DBS - The Bedrock of Singapore's Economy
πππ$DBS GROUP HOLDINGS LTD(D05.SI)$
is the bedrock of Singapore's economy. DBS is also the largest bank in Singapore by market capitalisation as well the Number 1 holding in $STI ETF(ES3.SI)$
DBS was founded in 1968 at a time when Singapore was a young nation and its purpose was to help develop Singapore. DBS has grown alongside Singapore to be become the Best Bank in the world. In fact DBS was awarded the Best Bank in the world for 5 years running. DBS is also the winner of 40 awards including the Safest Bank in Asia.
In the latest 2nd quarter 2023 earnings report, DBS has achieved a record performance. Net Profit rose 48% from previous year to SGD 2.69 billion with Return on Equity reaching 19.2%, both at new highs. Total income increased 35% to exceed SGD 5 billion for the first time.
First half net profit rose 45% to SGD 5.26 billion and Return on Equity climbed to a new high of 18.9%. Total income increased 34% to SGD 10 billion, driven by a higher net interest margin as well as improved card fees and Treasury customer income.
Asset quality continues to be resilient with Non Performing Loan ratio at 1. 1% and specific allowances at 10 basis points of loans for the 2nd quarter and 8 basis points for the first half.
DBS rewards its shareholders well with quarterly dividends. It declared a dividend of 48 cents per share for the 2nd quarter, an increase of 6 cents per share from the previous payout. Together with the 1st quarter dividend, the total dividend for the 1st half 2023 amounted to 90 cents per share.
In the 2nd quarter 2023, Net Interest Income rose 54% from last year and 6% from the previous quarter to SGD 3.58 billion. Net Interest Margin increased 96 basis points from last year, including 12 basis points during the quarter, to 2.81% from higher interest rates.
Profit was SGD 3.11 billion, 50% higher than last year and 2% above the previous quarter.
The acquisition of Citibank's consumer banking business in Taiwan makes DBS the largest foreign bank by assets in the country. The deal effectively doubled DBS consumer banking customers to 1.1 million, with credit card customers up nearly five times to over 3 million. DBS paid NT 19.8 billion or SGD 956 million dollars for the acquisition.
DBS has a strong Balance Sheet, underpinned by resilient asset quality, strong asset prices and healthy employment in Singapore.
The outlook for interest rates has shifted from peaking rates to higher rates for longer. Besides firm Net Interest Margin, DBS may also capitalise on higher fee income from wealth management and contributions from acquisitions.
On the negative side, higher interest rates and weaker economic conditions may lead to slower loan growth.
Performance wise DBS share price is only 0.96% up in 1 year. Analysts are bullish on DBS with a Buy rating, the Target price from SGD 35.30 by CGS-CIMB to a high of SGD 44.35 by UOB Kay Hian.
I am bullish on DBS as it ticks all the core fundamentals of a quality stock with great profits, rock solid balance sheet and an excellent management team under Piyush Gupta. DBS also has a wide moat due to its extensivebanking network in Singapore and the region.
Best of all, I get to collect nice juicy dividends every 3 months while waiting for capital growth.
Go Long Go Strong Go DBS!
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There are risks that the share price may either stay put or fall if economies, locally or globally, get hit by a prolonged and deep recession.
I am invested here since 4 months and stay in for the next years. I am also in ITS big competitor HSBC Holdings.
Although bullish on DBS's long-term growth and total returns potential, the near-term outlook may prove sluggish.
DBS does offer an attractive present yield between 5 and 6%, I think that it is a relatively safe place to be invested.
I have been a shareholder for many years. They certainly are a good bank.
Good read