DBS Group (SGX: D05) is the first of the three local banks to report its first set of earnings for 2024.
Singapore’s largest bank did not disappoint.
DBS reported a stellar set of earnings for the first quarter of 2024 (1Q 2024) while raising its quarterly dividend by 42% year on year.
Here are five highlights from the bank’s latest set of financial results.
Total income and net profit at record highs
For 1Q 2024, net interest income rose 8% year on year to S$3.6 billion, buoyed by the current high interest rate environment.
Fee income also jumped 23% year on year to exceed S$1 billion for the first time.
As a result, the blue-chip lender saw its total income climb 13% year on year to S$5.6 billion, a record high.
With expenses rising by just 10% year on year to S$2.1 billion, DBS’s profit before allowances improved by 14% year on year to S$3.5 billion.
After accounting for S$5 million of expenses related to its Citigroup (NYSE: C) Taiwan acquisition, the bank’s net profit came in at S$2.95 billion, up 15% year on year and also at a record.
With total income and net profit hitting record highs, the bank’s return on equity also correspondingly hit a new high of 19.4% for 1Q 2024.
Slightly improved NIMs and loan book
DBS saw its net interest margin (NIM) improve slightly year on year to 2.14% from 2.12% a year ago.
The increase was because of the upward repricing of its fixed-rate loans with outflows from current and savings accounts being slower than the prior year.
In addition, 1Q 2024’s NIM was also slightly better than the 2.13% logged for the fourth quarter of 2023 (4Q 2023).
DBS’s loan book increased by 2% year on year to S$424.8 billion because of higher non-trade corporate loans and the consolidation of Citigroup Taiwan.
Fee income surpasses S$1 billion
Fee income also did well with a 23% year-on-year jump to S$1 billion, up from S$851 million a year ago.
Wealth management fees experienced a 47% year-on-year jump to S$536 million for 1Q 2024, benefitting from better market sentiment and an increase in the bank’s assets under management.
Card fees climbed 33% year on year to S$301 million in line with higher spending while loan-related fees increased by 30% year on year to S$185 million.
The consolidation of Citigroup Taiwan helped to boost both wealth management and card fees.
Quarterly dividend shoots up 42%
In line with the strong results, DBS has declared a quarterly dividend of S$0.54 per share on the enlarged share base after its 1-for-10 bonus issue.
Adjusting for this bonus issue, 1Q 2023’s quarterly dividend stood at S$0.38, implying a 42% year-on-year increase in the lender’s dividend.
This level of dividend was also slightly higher than the previous quarter’s S$0.49.
Raising its outlook for 2024
CEO Piyush Gupta expects macroeconomic conditions to remain resilient despite the geopolitical risks.
He estimates that group net interest income will be modestly better than in 2023 with commercial book’s non-interest income to hit mid-to-high teens percentage growth.
The revised outlook is based on better-than-expected momentum in its wealth management and treasury customer divisions.
As a result, total income is expected to be one to two percentage points higher than DBS’s prior guidance of mid-single-digit year on year growth.
No stress has been noted so far that requires specific provisions to be higher at this point.
In sum, DBS expects 2024’s net profit to be above 2023’s levels.
Get Smart: Better days ahead for DBS
Judging from the revised outlook from management, investors can look forward to a better 2024 for the lender.
The cost-to-income ratio improved slightly to 37.4% in 1Q 2024 from 38.1% a year ago while the non-performing loans ratio remained stable at 1.1%.
Progress has also been made in executing its technology resiliency roadmap to enable greater service availability and allow for a faster full recovery of services in the event of an outage.
The bank’s momentum may see its total income and net profit deliver a positive surprise for 2024.
Investors may also get to enjoy a higher dividend if the bank can maintain its earnings trajectory.
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Disclosure: Royston Yang owns shares of DBS Group.
