Excerpts from UOBKayHian report
DBS Group Holdings Ltd (SGX: D05)
- DBS Group achieved a net profit of S$3,522m in 4Q24 (+11% yoy), driven by an uptick in NIM, surge in wealth management fees (+41% yoy) and markets trading income (+40% yoy).
- In addition to the share buyback programme of S$3b, the Board had established a capital return dividend of 15 S cents per quarter to be paid out over 2025.
- Management expects to pay out similar amounts of capital in the subsequent two years in 2026 and 2027.
Downgrade to HOLD. Target price: S$49.80.
NIM expanded 2bp yoy and 4bp qoq to 2.15% in 4Q24
DBS Group Holdings (DBS) reported a net profit of S$2,522m for 4Q24, up 11% yoy but down 17% qoq. The results were in line with our net profit forecast of S$2,535m.
NIM expanded 2bp yoy and 4bp qoq to 2.15% in 4Q24Â due to repricing of fixed rate assets. DBS also benefitted from CASA inflow of S$13b in 2H24. Loans grew 3% yoy on a constant-currency basis driven by trade loans and non-trade corporate loans.
Net interest income rose 8.6% yoy. NIM retraced to 2.12% in Jan 25 due to recent three rate cuts totalling 100bp to bring the Fed Funds Rate to 4.25%.
Fees & commissions grew 12% yoy in 4Q24
DBS Group wealth management fees surged 41% due to brisk sales of investment and bancassurance products. DBS attracted net new money of S$6b for 4Q24 and S$21b for 2024. AUM expanded 17% yoy to S$426b. Cards and transaction service fees also jumped 4% and 7% yoy respectively.
Non-interest income boosted by property disposal gain
Other non-interest income grew 15% yoy to S$809m in 4Q24. Treasury customer sales rose as foreign exchange, interest rate and equity derivative activities benefitted from market volatility.
Markets trading income expanded 40% to S$158m from the low base last year. DBS also recognised a property disposal gain.
CIR within guidance on full-year basis
DBS Group operating expenses increased 9% yoy to S$2,395m with Citi Taiwan accounting for 3ppt of the increase. Staff cost grew 8% yoy. DBS set aside S$100m for Corporate Social Responsibility (CSR) commitment. Cost-to-income ratio (CIR) was seasonally higher at 43.5% in 4Q24 (2024: 39.9%).
Asset quality remains stable
NPLs increased 4% qoq as upgrades & recoveries were lower at S$208m in 4Q24 (3Q24: S$491m). NPL ratio inched marginally higher by 0.1ppt qoq to 1.1%. Specific provisions were 20bp (3Q24: 14bp). It wrote back S$20m of general allowance. Management overlay for general provision was S$2.4b.
High ROE despite strong capital adequacy
DBS Group’ CET-1 CAR was 17.0% as of Dec 24 based on transitional arrangements (fully phased-in: 15.1%). ROE was an impressive 18.0% for 2024. Final Basel III reforms were implemented on 1 Jul 24.
Returning excess capital to their rightful owners
The Board increased quarterly dividend by 6 S cents to 60 S cents for 4Q24 and introduced a Capital Return Dividend of 15 S cents per quarter to be paid out over 2025. Management expects to pay out similar amounts of capital in the subsequent two years in 2026 and 2027.
Guidance for 2025
Management guided net interest income to be slightly above 2024 levels in 2025. The negative impact from slight NIM compression (management expects two rate
cuts in 2025 instead of four) would be offset by positive impact from mid-single-digit loan growth.
Management expects NIM to be around 2.10% (2024: 2.13%). Non-interest income is expected to grow at high single-digit, driven by wealth management and treasury customer sales. CIR is likely to be in low-40%.
Specific provisions are expected to be 17-20bp. Pre-tax profit should be flat at around 2024 levels. Net profit could be lower than 2024 levels due to the global minimum tax rate of 15% (negative impact of S$400m).
Valuation/Recommendation
Downgrade to HOLD. Our target price of S$49.80 for DBS is based on 2.07x 2025F P/B, derived from the Gordon Growth Model (ROE: 15.7% (previous: 15.2%), COE: 8.5%, growth: 1.8%). HOLD for attractive 2025 dividend yield of 6.6%.
You can find the full report here and the company website here.
