[Amendments/Additions on 07 August 2020: Information on the bank’s dividend payouts (both cash as well as scrip), along with some clarifications I need to make regarding whether I will be receiving cash or scrip – I will be striking out any original text that I am amending, with amendments in italics for easy identification.]

Early this morning, DBS Group Holdings (SGX:D05) released its financial results for the second quarter, as well as the for the first half of the financial year 2020 ended 30 June 2020.

As a shareholder of Singapore’s largest bank, I have studied through its latest results release and in this post, you will find a summary of the most important financial results and statistics to take note of, along with my personal thoughts about it to share…

Key Financial Results (2Q FY2019 vs. 2Q FY2020, and 1H FY2019 vs. 1H FY2020)

In this section, you will find a comparison of the bank’s key financial results on a quarter-on-quarter (q-o-q) basis (i.e. 2Q FY2019 vs. 2Q FY2020), as well as on a year-on-year (y-o-y) basis (i.e. 1H FY2019 vs. 1H FY2020):

2Q FY2019 vs. 2Q FY2020:

2Q FY20192Q FY2020% Variance
Total Income
(S$’bil)
$3.71b$3.73b+0.5%
– Net Interest
Income (S$’bil)
$2.43b$2.30b-5.3%
– Net Fee &
Commission
Income (S$’bil)
$0.77b$0.68b-11.7%
– Other Non-
Interest
Income (S$’bil)
$0.51b$0.74b+45.1%
Net Profit
(S$’bil)
$1.61b$1.27b-21.4%
Net Profit
Attributable to
Shareholders
(S$’bil)
$1.60b$1.25b-21.8%

While both the bank’s net interest income and net fee and commission income saw q-o-q declines by 5.3% and 11.7% respectively, its other non-interest income saw a huge jump (by 45.1% on a q-o-q basis). This contributed to the bank’s total income edge up by 0.5% on a q-o-q basis to S$3.73b.

However, as a result of a huge increase in the bank’s allowances for credit and other losses (from S$0.25b in 2Q FY2019 to S$0.85b in 2Q FY2020), its net profit as well as net profit attributable to shareholders dropped by 21.4% and 21.8% on a q-o-q basis respectively.

1H FY2019 vs. 1H FY2020:

1H FY20191H FY2020% Variance
Total Income
(S$’bil)
$7.26b$7.75b+6.8%
– Net Interest
Income (S$’bil)
$4.74b$4.79b+1.1%
– Net Fee &
Commission
Income (S$’bil)
$1.50b$1.51b+0.7%
– Other Non-
Interest
Income (S$’bil)
$1.02b$1.45b+42.2%
Net Profit
(S$’bil)
$3.27b$2.43b-25.7%
Net Profit
Attributable to
Shareholders
(S$’bil)
$3.25b$2.41b-25.9%

Net interest income saw a 1.1% y-o-y improvement as a result of higher loans and deposit volumes, offset by a lower net interest margin in the second quarter.

Net fee and commissions income inched up 0.7% y-o-y due to a good first quarter result in this segment (which saw a 14% q-o-q growth), offset by a slump in its results in the second quarter (which went down by 11% on a q-o-q basis.)

Other non-interest income skyrocketed by 42.2% on a y-o-y basis mainly attributed to a three-fold increase in net gain on investment securities.

As a result, the bank’s total income saw a 6.8% improvement on a y-o-y basis to S$7.75b.

However, as a result of a huge increase in the bank’s allowances for credit and other losses (from S$0.33b in 1H FY2019 to S$1.94b in 1H FY2020), its net profit as well as its net profit attributable to shareholders fell by 25.7% and 25.9% on a y-o-y basis respectively.

If not for the allowances, which according to the bank, was “conservatively set aside” to fortify its balance sheet against risks arising from the Covid-19 pandemic, its net profit would have been up by 11.6% to S$4.71b on a y-o-y basis, a record for the bank (1H FY2019: S$4.22b, excluding any allowances for credit and other losses.)

My Thoughts: Personally, I thought that on a y-o-y basis, this was a resilient set of results reported by the bank – where all 3 of its business segments (net interest income, net fee and commissions income, as well as other non-interest income) reported improvements.

The reason why its net profit fell was because of the allowances set aside to cope with uncertainties relating to the Covid-19 pandemic. If we omit the allowances being set aside, its net profit too would have saw a y-o-y improvement.

Therefore, as a shareholder, I am happy with the bank’s latest set of financial results.

Key Financial Ratios (1Q FY2020 vs. 2Q FY2020)

In this section, I will be looking at the bank’s key financial ratios for the second quarter of FY2020 (ended 30 June 2020), compared against the previous quarter (i.e. 1Q FY2020 ended 31 March 2020) to find out if they have improved or deteriorated three months on:

1Q FY20202Q FY2020Difference (in
Percentage Points)
Net Interest
Margin (%)
1.86%1.62%-0.24pp
Return on
Assets (%)
0.78%0.77%-0.01pp
Return on
Equity (%)
9.2%9.8%+0.6pp
Non-Performing
Loans Rate (%)
1.6%1.5%-0.1pp

My Thoughts: While the net interest margin fell by quite a fair bit 3 months on (which is in my expectations), some positives to note here is that the bank’s return on equity have saw some improvements compared to the first quarter. Also, its non-performing loans ratio have edged down slightly in the same time period.

Again, as a shareholder, taking into considerations the headwinds relating to the Covid-19 pandemic on the bank, the key financial ratios I have looked at have continued to remain resilient.

Dividends Declared (2Q FY2019 vs. 2Q FY2020)

As a result of MAS’ call on the local banks to cap their dividend payouts to 60% of what was paid in FY2019, along with their suggestion to allow shareholders to receive scrip instead of cash (you can read the media release in full here), a dividend payout of 18.0 cents/share was declared, and at the same time, shareholders will also be given the option to receive scrip (where the amount will be determined based on the average closing prices on 14 and 17 August 2020.)

In the same period last year (i.e. 2Q FY2019), a dividend payout of 30.0 cents/share was declared.

The following are some of the information you need to take note of – The ex-dividend date will be on 14 August 2020, record date will be on 17 August 2020 at 5.00pm, announcement of issue price will be on 18 August, and payout date will be on 05 October 2020.

My Thoughts: MAS’ call came as a surprise to me as a shareholder, as all along I have expected the bank to have the resiliency to not only be able to maintain their 33.0 cents/share of dividend payout to shareholders quarterly, but at the same time, be able to deal with the headwinds resulting from the Covid-19 pandemic (if you look at its y-o-y results in the earlier section, I’m sure you’ll share the same view as me about the bank’s resiliency.)

In Conclusion

I’m sure you may be wondering whether I will be receiving cash or scrip – it will largely depend on how much the scrip is based on. [Amended Text: as the amount of scrip will only be announced after ex-dividend date, I will personally be keeping tabs on its share price movements over the next couple of days before I make my decision.] All decisions will be updated in my long-term investment portfolio page (you can check out a full list of all my long-term investments here) accordingly.

For those of you who are not familiar with scrip, there is something you need to know and that is, if you opt for it, you will very likely end up holding odd-numbered shareholdings and should you decide to sell off all your shareholdings in the future, you will need to manually contact your brokerage firm to dispose of these odd-numbered shareholdings (another thing to bear in mind is the brokerage fees involved in your sell order.)

Finally, except the part about dividend payout, I am happy with the bank’s latest set of results.

Related Documents

Disclaimer: At the time of writing, I am a shareholder of DBS Group Holdings Limited.

 

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