Hot stock: DBS crosses S$40 for first time to hit new high on strong results, S$3 billion share buyback plan

SHARES of DBS rose to a historic level after it announced the establishment of a S$3 billion share buyback programme in tandem with its third-quarter results, which saw net profit crossed the S$3 billion mark for the first time.

As at 11.49 am, the counter leapt as much as 6.9 per cent or S$2.72 to reach an intraday and all-time high of S$41.87.

It later eased to pause at S$41.69 as at the midday break, up 6.5 per cent or S$2.54, and was the top-traded counter by value of the morning with 10.1 million securities worth S$413.1 million transacted.

This is also marks the first time the bank’s share price had breached the S$40 mark throughout the bank’s trading history since 1999.

Shares of DBS’ peers rose as well, with OCBC up 3.5 per cent or S$0.54 at S$15.84 and UOB adding 2.3 per cent or S$0.76 to trade at S$33.45 at midday.

According to ShareInvestor data, several married deals for DBS shares were made in early trade.

The first of such transactions took place at S$39.15 apiece – the bank’s Nov 6 closing price – for 80 DBS shares at 8.30 am before the pre-open session.

In a married deal trade conducted at 9.08 am, 20,000 shares went for S$40.15 per security, with another taking place at 9.20 am for the same volume at S$40.44. 

An additional 23,000 DBS shares went for S$40.66 per security at 9.42 am.

Three more married deals were executed after 10 am, with transactions ranging from S$40.83 to S$41.46 at volumes of 3,800 to 12,000. 

Before the market opened on Thursday (Nov 7), Singapore’s largest lender reported that its Q3 net profit rose 17 per cent year on year to S$3.03 billion from S$2.59 billion the year before.

This exceeded the S$2.76 billion consensus forecast among four analysts polled by Bloomberg.

An interim dividend of S$0.54 for each ordinary share was declared, resulting in estimated total dividends payable of S$1.54 billion, and up from S$0.48 per share in the same period a year earlier.

This year’s Q3 interim dividend will be paid out on or about Nov 25.

Earnings per share (EPS) stood at S$4.21 versus S$3.64 in the year before.

On the commercial book level, total income stood 8 per cent higher at S$5.42 billion, while net interest income rose 3 per cent to S$3.8 billion.

Net fee and commission income rose 32 per cent to S$1.11 billion, while other non-interest income grew 4 per cent on the year to S$517 million. Both increases were attributed to higher contributions from wealth management.

The group said that net interest margin (NIM) on its commercial book remained stable at 2.83 per cent. On the group level, NIM stood at 2.11 per cent, down slightly from 2.19 per cent from Q3 FY2023.

Its cost-income ratio stood at 39.1 per cent versus 39.3 per cent in Q3 FY2023, while profit before allowances rose 11 per cent year on year to S$3.5 billion.

Non-performing loans ratio fell to 1 per cent versus 1.2 per cent in the same period a year earlier, with specific allowances at 14 basis points of loans for the third quarter.

Markets trading income grew 99 per cent on the year to its highest level in 10 quarters at S$331 million, driven by foreign exchange, interest rates and equity derivatives.

Expenses rose 10 per cent to S$2.25 billion, of which the group noted that Citi Taiwan accounted for three percentage points of the increase from S$2.04 billion previously.

Share buyback programme

Additionally, DBS’ board has established a new S$3 billion share buyback programme where the bank’s shares will be purchased in the open market and cancelled.

The programme marks the first time that repurchased shares will be cancelled. Buybacks under it will be carried out at the management’s discretion, subject to market conditions.

Based on the bank’s balance sheet as at September 2024, it is estimated to reduce the fully phased-in CET-1 ratio by around 0.8 percentage point when completed.

Bloomberg Intelligence credit analyst Rena Kwok said that DBS will retain about S$6 billion in CET-1 excess capital upon completion of the buyback, above its targeted range of 12.5 to 13.5 per cent.

The programme comes as part of its board’s capital management initiatives, noted DBS, adding that it is expected to provide a “permanent lift” to EPS in addition to higher return on equity.

Citi analyst Tan Yong Hong had earlier expected a “strong positive share price reaction” to the news.

As the latest quarter’s interim dividend remained unchanged from that of the second quarter of FY2024, Tan said that the share buyback plan was a key highlight of the bank’s announcement this earnings season. 

He also observed that the programme’s S$3 billion quantum stood at 2.7 per cent of DBS’ market capitalisation. It is estimated to consume about 0.8 per cent of capital, though the pace of the buybacks was not disclosed. 

Deputy chief executive Tan Su Shan said: “The buyback programme expands our toolkit for capital management. The considerable amount of capital we have returned in recent years has been a distinguishing hallmark that remains well supported by our financial strength.”

She is due to succeed chief Piyush Gupta when he retires at the next annual general meeting on Mar 28, 2025. 

She also said: “I am committed to continuing with this approach when I take over from Piyush.”