DBS Group Holdings D05 has reported net profit (or earnings) of $2.57 billion for the 1QFY2023, 43% higher y-o-y and 10% higher q-o-q.
The earnings, which was a record for the bank, were attributable to the higher net interest margin (NIM), sustained business momentum from higher y-o-y fee income, corporate loan growth and net new money inflows, as well as resilient asset quality, says DBS in its business update on May 2.
The bank’s return on equity (ROE) increased to 18.6%, also a new high for the group. “[This] reflects structural improvements from ongoing digital and organisational transformation as well as higher interest rates,” says the bank in its chief financial officer (CFO) presentation that came along with its update. The bank has guided for its full-year ROE as likely to be above 17%.
During the quarter, DBS’s commercial book total income, which excludes treasury markets, rose by 44% y-o-y and 6% q-o-q to $4.67 billion.
Net interest income (NII) rose by 69% y-o-y but fell 1% q-o-q to $3.38 billion. NIM rose 104 basis points (bps) y-o-y and 8 bps q-o-q to 2.69% for the bank’s commercial book.
Net fee and commission income fell by 4% y-o-y but rose by 29% q-o-q to $851 million. The y-o-y drop was attributable to the decline in wealth management fees with all of the decline occurring in January due to base effects, though they remained stable in February and March on a y-o-y basis. Card fees rose by 21% y-o-y from higher spending including for travel while investment banking fees rose 2%. Loan-related fees were stable while transaction service fees were 4% lower.
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On a q-o-q basis, net fee and commission income increased due to growths across the board. During the quarter, wealth management fees, investment banking fees, loan-related fees as well as transaction fees increased and were offset by a decline in credit card fees which fell due to the seasonally higher spending in the 4QFY2022. Wealth management fees were up due partly to seasonal effects which investment banking fees doubled from higher equity and debt capital market activity.
Other non-interest income rose by 22% y-o-y and 35% q-o-q to $432 million due to higher treasury customer income.
Treasury markets total income normalised to $269 million. The figure represents a 38% decline y-o-y and 32% growth q-o-q.
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Under treasury markets, NII stood at a loss of $113 million compared to the $182 million in the corresponding quarter the year before. However, the figure was a 10% improvement q-o-q from the 4QFY2022’s $125 million loss.
Non-interest income under treasury markets rose by 53% y-o-y and 16% q-o-q to $382 million.
On the whole, total income was up by 34% y-o-y and 8% q-o-q to $4.94 billion.
In the 1QFY2023, expenses rose by 14% y-o-y but fell by 4% q-o-q to $1.88 billion. The y-o-y increase was due to higher staff costs while the q-o-q dip was due to non-recurring items in the previous quarter.
Profit before allowances surged by 50% y-o-y and 16% q-o-q to $3.05 billion with higher total allowances as there had been a general allowance write-back in the previous quarter.
During the quarter, the group’s non-performing assets (NPA) fell by 17% y-o-y and 3% q-o-q to $4.95 billion. Its non-performing loan (NPL) ratio fell by 0.2 percentage points y-o-y but remained unchanged q-o-q at 1.1%.
The bank’s new non-performing asset formation remained low and was more than offset by repayments and write-offs. Specific allowances came up to $62 million or six basis points of loans.
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In the 1QFY2023, general allowances of $99 million were taken as a “prudent measure” to strengthen the bank’s general provisions of $3.83 billion.
Its allowance coverage stood at 127% and at 229% after considering collateral.
As at March 31, DBS’s Common Equity Tier-1 (CET-1) ratio rose by 0.4% y-o-y but fell by 0.2% q-o-q to 14.4%. The net profit accretion during the 1QFY2023 was offset by the impact of the ordinary and special dividends of 92 cents per share in the 4QFY2022 as well as by risk-weighted asset growth, says the bank.
Its leverage ratio of 6.4% as at March 31 stood more than two times the regulatory minimum of 3%.
“We delivered a record performance and benefited from safe-haven deposit inflows during a quarter marked by increased market volatility,” says DBS CEO Piyush Gupta.
“Our ability to sustain business momentum, as well as customers’ trust in a time of market stress, are the result of our solid capital position, prudent risk management, diversified business lines and nimble execution, underpinned by an ongoing digital transformation. Our multi-faceted franchise strengths will enable us to continue supporting customers and delivering shareholder returns,” he adds.
For the 1QFY2023, DBS has declared an interim dividend of 42 cents per share, unchanged q-o-q but up 16.7% y-o-y.
Shares in DBS closed 6 cents higher or 0.18% up at $32.82 on April 28.
