8 Key Takeaways from DBS Group’s First-Quarter Results

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DBS Group Holdings Ltd (SGX: D05) is one of Singapore’s three largest banks. The group provides a wide and comprehensive range of banking services to individuals and corporations.

DBS announced its first-quarter earnings for 2020 on 30 April. Here are eight key points I took from the report in terms of how it performed.

  1. Total income for the group came in at S$4.03 billion (US$2.84 billion), up 13% year-on-year.
  2. Net interest income rose by 7% to S$2.48 billion compared to the same quarter in the prior year.
  3. Non-interest income came in at S$1.55 billion. Compared to the first quarter of 2019, fee income was up 14% contributing S$832 million while other non-interest income rose 39% contributing S$712 million.
  4. The net interest margin stood at 1.86% down from 1.88% year-on-year.
  5. Net profits were down 29% to S$1.17 billion year-on-year. This was due to S$1.09 billion in total allowances – S$700 million put aside for general allowances.This was done as a precaution due to the uncertain economic environment and S$383 million for specific allowances were recognised during the quarter.
  6. Non-performing loans came in at 1.6% inching up slightly from 1.5% from the first quarter of 2019.
  7. Loan to deposit ratio improved to 83% compared to the previous quarter. This is a good sign that the bank is being cautious about administering new loans in this uncertain environment.
  8. DBS CEO Piyush Gupta commented that:

“Our record operating performance in the first quarter has given us a head start to face the challenges of the coming year.

While the economic outlook remains uncertain and credit risks have increased, the digital investments we have made have strengthened the resilience and efficiency of our franchise and we remain committed to serving our customers.

We will maintain a solid balance sheet with ample capital, liquidity, and loss allowance reserves that give us strong buffers to absorb external shocks.”

Foolish summary

Overall, while DBS has announced a lower net profit figure, this is because it has taken a cautious stance by increasing its allocation for allowances.

The bank also only increased its loan book by 1% during the quarter, exercising prudence in administering loans. In terms of liquidity, this meant that the bank saw a decreasing loan-to-deposit ratio which is another plus.

Another positive was the fact that DBS announced a dividend per share (DPS) of S$0.33, in line with the previous quarter.

Lastly, management is keenly aware of the current economic situation and is actively taking steps to ensure that the bank comes out of this crisis on top.