DBS HOLDINGS (SGX:D05) – Sailed Through The Pandemic Quite Well

DBS Holdings is one of Asia’s leading banks, focused on leveraging digital technology to reimagine banking to provide its customers a full range of services in consumer banking, wealth management and institutional banking.

It is a Singapore-based banking group providing a full range of consumer, small to medium enterprise, and corporate banking services. It has 280 branches in 18 markets. Its footprint is concentrated in Greater China, Southeast Asia, and South Asia. The bank’s wealth-management business is one of the largest in Asia, with assets under management (SGD 206 billion).

DBS has adequate level of liquid capital (CET1 ratio of 14.3%). New NPA formation is below pre-COVID level.

Revenue Growth Vs its Peers

DBS has been a laggard in terms of revenue growth vis-à-vis its Singapore Peers till 2014. After 2014, DBS has tried to catch up with its Peers and narrowed the gap in revenue growth with its Peers.

Revenue Breakdown By Income Category

Traditionally, banks generate most of its income by issuing loans and collecting the interest payments (i.e. Interest Income). However, a large fraction of bank revenue also comes from so-called “noninterest income”, which includes items such as fees Income, trading revenue, income from fiduciary activities and non-fee income.

For DBS, the net Interest Income contributes around 66% of total revenue and rest 34% are contributes by non-interest segment. 

Revenue Breakdown By Geographical segments

Revenue from Singapore has been continuously increasing since past 18 years. Though, revenue from non-SG regions did not increase with the same pace as revenue growth in Singapore.

The company derives around 65% of total revenue from Singapore, 20% from Hong Kong and 7% from rest of greater China.

Loan book breakdown

Building & Construction sector (24%) has the largest share of total loan book. Housing loan (20%) has the second largest share. General Commerce (13%) has 3rd largest share in total loan book.

Net Interest Margin (Vs Its Peers)

Net Interest Margin (NIM) of DBS, currently stands at a little above 2.5% level. While, NIM of its Peers is below 2.5% level. 

Return on Equity

Currently, DBS is ahead of its peers in Return on Equity (almost 13%). But historically, it has always lagged its peers till 2017. From 2018 onward, it has maintained its lead position over its Peers. 

Dividend Yield

It has consistently paid dividend since past several years. The Current dividend yield is 2.45%.

Valuation

Price to Sales

At the current market price of SGD29.4 as on 04 May 2021, DBS Holdings is trading at a Price to Sales(P/S) Ratio of 5.059 times last 12 months sales.  This is almost 13.0% premium to its historical average Price to Sales Ratio of 4.5 times.

Near to Medium term Trigger

  • Improved Management guidance on loan growth and fee-based income. Asset quality better than expected.
  • New Blockchain based platform (in partnership with Temasek and JPM) for cross border payment solution. Scheduled to be launched in Q3 2021.
  • Recent Acquisition of Lakshmi Vilas Bank (India).

Disclaimer

Our content is for informational purpose only. We don’t recommend the stocks by such analysis. You must do your own research before undertaking any investment making decision.

==================================================================

Do follow below page to read other SG investment blogs:

http://www.sginvestbloggers.com/

Published by Amit

.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: