DBS Group Holdings has reported net profit of $1.30 billion for 3QFY2020, up 4% q-o-q, as business momentum recovers.
For 9MFY2020, the bank registered earnings of $3.71 billion, which is 24% lower than the $4.88 billion reported a year ago, owing to the higher allowances.
Total allowances of $554 million were taken during the quarter. Together with the $1.94 billion set aside in 1HFY2020, total allowances for the nine months quadrupled from a year ago to $2.49 billion.
For 3QFY2020, the Board has declared an interim one-tier tax-exempt dividend of 18 cents for each ordinary share, to which the DBSH Scrip Dividend Scheme will be applied. DBS will take the average of its closing prices on Nov 12 and 13 as the issue price for new shares to be allotted.
The estimated dividend payable is $457 million.
While total income for 3QFY2020 fell 4% q-o-q and 6% y-o-y to $3.58 billion, fee income rebounded 17% q-o-q to pre-Covid levels at $798 million, softening the impact of lower interest rates as well as a decline in trading income from a high base. That said, fee income is still down 2% y-o-y.
For the 9MFY2020, total income rose 2% y-o-y to $1.13 billion.
Net interest income for the quarter came in at $2.17 billion, down 12% y-o-y as loan growth was offset by a lower net interest margin.
Non-interest income fell 6% y-o-y to $608 million as trading income declined from a high base.
See: DBS posts 26% fall in 1H20 earnings to $2.41 bil; increases provisions, lowers dividend to 18 cents
Expenses shrank 5% y-o-y to $1.54 billion as travel and marketing expenses declined, but rose 4% from the previous quarter due to Covid-19-related support for staff as well as non-recurring occupancy costs.
For the nine months, expenses fell 2% to SGD 4.58 billion. A decline in general expenses and bonus accruals was offset by an increase in base salary costs from a higher headcount.
Profit before tax fell 24% y-o-y to $1.48 billion, though this was up 6% q-o-q.
Net interest margin fell nine basis points to 1.53% as the impact of global interest rate cuts in March and April was more fully felt.
With total income up 2% and expenses down as much, the positive jaw of four percentage points resulted in an improvement in the cost-income ratio from 42% to 40%.
Non-performing assets (NPA) rose 3% from the previous quarter to SGD 6.52 billion as new NPA formation was moderated by repayments and write-offs. The non-performing loan ratio rate was at 1.6%.
Customer loans rose 5% y-o-y to $371 billion, though this was dipped 1% q-o-q.
Current and savings accounts (CASA) rose 5% q-o-q to $16 billion, bringing the growth since end-2019 to 29%, or $70 billion, and enabling higher-cost fixed deposits to be let go. Casa deposits accounted for 69% of total deposits, an increase of 3 percentage points from the previous quarter and 10 percentage points since end-2019.
Common Equity Tier 1 (CET1) ratio is at 13.9%, while leverage ratio of 6.9%, more than twice the regulatory minimum of 3%.
In his statement, DBS CEO Piyush Gupta highlights the recovery in business momentum as regional economies emerge from lockdowns.
“The rebound in fee income to pre-Covid levels has enabled us to cushion the full impact of lower interest rates. At the same time, the accelerated build-up of allowances has strengthened our ability to meet the challenges of an uneven economic recovery in the coming year. In the longer term, Asia’s fundamentals remain undiminished. With ample liquidity and healthy capital, we remain well positioned to support customers and the community.”
Shares in DBS closed 12 cents higher, or 0.56% up, at $21.55 on Nov 4.
