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DBS’s 1Q14 Results Shoot Through The Roof; More To Come?
Tradeable, Tradeable Ideas | 08 May 2014
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By: Lim Si Jie
Articles (169) Profile
  1. Strong Q1 results with profit hitting a record $1.03 Billion and a low P/B ratio.
  2. Move to appoint new Chief Innovation Officer signals DBS’ intent to catch up in e-commerce and digital banking.
  3. Moving Average, MACD and ADX are signalling a bullish run.

Company Profile And Business Operations
DBS Bank is engaged in the provision of retail, small and medium-sized enterprise, corporate and investment banking services. The Company’s financial businesses are organized into four segments: Consumer Banking/Wealth Management, Institutional Banking, Treasury, and Others.

Q1 Results
DBS registered a record $1.03 billion profit in Q1 2014. This is attributed to a healthy rise in net interest income as well as trade, loans, and wealth management fees which helped to boost the group’s bottom line figures.

Treasury customer income was also strong, rising 20 per cent to a record $335 million from increased corporate, institutional and individual customer activity. Net interest income also grew by 12 per cent to $1.49 billion.

Price To Book Value
DBS Bank has a low price to book ratio of 1.18 as compared to the industry average of 2.97. Most of the assets of a bank can be considered to be highly liquid. A low price to book ratio represents a bargain for investors who are looking to invest in the long run.

New Appointment Within DBS
DBS Bank appointed Mr Neal Cross as managing director and chief innovation officer of its technology and operations division. Mr Neal Cross has 20 years of experience in technology, innovation and financial services.

DBS will be putting Mr Neal in charge of developing the bank’s digital banking efforts in Greater China, Southeast Asia and South Asia.

Digitalisation of Banking
The Asian banking industry is facing stiff competition from mobile and internet companies. The industry, in my opinion, must thus embrace digital banking to ensure long-term survival. We can see that DBS is embracing technology to create better user experiences for its banking customers.

Demand for retail banking services in Asia is being driven by a rising middle class in markets such as Southeast Asia and India, combined with the adoption of e-commerce technology such as mobile banking applications by young, tech-savvy consumers.

With smart phones and tablets rapidly becoming an integral part of everyone’s lives, this move could increase DBS bank’s foothold in Greater China, Southeast Asia and South Asia.

Moving Average, MACD and ADX Signals

DBS share price bounced from its low of $15.66 in the middle of March 2014. Its 20 days exponential moving average (EMA) only recently crossed the 50 EMA. This hints that DBS share prices is likely to continue further towards the resistance at $17.41.

Additional evidence is shown from the MACD and ADX, both of which are supporting a bullish call on DBS.

Bullish In The Long Run
Both fundamental and technical analysis have given me the confidence to go for a bullish call on DBS in the long run.

For more conservative investors, you might want to wait for the resistance at $17.41 to be broken before entering the market. As for investors who are more aggressive, you might want to monitor for the pullback and enter at a cheaper price.

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Si Jie is no stranger to investing having started his journey at a young age. He is heavily influenced by acclaimed investors such as Benjamin Graham, Peter Lynch, and John Rothchild.

Please click here for more information about this author.

DBS Group Hldgs  24.780 -0.16 -0.64%   
Business: [FY18 Total Income] Institutional banking (43.7%), consumer banking/wealth management (42.9%), treasury markets and others (13.4%).

Insight: Apr-19, 1Q19 net profit rose 9% to a record $1.7b.... Read More

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