Early this morning, the other 2 Singapore banks, DBS Group Holdings (SGX:D05), as well as Overseas-Chinese Banking Corporation (SGX:O39), reported their business updates for the third quarter as well as for the first nine months of financial year 2020 (ended 30 September 2020.)

In this post, my focus will be on DBS’ latest results (I will publish a separate post to review OCBC’s latest quarter results shortly), where I will be looking at some of the key financial statistics (Q3 FY2019 vs. Q3 FY2020, and 9M FY2019 vs. 9M FY2020), as well as some of their key financial ratios (reported for Q3 FY2020 ended 30 September 2020, compared against the ratios reported 3 months ago – i.e. Q2 FY2020 ended 30 June 2020), along with information regarding its dividend payout for the quarter (DBS is the only bank out of the 3 Singapore banks that pays out a dividend to its shareholders on a quarterly basis.) Finally, you will also find in this post my personal thoughts about the bank’s latest set of results.

Let’s begin…

Key Financial Statistics (Q3 FY2019 vs. Q3 FY2020, and 9M FY2019 vs. 9M FY2020)

With effect from this financial year, DBS have switched to reporting its full financial statements on a semi-annual basis (i.e. for the first and fourth quarter.) For the first and third quarter, they will only provide updates on some of the most important financial numbers.

In this section, let us take a look at the bank’s financial figures both on a quarter-on-quarter (q-o-q), as well as on a year-on-year (y-o-y) basis:

Q3 FY2019 vs. Q3 FY2020:

Q3 FY2019Q3 FY2020% Variance
– Net Interest
Income (S$’mil)
$2,460m$2,171m-11.7%
– Net Fee & Commission
Income (S$’mil)
$814m$798m-2.0%
– Other Non-Interest
Income (S$’mil)
$549m$608m+10.7%
Total Income
(S$’mil)
$3,823m$3,577m-6.4%
Total Expenses
(S$’mil)
$1,614m$1,539m-4.6%
Net Profit Attributable
to Shareholders (S$’mil)
$1,629m$1,297m-20.4%

On a q-o-q basis, the bank’s results were largely a weaker one – its total income fell by 6.4%, due to a drop in its net interest income (by 11.7% on a q-o-q basis, as loan growth was offset by a lower net interest margin), as well as in its net fee and commission income, offset by a 10.7% q-o-q growth in its other non-interest income.

At the same time, its total expenses saw a 4.6% q-o-q dip due to a reduction in travel and marketing expenses.

Finally, as a result of a huge increase in allowances for credit and other losses (which jumped from S$254m in Q3 FY2019 to S$554m in Q3 FY2020), its net profit attributable to shareholders saw a 20.4% decline to S$1,297m.

9M FY2019 vs. 9M FY2020:

9M FY20199M FY2020% Variance
– Net Interest
Income (S$’mil)
$7,199m$6,956m-3.4%
– Net Fee & Commission
Income (S$’mil)
$2,311m$2,311m
– Other Non-Interest
Income (S$’mil)
$1,573m$2,062m+31.1%
Total Income
(S$’mil)
$11,083m$11,329m+2.2%
Total Expenses
(S$’mil)
$4,658m$4,578m-1.7%
Net Profit Attributable
to Shareholders (S$’mil)
$4,883m$3,709m-24.0%

On a y-o-y basis, its results was a much better one (compared to on a q-o-q basis), which can be attributed to better performances recorded in the first 2 quarters of the current financial year (you can check out my summary of the bank’s first and second quarter results here and here, respectively.)

My Thoughts: The latest quarter results reported by the Singapore bank was pretty much within my expectations, as the current weak economic climate, coupled with low interest rates, is bound to negatively impact the bank’s financial performances to a certain extent.

Looking forward, I am of the opinion that the bank’s results will continue to remain weak for the final quarter of FY2020. As for the next financial year, it will largely depend on the situation as far as the ongoing Covid-19 pandemic is concerned; while I am optimistic of its results being better than this year, but compared to the previous years (in terms of growth rate), it will be a smaller one.

Key Financial Ratios (Q2 FY2020 vs. Q3 FY2020)

As I’ve mentioned in the beginning of this post, I will be comparing some of the key financial ratios reported by the bank for the quarter under review (i.e. Q3 FY2020 ended 30 September 2020) against the ratios reported in the previous quarter (i.e. Q2 FY2020 ended 30 June 2020) to find out if it has improved or deteriorated:

Q2 FY2020Q3 FY2020Difference (in
Percentage Points)
Net Interest
Margin (%)
1.62%1.53%-0.09pp
Return on
Assets (%)
0.77%0.81%+0.04pp
Return on
Equity (%)
9.8%10.0%+0.02pp
Non-Performing
Loans Ratio (%)
1.5%1.6%+0.1pp

My Thoughts: There are both positives, as well as negatives, as far as the above financial ratios are concerned – first the positives: I am happy to note that, despite of the headwinds, the bank still managed to record improvements in its return on assets and in its return on equity compared to the last quarter.

On the other hand, its non-performing loans edged up slightly (by 0.1pp to 1.6%), while its net interest margin fell by 0.09pp to 1.53%, as the effects of global interest rate cuts in March and April fully sets in (the magnitude of the drop came as a surprise to me.)

Dividends Declared for the Quarter under Review

A dividend payout of 18.0 cents/share was declared for the quarter under review. The ex-dividend date will be on 12 November 2020, with payout date to be on 29 December 2020.

Just like in the previous quarter, shareholders have the option to opt for shares of the bank instead of cash – the issue price for new shares to be allocated shall be the average of the closing prices on 12 and 13 November 2020. Details on how you can apply for scrip can be found here.

If you prefer to receive your dividends in cash (which is the default), then there’s no need for you to do anything.

In Conclusion

As I have mentioned earlier in this post, the latest set of results was largely within my expectations.

I was pleasantly surprised by the slight gain in its return on assets, as well as in its return on equity. On the other hand, I was a little concerned by the 0.09pp decline in its net interest margin in the current quarter compared to the previous quarter 3 months ago – I will continue to monitor this ratio in the coming quarters ahead.

With that, I have come to the end of my review on DBS’ latest quarter results. I hope you find the share useful, and before I end, a disclaimer that everything you’ve just read is purely for educational purposes only. They do not represent any buy or sell calls on the bank’s shares. Please do your own due diligence before you make any investment decisions.

Related Documents

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

 

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