DBS 2Q21 net profit of S$1.7bn (+-15% qoq, +37% yoy) was 6%/18% above our/sconsensus’ estimate of S$1.6bn/1.5bn. The beat was primarily due to a S$85m writeback of general provisions, resulting in total impairments of only S$79m (or 8bp) in 2Q21. On total income, the NII dip was heftier than expected, but non-II was in line.
DBS declared interim DPS of S$0.33 for 2Q21. We expect S$1.08 in full-year FY21F.
NIM drifted 4bp lower to 1.45% in 2Q21 (1Q21: 1.49%) as the tail-end of repricing filtered through. Consequently, NII dipped 1% qoq in 2Q21 (-9% yoy) as loan growth eased to 2.7% in 2Q21 (1Q21:+4% qoq).
Fee income was resilient at S$868m in 2Q21 (-9% qoq,+27% yoy) despite coming off the exceptional 1Q21 levels. This came on the back of sustained trade and transaction services, loan-related, and IB fees on continued business momentum. Wealth management fees eased slightly (-18% qoq, +40% yoy), but remained on a strong trajectory. Meanwhile, treasury income was normalised to S$632m (-20% qoq, -15% yoy) on the back of softer financial markets in 2Q21.
On balance, PPOP dipped 10% qoq (-9% yoy) given the lower non-II, and was in line with our expectations given due to our higher opex estimates. CTI was slightly higher at 43% in 2Q21 (1Q21: 41%)
DBS recorded total allowances of S$79m in 2Q21, translating to 8bp credit costs (1Q21: S$10m or 1bp). This was largely due to a S$85m writeback of general provisions. Loan SPs alone came up to 14bp (S$164m) – much lower than the 21bp recorded in 1Q21.
CEO guidance and outlook:
– Upgrading full-year loan growth to high single digit (from mid-to-high single digit)
– Increased full-year fee income growth forecast to mid-teens (from double) digits
– Underlying expenses stable
– Asset quality better than expected with improving economic environment. New NPA formation and specific provisions at pre-pandemic levels.
– Guiding for full-year allowances to not exceed S$0.5bn (from S$1bn expectation previously)
Key ratios:
- NIM dipped 4bp to 1.45% in 2Q21 (1Q21: 1.49%). Management guides for NIMs to come in at 1.45-1.5% in FY21F (FY20: 83bp)
- Loans rose 2.7% qoq in 2Q21 (1Q21: +4.1% qoq).
- NPL ratio held steady at 1.5% (1Q21: 1.5%)
- LDR held steady at 82% (1Q21: 81%)
- CTI rose to 42% in 2Q21 (1Q21: 41%, FY20: 43.5%)
- 2Q21 ROE: 12.7% (1Q21: 15.4%, FY20: 9.1%)
- 1Q21 CET-1: 14.5% (1Q21: 14.3%).
We expect positive share price movement today given the beat
DBS: