Summary: DBS Group Holdings (DBS) delivered FY11 net earnings of S$3.04b, up 15%. The improvement was buoyed by record net interest income of S$4.83b, up 12%. Reflective of the healthy corporate loans market in Singapore, loans grew 28% to S$195b. Non-interest income saw mixed performances, but was up by an overall 2% to S$2.81b. Management has announced an unchanged final dividend of 28 cents, bringing full year to 56 cents. DBS’s strengths in certain areas, including its focus on SMEs, Wealth and its regional franchise, should position it well in the current challenging environment. We raised our fair value estimate to S$15.40 (based on 1.3x book) and retain our BUY rating.
Record Net Interest Income of S$4.8b
DBS Group Holdings (DBS) generated FY11 net earnings of S$3.04b, up 15%, and better than consensus estimate of S$2.97b as polled by Bloomberg. The improvement was buoyed by record net interest income of S$4.83b, up 12%. Reflective of the healthy corporate loans market in Singapore, loans grew 28% to S$195b. Non-interest income saw mixed performances, but was up by an overall 2% to S$2.81b. Net Interest Margin (NIM) was flat QoQ at 1.73% in 4Q11, but was down from 1.79% in 4Q10. NIM fell from 1.84% in 2010 to 1.77% in 2011. This was due to the still-soft interest rate environment. Non-performing loan rate improved from 1.9% at end-2010 to 1.3% at end-2011. Management has announced an unchanged final dividend of 28 cents, bringing full year to 56 cents. The stock will trade ex-dividend on 9 May 2012.
Disciplined growth plans
Despite the protracted uncertainty and volatility in the market, DBS has delivered record earnings in FY11. The growth in the past 2-3 years was due to several reasons including its strength in SME business and increased focus on its Wealth operations. These have shown results and total income from Wealth grew 23% in 2011 to S$620m. In addition, it is also seeing good traction from its operations in the region. Growth from these markets (Indonesia, Taiwan, India and China) ranged from 20-62% YoY in 2011. As the global environment remains challenging, we expect growth to moderate in 2012. Loans growth will also come off from the stellar performance in 2011 to low double-digit growth. We are expecting a modest 1% earnings growth in 2012, before a recovery in 2013 will bring growth rate to 6.6%.
Reiterate BUY, with higher fair value of S$15.40
We are leaving our FY12 earnings estimates largely intact. Despite a challenging environment, management seems to be fairly positive on its outlook, albeit at lower growth. With recent improving data from the US, we have raised our valuation peg slightly from 1.2x book to 1.3x book, bringing it more in line with its peers. As a result of this, our fair value goes up from S$14.26 to S$15.40. Reiterate BUY.
DBS Group Holdings (DBS) generated FY11 net earnings of S$3.04b, up 15%, and better than consensus estimate of S$2.97b as polled by Bloomberg. The improvement was buoyed by record net interest income of S$4.83b, up 12%. Reflective of the healthy corporate loans market in Singapore, loans grew 28% to S$195b. Non-interest income saw mixed performances, but was up by an overall 2% to S$2.81b. Net Interest Margin (NIM) was flat QoQ at 1.73% in 4Q11, but was down from 1.79% in 4Q10. NIM fell from 1.84% in 2010 to 1.77% in 2011. This was due to the still-soft interest rate environment. Non-performing loan rate improved from 1.9% at end-2010 to 1.3% at end-2011. Management has announced an unchanged final dividend of 28 cents, bringing full year to 56 cents. The stock will trade ex-dividend on 9 May 2012.
Disciplined growth plans
Despite the protracted uncertainty and volatility in the market, DBS has delivered record earnings in FY11. The growth in the past 2-3 years was due to several reasons including its strength in SME business and increased focus on its Wealth operations. These have shown results and total income from Wealth grew 23% in 2011 to S$620m. In addition, it is also seeing good traction from its operations in the region. Growth from these markets (Indonesia, Taiwan, India and China) ranged from 20-62% YoY in 2011. As the global environment remains challenging, we expect growth to moderate in 2012. Loans growth will also come off from the stellar performance in 2011 to low double-digit growth. We are expecting a modest 1% earnings growth in 2012, before a recovery in 2013 will bring growth rate to 6.6%.
Reiterate BUY, with higher fair value of S$15.40
We are leaving our FY12 earnings estimates largely intact. Despite a challenging environment, management seems to be fairly positive on its outlook, albeit at lower growth. With recent improving data from the US, we have raised our valuation peg slightly from 1.2x book to 1.3x book, bringing it more in line with its peers. As a result of this, our fair value goes up from S$14.26 to S$15.40. Reiterate BUY.
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