DBS slips to one-month low following Shenzhen deal

Southeast Asia’s largest bank DBS saw a sell-off in its shares after announcing a stake acquisition in China.

  • DBS Group Holdings Ltd (SGX: D05) share price declines to S$28.40 per share
  • It will acquire a 13% stake in a Shenzhen commercial bank for S$1.08 billion
  • Investors may be concerned about how DBS’ dividends may be affected, analysts said
  • Buy and sell DBS shares with an IG account

DBS stock price sheds 2.5%

Shares of DBS lost ground on Wednesday (21 April 2021), falling as much as 2.5% to S$28.28 at around 11:00 SGT.

The counter went on to finish at a one-month low of S$28.40, down 2.1% day-on-day.

The previous evening, it announced a stake purchase in a Chinese bank, which would mark DBS’ second acquisition in five months.

Separately, Reuters reported that DBS and OCBC are among potential bidders for parts of Citigroup’s consumer business in Asia. Citi is exiting from its consumer franchises in 13 markets, ten of which are in Asia.

DBS to buy shares of Chinese bank

DBS has agreed to subscribe for a 13% interest in Shenzhen Rural Commercial Bank (SZRCB) for RMB 5.29 billion, or about S$1.08 billion.

DBS will become the Chinese bank’s biggest shareholder and have representation on the latter’s board of directors, it announced on Tuesday (20 April) after the stock market closed.

The Singapore-based lender will acquire 1.35 billion new SZRCB shares at RMB 3.91 apiece, representing 1.01 times of the Shenzhen bank’s book value per share as of end-2020.

The investment will have an impact of less than 0.2 percentage points to DBS Group’s capital ratios, and is expected to be immediately accretive to earnings and return on equity.

Will DBS’ dividends be affected?

Jefferies’ research team maintained ‘buy’ on DBS given the positive earnings outlook, but said the pricing for the SZRCB deal ‘seems a bit too good’. Its analyst Krishna Guha gave a S$33 price target.

Although the deal’s impact to DBS’ Common Equity Tier 1 is ‘minimal’, it comes at a time when debt moratoriums are expected to end and risk weights may increase, he wrote.

There has also been debate about the extent of banks’ dividend reinstatement and the growth in business volumes from the economy’s reopening. ‘While the (SZRCB) investment doesn’t put dividends at risk, it may elongate the time needed to fully restore dividends to pre-Covid levels, especially as other M&A (merger and acquisition) opportunities arise,’ Guha said.

Citi’s Robert Kong pointed out that the stake purchase follows the Lakshmi Vilas Bank deal in India last November, with both transactions giving DBS greater retail exposure.

Investor concerns may include how further M&A might affect DBS’ dividend policy, as well as its management bench depth to handle multiple deals, Kong said. He recommended ‘buy’ on DBS shares with a S$32.20 target.

RHB kept its ‘buy’ call intact, with a S$33 target. Although the SZRCB acquisition’s near-term impact on DBS’ earnings will be small, it will help accelerate the Singapore-based group’s expansion into the Greater Bay Area, said RHB.

Trade Singapore bank shares with IG today

Create an IG account or log in to your existing account to get started now.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Explore the markets with our free course

Learn how shares work – and discover the wide range of markets you can spread bet on – with IG Academy's free ’introducing the financial markets’ course.

Put learning into action

Try out what you’ve learned in this shares strategy article risk-free in your demo account.

Ready to trade shares?

Put the lessons in this article to use in a live account – upgrading is quick and easy.

  • Trade on over 13,000 popular global stocks
  • Protect your capital with risk management tools
  • React to breaking news with out-of-hours trading on 70 key US stocks

Inspired to trade?

Put your new knowledge into practice. Log in to your account now.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.


Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.