DBS Group Holdings D05 has reported net profit of $3.027 billion for 3QFY2024 ended Sept 30, 15% higher y-o-y and 8% higher q-o-q. This is the first time third-quarter net profit has surpassed $3 billion.
Including one-time items recorded this time last year, such as the acquisition of Citi Taiwan, net profit would have risen 17% y-o-y.
DBS’s 3QFY2024 net profit beat the $2.74 billion average estimate by analysts surveyed by Bloomberg, surpassing the forecast by more than 10%.
Meanwhile, DBS’s 9M2024 net profit rose 11% y-o-y to a new high of $8.786 billion, and the bank appears on track to beat FY2023’s record net profit of $10.3 billion, which had crossed the $10 billion mark for the first time.
DBS shares reacted accordingly, breaching the $40 mark for the first time when trading started this morning. DBS shares reached as high as $41.81 as at 10.30am, up from yesterday's close of $39.15, before easing slightly.
Total income for the quarter rose 11% y-o-y and 5% q-o-q to $5.75 billion from “broad-based growth”, says the bank on Nov 7.
See also: DBS reports 3QFY2023 net profit of $2.63 bil; 9MFY2023 net profit of $7.89 bil at new high
Commercial book net interest income (NII) rose 3% y-o-y and 1% q-o-q to $3.80 billion from balance sheet growth and “stable” net interest margin (NIM) of 2.83% for the quarter, unchanged q-o-q, helped by the repricing of fixed-rate assets.
Group NIM was 2.11%, down from 2.14% in the previous quarter.
Loans expanded $3 billion or 1% q-o-q in constant-currency terms to $418 billion, led by a $2 billion growth in trade loans. Deposits grew $10 billion or 2% q-o-q in constant-currency terms to $545 billion from current account and savings account (Casa) inflows, some of which were transitory, according to DBS.
DBS saw record fee income during the quarter, led by wealth management, and treasury customer sales were also higher.
Commercial book net fee income grew 6% q-o-q to a record $1.11 billion. The increase was largely due to wealth management fees, which rose 18% to $609 million.
There was broad-based growth in investment products and bancassurance from stronger investor sentiment. Investment banking fees were also higher, rising 63% q-o-q to $31 million from increased debt capital market income.
Transaction service fees were stable q-o-q at $227 million. Card fees and loan-related fees were lower than their previous-quarter records, falling 4% to $302 million and 22% to $146 million respectively.
Commercial book other non-interest income rose 8% q-o-q to $517 million, contributed by higher treasury customers sales. Markets trading income rose 77% q-o-q to $331 million, the highest in ten quarters, as foreign exchange, interest rate and equity derivative activities benefited from market volatility.
Markets trading income was the highest in ten quarters. Expenses rose 10% y-o-y and 4% q-o-q to $2.249 billion, led by higher staff and computerisation costs, with Citi Taiwan accounting for 3 percentage points (ppts). The cost-to-income ratio stood at 39%.
Meanwhile, allowances fell 40% y-o-y and 12% q-o-q to some $130 million in 3QFY2024. Allowance coverage rose to 135% from129% in the previous quarter.
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Non-performing assets declined 8% q-o-q to $4.68 billion as repayments, upgrades and write-offs more than offset new non-performing asset formation. The non-performing loan (NPL) ratio fell from 1.1% to 1.0%.
Specific allowances were $120 million, or 14 basis points (bps) of loans for the third quarter.
DBS has proposed a third-quarter dividend of 54 cents per share, unchanged since 1QFY2024, with a record date of Nov 14 and a payment date of around Nov 25. The estimated dividend payable is $1.536 billion.
DBS also announced a new $3 billion share buyback programme, where shares will be purchased in the open market and cancelled.
The programme marks the first time that repurchased shares are cancelled. The programme is over and above share buybacks periodically carried out for the purpose of vesting employee share plans.
Based on DBS’s balance sheet as at Sept 30, the programme will reduce the fully phased-in common equity tier-1 (CET-1) ratio by around 0.8ppts when completed.
DBS CEO Piyush Gupta says: “We achieved another record performance in the third quarter. Commercial book net interest margin was supported by reduced interest rate sensitivity of our balance sheet, while wealth management drove fee income to a new high as a benign macroeconomic and interest rate outlook buoyed investor confidence. The new buyback programme we announced today is underpinned by our strong capital position and ongoing earnings generation, and it is another affirmation of our commitment to capital management. We remain well-positioned to continue delivering healthy shareholder returns.”
With the implementation of final Basel III reforms on July 1, the reported CET-1 ratio was 17.2% based on transitional arrangements, up from 14.8% in the previous quarter, while the pro-forma ratio on a fully phased-in basis was 15.2%.
Looking ahead to 2025, Gupta sees group NII at “around 2024 levels”, with a slight decline in group NIM mostly offset by loan growth. Markets trading will benefit from lower funding cost, he adds.
Gupta also thinks commercial book non-interest income growth will be in the high-single-digits, led by growth in wealth management fees and treasury customer sales.
The cost-to-income ratio will be in the low-40% range, says Gupta, and net profit will be below 2024 levels due to the global minimum tax of 15%.
Shares in DBS closed 6 cents higher, or 0.15% up, at $39.15 on Nov 6.
