DBS chief expects 2024 earnings to hit new highs as Q1 profit rises 15% to S$2.95 billion

THE net profit of DBS for 2024 will likely be able to exceed its record levels in 2023, said chief executive Piyush Gupta.

Gupta expects it is with “reasonable assumption” that the lender can beat its 2023’s profit numbers given its strong first-quarter performance, where net profit rose 15 per cent to S$2.95 billion.

“This was obviously a very strong first quarter. It is exceptional by any measure and it’s safe to say everything went our way,” he said at a briefing for the bank’s Q1 results on Thursday (May 2).

The lender’s Q1 net profit beat the S$2.5 billion consensus forecast in a Bloomberg survey of five analysts. Excluding integration costs for Citibank Taiwan, net profit would have been a record S$2.96 billion.

DBS posted several record figures in Q1, with return on equity at a high of 19.4 per cent, and total income up 13 per cent to a high of S$5.56 billion

Group net interest margin (NIM) remained stable at 2.14 per cent, from 2.13 per cent in the previous quarter.

Gupta said the lender’s commercial book NIM – which rose two basis points (bps) to 2.77 per cent – was better than expected, despite the decline in the Hong Kong Interbank Offered Rate.

This was due to a better uptake in fixed rate loans than previously expected, and a slower outflow in current and savings accounts.

Loan growth – up 1 per cent on the quarter amid a broad-based rise in non-trade corporate loans – was also more robust than expected, he said.

While markets trading income fell 9 per cent on the year to S$246 million, on higher funding costs and due to a high base effect, DBS noted that it was still a strong quarter for the segment.

In the quarter, the lender also saw opportunities to deploy into high-quality assets, which was accretive to net interest income although dilutive to NIMs.

Furthermore, fee income was “particularly pleasing” because of strong performance of its wealth management business, Gupta said.

Q1 net fee income was up 23 per cent on year to S$1.04 billion, crossing S$1 billion for the first time as treasury customer sales reached a record.

Wealth management fees were up 47 per cent to S$536 million, amid a stronger market sentiment and an expanded asset under management base.

Gupta noted that Q1 2023 was a low base amid impact from Credit Suisse’s fallout. But even adjusted for that and excluding gains from its Citibank Taiwan acquisition, wealth management was still strong as customers were increasingly putting their money to work.

Meanwhile, DBS’ cost-income ratio stood little changed at 37 per cent. Expenses rose 10 per cent, with Citibank Taiwan accounting for five percentage points of the increase.

Non-performing loans ratio remained unchanged at 1.1 per cent, with specific allowances at 10 bps of loans.

Higher forecasts

For 2024, Gupta expects the lender’s group net interest income to be modestly better than 2023 levels, given resilient macroeconomic conditions.

Geopolitical risks persist amid wars in Ukraine and the Middle East, and with tensions between China and the US. But growth in Asia still looks “quite stable”, he said.

The lender is also guiding for commercial book non-interest income growth to be in the mid-to-high teens per cent, given that it is already seeing that momentum in wealth management and treasury customer sales in Q1.

As a result, total income could be one or two percentage points higher than its previous guidance of mid-single digit, Gupta said.

For specific allowances, DBS kept its guidance at 17 to 20 bps to account for uncertainty due to higher rates.

“It’s not unreasonable to assume that at some stage, you should start seeing a pickup in provisions to go back to long-term averages. Having said that, we are not seeing any obvious signs of stress anywhere,” he said.

The lender declared an interim dividend of S$0.54 for each ordinary share, resulting in estimated total dividends payable of S$1.54 billion.

Additional shares arising from its proposed one-for-10 bonus issue will also qualify for this dividend.

The payment date for the Q1 interim dividend will be on or about May 20, after books closure on May 10.

After the results were announced, shares of DBS reached an all-time peak of S$36 on Thursday morning, while its market capitalisation crossed the S$100 billion mark, the first time a Singapore-listed company has done so.

As at 1.31 pm, DBS shares were up 1.8 per cent or S$0.62 at S$35.52.