DBS Group Holdings has reported net profit of $1.82 billion for the 2QFY2022 ended June, 7% higher than the net profit of $1.70 billion in the same period the year before.
This brings the bank’s net profit for the 1HFY2022 to $3.62 billion, which fell by 3% compared to its record net profit of $3.71 billion reported in the 1HFY2021.
Earnings per share (EPS) for the 1HFY2022 stood at $2.80, down from the previous period’s EPS of $2.88.
For the 2QFY2022, DBS has declared an interim dividend of 36 cents, bringing the 1HFY2022 dividend to 72 cents per share. The quarter’s interim dividend is also 3 cents higher than the interim dividend declared in the year before.
The dividend will be paid on Aug 26.
2QFY2022
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During the 2QFY2022, the higher net profit, which is the second highest on record for the bank, was thanks to the increase in net interest income (NII).
In that period, NII increased by 17% y-o-y and 12% q-o-q to $2.45 billion, boosted by the quarter’s net interest margin (NIM) of 1.58%, which surged by 13 basis points y-o-y and 12 basis points q-o-q.
Net fee and commission income fell by 12% y-o-y and 14% q-o-q to $768 million due to lower wealth management and investment banking fees on the back of weaker market conditions.
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Loan-related fees increased by 2.7% y-o-y to $114 million, but fell by 20.8% q-o-q from the previous quarter’s record levels. This was moderated by higher card fees of $203 million, which was up by 23.03% y-o-y and 8.56% q-o-q.
Transaction service fees stood at $233 million, up by 4.01% y-o-y and down by 2.92% q-o-q and in line with previous quarters.
Other non-interest income fell by 10% y-o-y and 15% q-o-q to $570 million due to weaker market conditions.
Total income for the 2QFY2022 came in at $3.79 billion, up by 6% y-o-y and 1% q-o-q.
During the period, expenses increased by 7% y-o-y and 1% q-o-q to $1.66 billion. The y-o-y growth in expenses was led by higher staff costs.
Profit before allowances was $2.13 billion, 4% higher y-o-y and 1% up q-o-q.
Total allowances for the quarter fell by 42% y-o-y to $46 million.
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1HFY2022
In the 1HFY2022, NII increased by 11% y-o-y and 9% h-o-h to $4.64 billion, attributable to the growth in loans and deposits, as well as a higher NIM.
During the half-year period, NIM stood at 1.52%, up by 5 basis points y-o-y and 9 basis points h-o-h due to the rate hikes.
Loans and deposits increased by 33% y-o-y to $1.50 billion due to higher interest rates. This more than offset the lower investment product income, which fell by 16% y-o-y to $973 million.
Net fee income fell by 9% y-o-y to $1.66 billion as wealth management and investment banking fees declined y-o-y. In the 1HFY2022, wealth management fees fell by 21% y-o-y to $745 million as weaker market conditions led to lower investment product sales. Investment banking fees also fell by 36% y-o-y to $73 million as capital market activities slowed.
Meanwhile, card fees rose 17% y-o-y to $390 million as overall spending reached a new high on the back of travel spending returning to pre-pandemic levels. Loan-related fees increased by 12% y-o-y to $258 million. Transaction service fees rose by 4% y-o-y to $473 million thanks to higher cash management and trade finance fees.
Other non-interest income fell by 13% y-o-y to $1.24 billion as investment gains fell due to less favourable market opportunities.
Total income inched up by 1% y-o-y to $7.54 billion.
Total expenses increased by 5% y-o-y to $3.30 billion due to higher staff costs, bringing cost-to-income ratio at 44%.
Profit before allowances fell 2% y-o-y to $4.24 billion.
Customer deposits increased by 9% y-o-y to $527.83 billion.
As at June 30, DBS’s non-performing loan (NPL) ratio stood stable at 1.3% as new non-performing asset formation remained low.
First-half specific allowances declined 35% y-o-y to $236 million or 11 basis points of loans.
In the six-month period, the bank saw a general allowance write-back of $135 million due to repayments and transfers to non-performing assets (NPA). General allowance overlays built up in prior periods were maintained.
As at June 30, total allowance reserves amounted to $6.69 billion, resulting in an allowance coverage of 113% and of 199% after considering collateral.
DBS’s liquidity coverage ratio for the 1HFY2022 was at 140%. Its net stable funding ratio stood at 118%.
As at June 30, the bank’s Common Equity Tier-1 (CET-1) ratio stood at 14.2%, down 0.3 percentage points y-o-y, but still well above the regulatory requirement of 6.5%.
The bank’s leverage ratio for the period stood at 6.2%, down by 0.6 percentage points y-o-y.
Cash and cash equivalents for the period stood at $49.88 billion.
“We continued to deliver strong financial performance in the first half despite challenging financial market conditions. Net interest margin rose for the first time in three years and accelerated in the second quarter, while business momentum and asset quality were sustained,” says DBS CEO Piyush Gupta.
“While the macroeconomic outlook remains uncertain, we will benefit from rapidly rising interest rates and have proven nimble in capturing business opportunities. The income growth will improve the cost-income ratio in the coming quarters even as we judiciously invest for the future. Our ongoing stress tests indicate that asset quality continues to be robust,” he adds.
Shares in DBS closed 62 cents higher or 1.96% up at $32.33 on Aug 3.
