SINGAPORE (Aug 7): DBS Group might have achieved record earnings of $2.35 billion for the first half of 2017 on the back of an 8% increase in 2Q earnings, but analysts are not impressed.
“1H17 earnings were slightly below our expectation and met 45% of our previous FY17 forecast of $5.1 billion,” says Maybank Kim Eng Research analyst Ng Li Hiang in a Monday report.
Meanwhile, CIMB Research analyst Yeo Zhi Bin says DBS’ results were in line with its forecast, but described the bank’s 2Q performance as “good but not great”.
Both Maybank and CIMB are keeping DBS at “hold” and raising their target prices to $21.50, from their previous targets of $19.18 and $18.75, respectively.
See: DBS 2Q earnings rise 8% to $1.14 bil; achieves record earnings of $2.35 bil for half year
“While we believe DBS is a key beneficiary of rising rates, lending yields could come under some compression due to competition and the need to offer more attractive rates to gain market share,” says Ng.
In this light, Maybank is lowering its FY17E net interest margin (NIM) slightly to 1.77%, from 1.80% previously.
Looking ahead, CIMB’s Yeo says DBS’ performance is likely to be affected by the moderation in NIM guidance and higher credit costs.
On the other hand, he opines that broad-base loan growth, positive business momentum, and structural improvement in cost-income ratio will be pluses for DBS.
“Year-to-date, the stock has gained 23.9%, and we believe that positives have been priced in,” Yeo says.
Meanwhile, Ng adds that Maybank is keeping its “hold” call on DBS “with limited upside to [its] current share price.”
As at 1.13pm, shares of DBS are trading 28 cents lower at $21.21.
