DBS Group Holdings has reported net profit of $2.01 billion for the 1QFY2021 ended March, making it the first time that the bank has crossed $2 billion in its quarterly earnings.
The higher net profit was attributable to accelerated business momentum with faster loan growth, as well as record fee income.
The 1QFY2021 net profit stood 72% higher y-o-y compared to net profit of $1.17 billion for the 1QFY2020 and nearly double the net profit of $1.01 billion in the 4QFY2020.
The bank has kept its dividend for the quarter at 18 cents per share, in line with the Monetary Authority of Singapore’s (MAS) guidance of a dividend payout cap of 60% that of FY2019. The scrip dividend scheme will also apply.
In comparison, the bank maintained its dividend for the 1QFY2020 at 33 cents per share as it pre-emptively set aside $703 million in general reserves to buffer from potential risks from the potential Covid-19 outbreak at the time.
Total income for the 1QFY2021 fell 4% y-o-y to $3.85 billion due to lower interest rates, which were slightly offset by strong business volume growth. The figure would’ve seen a 9% growth y-o-y had net interest margin (NIM) been stable. Total income for the quarter was, however, 18% higher q-o-q.
NIM fell 0.37 percentage points y-o-y, but remained steady q-o-q at 1.49%.
Net interest income (NII) fell 15% y-o-y to $2.11 billion due to the decline in NIM on global interest rate cuts, and moderated by loan growth of 7% y-o-y.
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On a q-o-q basis, NII was up 2% on a day-adjusted basis from stable NIM and loan growth of 3%.
Net fee income grew 15% y-o-y and 28% q-o-q to a record $953 million due to new highs as wealth management and transaction service fees grew 24% y-o-y and 10% y-o-y to $519 million and $230 million respectively. Card fees during the quarter stood at $169 million, 2% lower than the 1QFY2020’s $173 million during the corresponding period the year before. The slightly lower card fees represent a recovery in consumer spending towards pre-pandemic levels, and amid acceleration in digital transactions.
Bancassurance fees were also higher, reversing declines throughout the FY2020.
Other non-interest income stood 12% higher y-o-y at $794 million and slightly more than double that of 4QFY2020’s $396 million due partly to “seasonal factors”.
Trading income doubled y-o-y and q-o-q as Treasury Markets non-interest income and treasury customer income rose to new highs.
Deposits during the quarter increased by 2% q-o-q to $478 billion, mainly attributable to the increase in current and savings accounts (CASA) deposits, which rose 4% q-o-q.
CASA accounted for 74% of the total deposits, an increase of 16 percentage points y-o-y and one percentage point q-o-q.
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DBS’s expenses rose 2% y-o-y to $1.59 billion due to the amalgamation of Lakshmi Vilas Bank (LVB). Excluding LVB, higher bonus accruals in line with the better financial performance were offset by lower non-staff expenses.
The bank’s cost-to-income ratio for the quarter stood at 41%.
The bank’s Common Equity Tier-1 (CET-1) ratio rose 0.4 percentage points q-o-q and y-o-y to 14.3%, remaining above the group’s target operating range and above the regulatory ratio of 9%.
DBS’s leverage ratio of 6.7% remains more than twice the regulatory minimum of 3%.
“This has been an extraordinary quarter for our business as we fired on all cylinders. Loan and deposit growth were robust, fees were strong and treasury had a record performance,” says DBS CEO Piyush Gupta.
“At the same time, we remained disciplined on costs while asset quality was resilient. The global economic rebound is strengthening and we are bullish about prospects for the coming year. Our franchise has been enhanced by new growth platforms, including stakes in Shenzhen Rural Commercial Bank and in Partior for blockchain cross-border clearing and settlement. We are in a position of strength to support customers and deliver shareholder returns as the economic recovery takes hold,” he adds.
In his business outlook, Gupta adds in his CEO observations, that business momentum is expected to remain strong.
On this, he is upgrading full-year loan growth to mid-to-high single digit, as well as full-year fee income growth at double digits.
DBS’s full-year expenses are expected to be around 3-4% higher than FY2019 levels, with LVB to add two percentage points. Another 1-2% will come in the form of higher costs to “support growing business activities”.
Full-year total allowances are likely to be below $2 billion.
Shares in DBS closed 1 cent lower or 0.03% down at $29.39 on April 29.
