Here are nine key takeaways from the most recent earnings of Singapore’s largest bank. –
DBS Group Holdings Ltd (SGX: D05) is one of Singapore’s three largest banks, with a strong presence in Southeast Asia and Hong Kong.
The group provides a wide and comprehensive range of banking services to individuals and corporations.
Recently (on 6 August), DBS announced its second-quarter 2020 results. Here are nine key takeaways for investors from its latest earnings.
- Total income for the group came in at S$3.73 billion, which was flat year-on-year.
- Net interest income declined by 5% to S$2.3 billion compared to the same quarter in the prior year.
- Non-interest income came in at S$1.42 billion – increasing 11.1% from S$1.28 billion registered in the second quarter of 2020.
- The net interest margin (NIM) stood at 1.62%, down from 1.91% year-on-year.
- Profit before allowances was up 4% to S$2.24 billion. However, net profits were down 22% to S$1.25 billion year-on-year, on the back of S$849 million in credit allowances.
- Non-performing loans came in at 1.5%, flat on the year.
- Loan-to-deposit ratio improved to 84%, which was in-line with the previous quarter. This is despite the loan book increasing by 1% quarter-on-quarter. Overall, this is a good sign, as it shows the bank is being cautious in giving out loans.
- The dividend was cut to S$0.18 per share from S$0.33 per share. This was due to guidelines set out by the Monetary Authority of Singapore (MAS), which capped dividend payouts for Singapore banks in 2020 to 60% of 2019 dividends.
- DBS CEO Piyush Gupta commented that:
“The strong operating performance we reported amidst severe macroeconomic headwinds in the first half attests to the resilience of our franchise.
Our solid balance sheet was further fortified by a significant increase in allowance reserves, strong liquidity inflows, and healthy earnings.
Notwithstanding the uncertainties, we are in a good position to continue supporting customers and the community through the difficult months ahead of us.”
Foolish bottom line
While net profits are down, this is largely due to the increase in allowances, which is necessary for this uncertain environment.
The cut in the dividend is also prudent given that it is hard to predict the length of this uncertainty.
On the capital front, DBS’s loan-to-deposit ratio is healthy. Overall, the bank seems to be in a good position to ride out the current uncertainties.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hong Kong contributor Saket Jhajharia owns shares of DBS Group Holdings.
The Motley Fool Hong Kong Limited(www.fool.hk) 2020