DBS Group (SGX: D05) is the second Singapore bank to release its third quarter 2023 (3Q 2023) earnings.
Two weeks ago, peer United Overseas Bank (SGX: U11) announced a sturdy set of earnings with core net profit rising to S$1.48 billion.
DBS did not disappoint as its 3Q 2023 core net profit rose to over S$2.6 billion, beating the average estimate of S$2.5 billion from four analysts.
Here are several interesting highlights from the lender’s latest earnings report.
1. A strong set of earnings
For 3Q 2023, DBS saw total income jump 16% year on year to a record high of S$5.2 billion.
The better performance was led by a 23% year-on-year rise in net interest income (NII) for its commercial book segment, in line with steadily higher interest rates.
Net fee and commission income also increased by 9% year on year to S$843 million.
With total expenses rising by just 12% year on year, the bank’s operating profit for 3Q 2023 improved by 18% year on year to S$3.2 billion.
Net profit came in at S$2.5 billion for the quarter and included a S$40 million charge related to the integration of DBS’s Citigroup (NYSE: C) Taiwan acquisition and higher specific provisions.
For the first nine months of 2023 (9M 2023), DBS saw its total income climb 27% year on year to a record S$15.2 billion.
Profit before allowances also hit a new high of S$9.3 billion, shooting up 37% year-on-year.
Core net profit for 9M 2023 also attained a new record, up 35% year on year at S$7.9 billion.
There was other good news.
The lender’s 9M 2023 return on equity hit a record 18.6% while its cost-to-income ratio improved by four percentage points to 39%.
These numbers above point to a very strong quarter for the blue-chip bank as it benefits from the rising interest rate environment.
2. Rising net interest margin offset by tepid loan growth
The group’s net interest margin (NIM) continued to improve, both on a quarterly and year-on-year basis.
NIM stood at 2.19% for 3Q 2023, up from 1.9% back in 3Q 2022.
The NIM has steadily risen this year from 2.12% in 1Q 2023 to the current 2.19%, and CEO Piyush Gupta expects higher-for-longer rates to support this NIM in 2024.
The group’s 9M 2023 NIM came in at 2.16%, sharply higher than the 1.65% in the previous corresponding period.
DBS’s loan growth, however, remained tepid.
For 3Q 2023, total customer loans contracted by 2% year on year to S$419.9 billion.
On a constant-currency basis, the lender’s loan book grew by 1% from the previous quarter, with Citigroup Taiwan’s consolidation adding S$10 billion to DBS’s loan book.
3. Higher overall fee income
Fee income also did well for 3Q 2023, rising by 13.5% year on year to S$1.05 billion.
The better performance was led by a rise in wealth management fees, card fees, and loan-related fees offset by weaker fees from investment banking and transaction services.
Wealth management fees rose 21.7% year on year for 3Q 2023 to S$393 million while card-related fees jumped 20.6% year on year to S$269 million.
Wealth management fees benefitted from higher banking insurance transactions and investment product sales while card fees received a boost from higher spending and the integration of Citigroup Taiwan.
Looking ahead, Gupta expects 2024’s fee income momentum to be sustained by both wealth management and card spending.
4. Successful integration of Citi Taiwan
DBS successfully consolidated Citi Taiwan on 12 August this year, making the group the largest foreign bank in the country by assets.
The integration helped to add S$10 billion to DBS’s loan book and boosted its deposits by S$12 billion.
It also increased DBS Taiwan’s credit card accounts by five-fold to more than three million and helped to triple its investment assets under management to more than S$12 billion.
DBS recorded S$936 million of goodwill and booked a one-time integration expense of S$40 million in 3Q 2023.
5. An interim dividend of S$0.48
In line with the good results, DBS declared an interim dividend of S$0.48 for 3Q 2023, 33.3% higher than the S$0.36 paid out last year.
With this declaration, the 9M 2023 dividend came up to S$1.38, nearly 28% higher than the same period a year ago.
DBS’s trailing 12-month dividend stood at S$2.30, but this included a special dividend of S$0.50 for 2022.
Looking ahead, the lender’s annualised dividend per share is S$1.92, giving its shares a forward dividend yield of 5.8%.
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Disclosure: Royston Yang owns shares of DBS Group.