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3 Things You Should Know From DBS’ 2Q14 Earnings
Corporate Digest, Featured | 05 August 2014
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By: Peter Ng
Articles (81) Profile

1H14 Earnings

DBS Group Holdings registered a modest three percent growth in total income for 1H14, mainly attributed to a 12 percent growth in net interest income.

The gain in net interest income was underpinned by an overall increase in interest bearing assets, particularly a $251 million rise in customer non-trade loans.

As a result, excluding one-off gains from the sale of a stake in Bank of the Philippine Islands, net profit for the six months soared nine percent to $2 billion.

Key metrics also remained healthy as net interest margin was up three basis points to 1.66. In addition, the bank’s liquidity position maintained at the current level as loan-to-deposit ratio edged up 0.5 percentage points to 86 percent.

The China Story

On top of ongoing concerns pertaining to a slowdown in China’s economy, where the group currently holds a $50 billion portfolio of loan assets in the country, DBS noted and remains committed that there are still significant business opportunities to be pursued in the world’s second largest economy.

This is because DBS is in the view that demand for credit in China remains high.

However, China remains as a highly competitive space and competition is likely to intensify further as more entrants shift their focus towards the country. Not forgetting to mention that the ongoing tightening of lending regulations could disadvantage a lender, making it more difficult for the group to grow in China.

Sticky Customer Base In Singapore

Anyone who has frequented an ATM like me would have observed an interesting phenomenon in the use of ATM by now.

That is, an ATM labelled with the name of POSB or DBS would draw strings of crowd waiting to perform their transactions, while another machine from United Overseas Bank and Oversea-Chinese Banking Corporation (OCBC) will be almost queue-less.

This is mainly attributed to the sticky customer base which DBS has benefited from for a long time. While the bank noted this competitive strength, however, there appears to be limited initiatives to upkeep this strength in the near term.

Queues forming at DBS' ATM

As competitors such as OCBC attempts to further penetrate the market of customer deposits by offering savings accounts that generate higher interest rates, DBS could be facing headwinds as a result.

This is evident as the growth in savings account deposits has fallen consecutively for four quarters (2Q14: $100 million, 1Q14: $98.8 million, 4Q13: $97 million, 3Q13: $94.3 million).

Digital

DBS shared its success in the digital space as its flagship DBS mobile application is rated first in the world under the category of mobile app strategy and simultaneously the best mobile application for wealth management by MyPrivateBanking Research.

The group is gaining traction in the digital space as the DBS mobile application has singlehandedly brought in 2,500 wealth management customers for this quarter.

Secondly, its newly introduced mobile application, DBS Paylah!, has raked in 150,000 registered users within six weeks, which DBS noted is the mobile payment application that has the highest take-up rate in the shortest period of time up till now.

The spectacular growth could be related to the promotions involved, where newly signed up users are rewarded with $5 dollar credits.

One should note that as the mobile application is still in its initial stage, hence it is sensible to watch whether the group is able to successfully translate growth initiatives in this space into tangible earnings.

Backed by a strong interest in investments, Peter's research spans across a range of industries, with his focus placed on companies listed on the SGX.

Please click here for more information about this author.

DBS Group Hldgs  24.710 -0.04 -0.16%   
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
Oversea-Chinese Banking Corp  10.690 -0.02 -0.19%   
Business: [FY18 Turnover] Global corporate/investment banking (35%), global consumer/private banking (34.8%), OCBC Wing Hang (11.5%), insurance (11%), global treasury & mkts (7.7%).

Insight: May-19, 1Q19 total income rose 14.7% driven by str... Read More
United Overseas Bank  24.990 -0.16 -0.64%   
Business: [FY18 Turnover] Group retail (43.3%), group wholesale (43.2%), global markets & investment management (5.1%), others (8.4%).

Insight: May-19, 1Q19 total income rose 7.8% to $2.4b due t... Read More


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