DBS Group share price: what to expect from Q4 earnings

The Singapore bank saw share price rose over 10% in 2019 on the back of record earnings for the first nine months of FY2019. Here’s an update ahead of next week’s Q4 earnings.

When is DBS Group’s Q4 results date?

Singapore bank DBS Group Holdings Limited is set to announce its fourth quarter earnings for the three months ended 31 December 2019, before the market opens next Thursday 13 February.

DBS is the largest financial services conglomerate in Southeast Asia with a market capitalisation value of over S$65 billion. According to DBS’ website, the bank has over nine million customers in 18 markets.

DBS’ largest controlling shareholder is Temasek Holdings, a Singaporean holding company owned by the local government. As of March 2018, Temasek owns 29% of DBS shares. The bank was founded in 1968 and set up by the Singapore government.

DBS Group Q4 results preview

Here’s what investors should know ahead of the release.

Third-quarter earnings for FY2019 up 15% from year ago

Compared to the same period in 2018, third-quarter net interest income grew 8% to S$2.46 billion.

Loans rose 4% or S$13 billion to S$353 billion, led by non-trade corporate loans across the region. Net interest margin was four basis points higher at 1.9%.

Net fee income rose 17% to S$814 million from broad-based growth. Wealth management fees increased 22% to S$357 million from higher investment product sales. Card fees grew 9% to S$202 million from increased transactions across the region. Investment banking fees more than doubled to S$55 million as equity and debt capital market activities increased. Transaction service fees grew 7% to S$190 million as both cash management and trade finance fees were higher.

For Q3, the group’s total income and profit before allowances grew to new highs. The healthy business growth, together with the improved profitability of its franchises, resulted in an increase in nine-month ROE from 12.4% a year ago to 13.6%.

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DBS Group share price up 10.4% in 2019

Consistently among the top three most traded stocks on IG, DBS Group saw its share price grow 10.4% in 2019, with a 52-week peak of S$28.64 in April.

A lot of that growth could be attributed to a profitable first three-quarters of 2019, with nine-month earnings up 13% to S$4.88 billion, as compared to 2018.

The company’s reputation as one of the top financial institutions in the world was also cemented again in 2019, having being named the world’s best bank by Euromoney magazine in July.

As a result of that honour, DBS Group became the first bank in the world to concurrently hold three global best bank awards, another remarkable feat in itself.

So far in 2020, the group’s share price is down 2.52%.

DBS Group CEO’s outlook for Q4

DBS Group CEO Piyush Gupta had said during the company’s Q3 analyst earnings call that a US-China trade deal would be beneficial for Asian markets. However, a deal was only signed in January this year, so any positive impact would probably only be reflected in Q1 FY2020 earnings.

The Wuhan coronavirus is also a non-factor for Q4 results, since it happened after the tracking period, but do look out for guidance regarding its impact on FY2020.

The political unrests in Hong Kong also did not majorly affect the group’s performance in Q3 according to Gupta. In November 2019, DBS launched a new full-service virtual bank in Hong Kong targeted at the affluent market, which Gupta is optimistic about. Investors can look forward to updates on this new venture in the Q4 report.

In terms of loan growth, Gupta said he expects the group to wind up with about 4% loan growth for FY2019.

‘Our non-trade corporate loan pipeline for the fourth quarter is strong. Housing loans could be down this year but we should be able to get back some growth next year. If we get a flat to somewhat higher mortgage book next year, it will help overall loan growth next year to keep pace with this year,’ he said.

‘So overall, there is still a reasonable amount of activity we can tap on: in the property and real estate space, M&A and corporate finance.’

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