DBS Group Holdings has reported earnings or net profit of $4.72 billion for the FY2020 ended December, 26% lower y-o-y than net profit of $6.39 billion a year ago. This was due to a 27 basis point decline in net interest margin (NIM) to 1.62% and over four times in allowances of $3.07 billion.
During the year, general allowances of $1.71 billion were set aside as provisions.
The bank has guided that total allowances over 2020 to 2021 is likely to be in the middle of the $3 billion to $5 billion range.
Profit before allowances for the year rose 2% y-o-y to a new high of $8.43 billion.
Total income for the FY2020 was stable at $14.59 billion.
This was mainly due to a 6% y-o-y decline in net interest income (NII) of $9.08 billion due to a 27 basis point decline in net interest margin (NIM). This was offset by a 32% y-o-y increase in other non-interest income to $2.46 billion.
Net fee income remained relatively stable at $3.06 billion from $3.05 billion a year ago, as higher wealth management fees and brokerage commissions were offset by lower cards and investment banking fees.
The nonperforming loan (NPL) rate rose 0.1 percentage points q-o-q to 1.6% as at end-December 2020.
Loans were up 4% y-o-y led by non-trade corporate loan growth.
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Overall, the bank’s cost to income ratio declined 0.8% y-o-y to 42.2%; total expenses fell 2% y-o-y to $6.16 billion.
DBS’s Common Equity Tier-1 ratio for the 4QFY2020 remained unchanged q-o-q at 13.9%, which is above the group’s target operating range as well as regulatory requirements.
The board has proposed a final dividend of 18 cents per share for the 4QFY2020, in line with the Monetary Authority of Singapore’s (MAS) guidance. of a dividend payout cap of 60% that of FY2019.
This brings FY2020 dividends to a total of 87 cents per share, compared to a total of 123 cents per share in the FY2019.
The scrip dividend scheme will be applicable as well, with scrip dividends to be issued at the average closing share prices on 7 and 8 April.
For the 4QFY2020, net profit fell 33% y-o-y to $1.01 billion due to lower net interest margin (NIM) and higher total allowances. The bank reported “healthy” business momentum during the quarter with broad-based loan growth.
Results for the 4QFY2020 included expenses of $33 million from the amalgamation of Lakshmi Vilas Bank (LVB) with DBS Bank India as directed by Indian authorities on Nov 27, 2020, with provisional goodwill of $153 million.
NII fell 13% y-o-y and 2% q-o-q to $2.12 billion.
NIM for the quarter was down 37 basis points y-o-y at 1.49%.
Net fee income stood 1% y-o-y higher at $747 million.
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Cards fees fell 12% during the 4Q, moderating from declines of 21% in 3QFY2020 and 34% in the 2QFY2020.
Other non-interest income rose 35% y-o-y due to higher trading income during the quarter.
Total allowances stood almost five times higher than the year before at $577 million.
Loans grew 1% q-o-q, due to growth in consumer and non-trade corporate loans, as well as $2 billion loans from LVB.
“Our record operating performance in one of the most challenging periods on record attests to the quality of our franchise and nimble execution. Business momentum was sustained in the fourth quarter and our pipeline for loans and fee income is healthy,” says DBS CEO Piyush Gupta.
“We have been proactive through the crisis and enter the year with new growth platforms. Lakshmi Vilas Bank in India and the securities joint venture in China will enhance our presence in both key markets," he says.
"Initiatives such as the Digital Exchange, supply chain digitalisation and efforts to broaden wealth management to the mass market will reinforce our leadership in digital finance. These platforms will strengthen our ability to continue supporting customers and delivering shareholder returns,” he adds.
Shares in DBS closed 22 cents lower or 0.8% down at $25.93 on Feb 9.
