the bank sought to fortify its balance sheet.
Total income grew 13% from a year ago to a new high of S$4.03 billion, on the back of healthy broad-based growth in non-trade corporate loans and fee income, and gains from investment securities.
Following the Q1 results release, IG data showed that DBS Group’s share price rose 1.1% to S$20.02 per share – its highest level since early-March – within the first 30 minutes of trading on Thursday 30 April 2020.
The average share price target for DBS based on five analyst estimates is S$22.338 per share. Of these, two have rated the DBS stock a ‘buy’.
Gain access to DBS and thousands of equities and financial markets via IG's world-leading online trading and investments platform. With CFDs, you can buy long or sell short on DBS shares depending on whether you think prices will rise or fall. Start today by opening an IG account.
DBS Q1 2020 dividend maintained from previous quarter
The group’s Board of Directors has declared a quarterly dividend per share (DPS) of S$0.33 for Q1 2020, unchanged from the previous quarter, but higher than Q1 2019’s DPS of S$0.30.
The total estimated interim dividend payable is S$838 million, with payment to be made on 26 May 2020.
Group CEO Piyush Gupta said in the Q1 presentation that the company’s current earnings generation is ‘expected to be sufficient for maintaining the quarterly dividends per share at S$0.33’.
From an operations standpoint, Gupta stated that business volumes remain strong, as productivity stayed at a high level with the bank’s seamless transition into remote working across all functions.
Its recent roll out of digital capabilities – including more self-service online options on the IDEAL platform (which has seen a 28% growth in year-on-year use), more account opening services for migrant workers (over 35,000 account opened in less than two weeks), and customer chatbots regarding the bank’s Covid-19 relief measures – have also allowed operations to stay undisrupted.
Outlook: interest rate cuts are 'main pressure to 2020 earnings'
Gupta said that Q1’s profit before allowances growth of 20% ‘has given us a head start to face the challenges of the coming year’, as it ‘provides capacity to absorb expected increase in allowances’.
He forecasted that full-year profit before allowances for 2020 will be around 2019 levels, even after factoring in declines caused by Covid-19.
Are you bullish or bearish on DBS Group? Either way, you can buy long or sell short on DBS Group shares and other Singapore-listed stocks using CFDs and other instruments offered on IG's world-leading trading platform. Start today by opening a live or demo IG account.
However, he cautioned that interest rates will likely have the biggest impact on overall earnings from Q2 onwards as a result of the recent interest rate cuts by central banks, which were not reflected in the latest Q1 report.
For this past quarter ending 31 March 2020, net interest income increased 7% from a year ago and 2% from the previous quarter to S$2.48 billion, while net interest margin dipped slightly from the previous quarter’s 1.88% to 1.86%.
Gupta also reiterated a statement from earlier this month that the company has no plans for retrenchments and pay cuts. However, he said the bank is ‘hiring judiciously’.
He added that business expenses will be tightened, citing a reduction in discretionary non-staff costs like travel, a prioritisation in investments, and an alignment of staff bonuses to earnings.
‘While the economic outlook remains uncertain and credit risks have increased, the digital investments we have made have strengthened the resilience and efficiency of our franchise and we remain committed to serving our customers. We will maintain a solid balance sheet with ample capital, liquidity and loss allowance reserves that give us strong buffers to absorb external shocks,’ Gupta said.
How to trade Singapore stocks with IG
Looking to trade DBS shares and other Straits Times Index (STI Index) stocks? Open a live or demo account with IG and buy (long) or sell (short) the asset using derivatives like CFDs in a few easy steps:
- Create an IG trading account or log in to your existing account
- Enter <company name> or <ticket code> in the search bar and select it
- Choose your position size
- Click on ‘buy’ or ‘sell’ in the deal ticket
- 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.
Seize a share opportunity today
Go long or short on thousands of international stocks.
- Increase your market exposure with leverage
- Get commission from just 0.08% on major global shares
- Trade CFDs straight into order books with direct market access
Live prices on most popular markets