facebookDBS Group Holdings Ltd (SGX: D05) 2020 Earnings: What Investors Should Know



100221_DBS earnings 2020_Seedly

DBS Group Holdings Ltd (SGX: D05) 2020 Earnings: What Investors Should Know

profileSudhan P

Singapore’s largest bank DBS Group Holdings Ltd (SGX: D05) just reported its 2020 earnings. Here are seven quick things to note about the bank’s latest financial results.

1. Total Income

DBS’ total income for the year was stable at S$14.59 billion, compared to S$14.54 billion a year ago.

Net interest income fell 6% due to lower net interest margin as central banks globally slashed interest rates.

(Investors would know that has caused interest rates on their savings accounts to fall as well.)

However, non-interest income grew 32% while fee income was flat.

The growth in non-interest income came on the back of gains from investment securities tripling and higher trading income.

DBS’ net interest margin (NIM) for 2020 stood at 1.62%, down from 1.89% a year back.

The NIM shows the average interest margin that a bank is earning from its borrowing and lending activities.

2. Profit Before Allowances

With expenses falling 2% year-on-year, profit before allowances grew 2% to S$8.43 billion, a new high.

DBS’ cost-to-income ratio for the year fell to 42.2% from 43% in 2019.

This metric is used to gauge a bank’s efficiency and productivity. Generally, the lower the ratio, the better it is.

Costs were tightly managed in 2020, and general expenses such as on travel, advertising and promotions were lower.

3. Allowances

DBS’ allowances for credit and other losses quadrupled from S$703 million in 2019 to S$3.07 billion in 2020.

General allowances of S$1.71 billion were set aside as a conservative measure for potential risks arising from the pandemic.

Non-performing loan (NPL) ratio for 2020 was 1.6%, up from 1.5% one year ago.

The NPL ratio shows the amount out of total loan that has turned sour (borrower is unable to pay off interest or the principal amount). The lower the ratio, the better it is for the bank.

Even though the NPL ratio has increased for the year, it is still manageable.

4. Net Profit

Considering all of the above, DBS’ net profit for 2020 tumbled 26% year-on-year to S$4.72 billion, down from S$6.39 billion a year back.

DBS said that in the second half of 2020, business momentum was healthy with broad-based loan growth and resilient fee income.

Source: DBS 2020 earnings presentation

5. Balance Sheet Strength

DBS’ Common Equity Tier 1 ratio at the end of 2020 was stable at 13.9% and is above the minimum requirement of 6.5%.

Its leverage ratio was 6.8%, above the 3% minimum requirement.

Both ratios measure the ability of a bank to meet its financial obligations.

6. Dividend

DBS has declared a final dividend of 18 cents per share, in line with MAS’ call for local banks to moderate their dividends for 2020.

In all, the bank will be paying out a total dividend of 87 cents per share for 2020.

Source: DBS 2020 earnings presentation

The scrip dividend scheme will be applicable for the fourth quarter dividend, with scrip dividends issued at the average of the closing share prices on 7 and 8 April 2021. DBS will announce the scrip issue price on 9 April 2021.

7. Business Outlook

Looking ahead, DBS said that the latest economic data support strong economic rebound for 2021.

The bank’s credit outlook is also positive for the year.

DBS’ chief executive, Piyush Gupta commented the following on the bank’s latest results (emphases are mine):

“Our record operating performance in one of the most challenging periods on record attests to the quality of our franchise and nimble execution. Business momentum was sustained in the fourth quarter and our pipeline for loans and fee income is healthy. We have been proactive through the crisis and enter the year with new growth platforms. Lakshmi Vilas Bank in India and the securities joint venture in China will enhance our presence in both key markets. Initiatives such as the Digital Exchange, supply chain digitalisation and efforts to broaden wealth management to the mass market will reinforce our leadership in digital finance. These platforms will strengthen our ability to continue supporting customers and delivering shareholder returns.”

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Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. ​Readers should always do their own due diligence and consider their financial goals before investing in any stock. The writer may have a vested interest in the company mentioned.

About Sudhan P
It isn't fair competition when only one company in the world makes Monopoly. But I love investing in monopolies. Before joining the Seedly hood, I had the chance to co-author a Singapore-themed investment book – "Invest Lah! The Average Joe's Guide To Investing" – and work at The Motley Fool Singapore as an analyst.
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