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Why are DBS shares falling?

Shares of Singapore’s largest bank have been struggling of late.

DBS Group share price target rating Source: Bloomberg
  • DBS Group (SGX: D05) share price closed at S$30.69 on Wednesday (25 May 2022)
  • Singapore’s largest bank reported a net profit of S$1.8 billion in its Q1 2022 financial results
  • Analysts foresee a 24.5% upside on the stock, with a consensus price target of S$38.20
  • Keen to trade DBS shares? Open an account with us to long or short the stock today

DBS share price: what's the latest?

DBS shares have fallen over 10% since the group announced its Q1 2022 earnings.

The blue-chip counter is also down by some 6.5% year-to-date, as markets continue to grapple with the potential economic impact of China’s ongoing zero-Covid-19 stance.

The latest analyst sentiments published by SGX StockFacts show a consensus rating skewed towards ‘outperform’, alongside a price target of S$38.20 on the stock.

The price target equates to a 24.5% upside potential from DBS’ last traded price of S$30.70 on Wednesday.

RHB and Maybank analysts recently reiterated ‘buy’ calls on the bank’s stocks. However, both research teams lowered their price targets, with RHB reducing their estimate from S$42.70 to S$38.10, and Maybank cutting their price target from S$41.82 to S$41.22.

Loans expected to grow 1% to 2% in Q2 2022

Last month, DBS reported a net profit of S$1.8 billion in its Q1 2022 financial results. This was on par with Bloomberg’s average analyst estimates of around S$1.88 billion. However, this was 10% lower than the same period a year prior.

The bank said that the weaker performance was due to ‘a high base for wealth management and treasury markets activities a year ago, when buoyant market sentiment and clear market momentum had driven income from both activities to exceptional levels’.

With these ‘exceptional’ activities now stabilised, the total income for Q1 2022 ended up 3% lower than a year ago at S$3.75 billion. Despite that, DBS stated that this was the second highest quarterly net profit ever recorded. Return on equity also rose to 13.1% from 9.9% last quarter.

Business momentum also ‘remained healthy’ as loans grew 2% over the quarter, with fee income streams (minus wealth management and investment banking) coming in higher than a year ago.

Net interest margin, a key indicator of a bank’s profitability and growth, rose three basis points from the previous quarter, the first increase in three years.

Looking ahead towards the rest of 2022, DBS’ CEO Piyush Gupta said recent geopolitical developments have created macroeconomic headwinds and financial market volatility which may affect some business activities such as wealth management.

However, he noted that the overall business pipeline ‘continues to be healthy’ and that the bank ‘will benefit significantly from interest rate increases in the coming quarters’. Loans are expected to grow 1% to 2% in the second quarter, the bank added.

‘We have stress tested our portfolio and it remains resilient,’ said Gupta, adding that loans are expected to grow 1-2% in Q2 2022, with full-year expense growth guidance maintained at ‘slightly above 2021’.

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