DBS hits 3-year high as Q1 profit crosses S$2bn for the first time

Singapore’s largest money lender saw its quarterly net profit cross S$2 billion for the first time in history.

  • DBS Group Holdings Ltd (SGX: D05) share price rallies over 2.5% to hit S$30.10 on Friday (30 April 2021)
  • This comes after the bank reported that Q1 2021 net profit rose 72% year-on-year to hit S$2.01 billion
  • A dividend amount of S$0.18 has been declared for the quarter, in line with MAS guidelines
  • Analysts from JPMorgan and Citigroup reaffirmed their bullish calls and price targets following the results
  • Buy and sell DBS Group shares with an IG account

DBS Group share price: what’s the latest?

DBS Group shares rose over 2.5% to a three-year high of S$30.10 on Friday (30 April 2021), after posting its first quarter 2021 financial results.

Q1 2021 net profit doubled from the previous quarter and increased 72% from a year ago to S$2.01 billion, as ‘business momentum accelerated during the quarter’, the group said. This marks the first time in the money lender’s history that quarterly earnings crossed S$2 billion.

Net interest income rose 2% on a day-adjusted basis from the previous quarter to S$2.11 billion, with net interest margin unchanged at 1.49%.

Compared to a year ago, however, net interest income fell 15% due to a 37 basis point decline in net interest margin resulting from global interest rate cuts that were moderated by loan growth of 7%.

Net fee income increased 28% from the previous quarter and 15% from a year ago to a new high of S$953 million. Other non-interest income of S$794 million was twice the previous quarter due partly to seasonal factors, and 12% higher year-on-year.

Total income rose 18% from the previous quarter to S$3.85 billion from higher non-interest income. Total income was 4% below a year ago as ‘strong business volume growth was more than offset by the impact of lower interest rates’, DBS noted.

In line with MAS’ guidance for local banks to moderate their dividends, the bank’s board of directors has declared a dividend of S$0.18 per share for the first quarter, for which the scrip dividend scheme will apply. Scrip dividends will be issued at the average of the closing share prices on 10 and 11 May 2021.

What’s the forecast for the rest of 2021?

DBS CEO Piyush Gupta said that Q1 ‘has been an extraordinary quarter’ as the business ‘fired on all cylinders’. Looking ahead, he is ‘bullish about prospects for the coming year’ in view of the strengthening global economic rebound.

Gupta also noted that the franchise has been enhanced by new growth platforms, including stakes in Shenzhen Rural Commercial Bank and in Partior for blockchain cross-border clearing and settlement.

‘We are in a position of strength to support customers and deliver shareholder returns as the economic recovery takes hold,’ he said.

Analysts maintain their optimistic outlook on the bank’s stock.

JP Morgan’s research team, which rated DBS ‘overweight’ alongside a S$33 price target, said the latest results affirms its stance on the stock being ‘one of its highest-conviction’ buys.

‘Overall, we see DBS improving value creation across geographies, asset classes, business lines and technology frontiers. We see the bank consistently delivering best-in-class return on equity for the next few years, leading to (the) highest multiple in at least (the) last two decades,’ the investment bank wrote in its thesis posted on Friday.

Elsewhere, Citigroup called DBS a ‘buy’ while giving a S$32.20 price target, citing the Q1 results as a ‘huge beat’ on double-digit growth in fees and low credit costs.

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