DBS results preview: Will the bank beat estimates?

All eyes are on DBS’ upcoming 2Q 2021 results, after the dividend cap was removed and its smaller rivals reported improved earnings.

  • DBS Group Holdings Ltd (SGX: D05) shares hits S$30.60 on Wednesday (04 August 2021)
  • Jefferies’ research team expects 2Q dividend to come in at S$0.30
  • Singapore’s central bank has lifted the pandemic-related dividend cap
  • Analysts on average target DBS shares to rise to S$31.25
  • Interested in trading DBS shares? Open an account with us to get started.

Dividend upside boosts DBS stock price

A day before Southeast Asia’s largest bank, DBS Group, is due to release its 2Q 2021 results, its shares climbed 1.3% to S$30.60 as of 12:23 SGT on Wednesday (04 August 2021).

Close to two million shares changed hands, making DBS the top traded by value on the Singapore bourse.

Investors and analysts have grown optimistic, with the dividend cap on Singapore banks lifted by the country’s central bank.

The Monetary Authority of Singapore (MAS) last Wednesday (28 July 2021) announced it will not extend the dividend restrictions. In July and August 2020, MAS had called on local banks to cap their total dividends per share for FY2020 at 60% of FY2019’s figure.

Jefferies analyst Krishna Guha noted that he had expected the dividend caps to be lifted in phases, and thus the complete reinstatement came as a ‘positive surprise’.

Bullish sentiment on DBS shares prevailed among research teams. As of Wednesday, there were 15 ‘buy’ recommendations, six ‘hold’ calls, and no ‘sell’ ratings. The analysts’ average 12-month target price was about S$32.60, Bloomberg data showed.

Last week, Credit Suisse suggested ‘outperform’ alongside a S$33.70 target, Macquarie recommended ‘neutral’ with a S$31.25 price target, while RHB said to ‘buy’ while eyeing S$34 per share.

DBS earnings: What do analysts anticipate?

On Thursday (05 August 2021) before the stock market opens, the lender is slated to announce its 2Q 2021 financial results.

Bloomberg Intelligence (BI) analysts on Wednesday wrote that DBS’ second-quarter profit may beat consensus, as indicated by its Singapore peers’ better-than-expected results.

UOB exceeded estimates by 8%, while OCBC’s banking business also topped expectations although its reported profit fell short of consensus due to a drop in insurance gains, BI noted.

‘The removal of dividend restrictions should boost the three banks’ payouts back to pre-pandemic levels,’ BI added.

Jefferies’ Guha expects DBS to raise its dividend at least to pre-pandemic levels, and is looking forward to loan growth outlook and the possibility of write-backs in subsequent quarters.

He estimated that the bank’s second-quarter dividend could come in at S$0.30 per share. Jefferies rated DBS shares ‘buy’ with a S$33.50 price target.

Meanwhile, Maybank’s research team noted that DBS earlier guided that it was ready to raise dividends following regulatory approvals. However, DBS ‘may not be able to match its 2019 absolute dividend till 2022, given that it already paid a capped quarterly dividend in 2022’, Maybank said.

As the bank does not have a special dividend policy, it is unlikely that DBS will catch up on the difference in 2021, unless it increases the base dividend from S$0.33 per quarter, Maybank analysts added.

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