Analyst briefs: DBS 1H21 results

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Southeast Asia’s largest bank DBS reported Thursday its first half net profit climbed 54 percent on-year to S$3.71 billion, a record high, on strong business momentum and resilient asset quality.

Shares of DBS were up 0.78 percent at S$31.04 at 1:54 p.m. SGT Friday.

These are analysts’ calls on the results:

Morgan Stanley

Morgan Stanley said DBS posted a solid set of second quarter results, with better revenue and lower provisions driving profit before tax above its forecast.

Second quarter net profit after tax of S$1.70 billion, up 37 percent on-year, came in 17 percent above forecast, Morgan Stanley said.

“Net interest margin (NIM) [was] a touch softer than forecast, but little else to complain about,” the investment bank said in a note Thursday. NIM fell 4 basis points on-quarter to 1.45 percent in the quarter, the note said.

Morgan Stanley said the outlook was positive and kept an Overweight call on DBS shares, with a price target of S$30.58.

Maybank Kim Eng

DBS’s results were a “strong beat” of forecasts for the first half, Maybank Kim Eng said in a note Thursday.

“The group offers the clearest pathway to growth given its gearing towards Singapore and North Asia – which are benefiting from re-opening momentum. Concurrently, lower exposure to Southeast Asia shields it from resurging Covid, while increasing the likelihood of earlier reserve releases,” the brokerage said.

“Dividends have been restored to pre-pandemic levels, while its recent bolt on acquisitions, new retail wealth and supply chain financing
initiatives together with sustainability financing could provide medium term catalysts for growth,” the brokerage added.

Maybank Kim Eng estimated DBS’s pre-provision operating profit (PPOP) would grow at a 7 percent compound annual growth rate over 2020-23, despite a lower interest rate environment.

The brokerage increased its 2021-23 earnings per share (EPS) forecasts by 1-5 percent on lower provisions and better loan and fee income, and raised its dividend per share projection for this year to S$1.17 from S$1.08 previously.

The target price was increased to S$35.11 from S$33.71, with a Buy call.