DBS Group Holdings (SGX:D05) is the first of the three Singapore-listed banks to release its results for the fourth quarter, as well as for the financial year 2020 ended 31 December 2020 early this morning (10 February 2021) – the other two banks will be releasing its results on the final week of February (OCBC on 24th February, and UOB on 25 February – both before market hours.)

In my post today, let us take an in-depth look into DBS’ latest ‘report card’ – particularly its key financial results, key financial ratios, as well as its dividend payouts to shareholders, along with my personal opinions as a shareholder of Singapore’s biggest bank to share.

Key Financial Results (Q4 FY2019 vs. Q4 FY2020, and FY2019 vs. FY2020)

In this section, you will find the bank’s results on a quarter-on-quarter (q-o-q) basis (i.e. Q4 FY2019 vs. Q4 FY2020), as well as on a year-on-year (y-o-y) basis (i.e. FY2019 vs. FY2020):

Q4 FY2019 vs. Q4 FY2020:

Q4 FY2019Q4 FY2020% Variance
– Net Interest
Income (S$’mil)
$2,426m$2,120m-12.6%
– Net Fee & Commission
Income (S$’mil)
$741m$747m+0.8%
– Other Non-Interest
Income (S$’mil)
$294m$396m+34.7%
Total Income
(S$’mil)
$3,461m$3,263m-5.7%
Total Expenses
(S$’mil)
$1,600m$1,580m-1.3%
Net Profit
(S$’mil)
$1,508m$1,012m-32.9%

Total income (which consisted of 3 components: net interest income, net fee and commission income, as well as other non-interest income) fell 5.7% on a q-o-q basis to S$3,263m, as a decline in its net interest income (due to a 37 basis point q-o-q drop in its net interest margin to 1.49%), cushioned by an increase in its net fee and commission income (attributed by an improvement in its wealth management fees), as well as in its other non-interest income (as a result of an increase in its trading income.)

Finally, its net profit went down by 32.9% on a q-o-q basis due to a lower net interest margin, along with higher total allowances.

FY2019 vs. FY2020:

FY2019FY2020% Variance
– Net Interest
Income (S$’mil)
$9,625m$9,076m-5.7%
– Net Fee & Commission
Income (S$’mil)
$3,052m$3,058m+0.2%
– Other Non-Interest
Income (S$’mil)
$1,867m$2,458m+31.7%
Total Income
(S$’mil)
$14,544m$14,592m+0.3%
Total Expenses
(S$’mil)
$6,158m$6,258m-1.6%
Net Profit
(S$’mil)
$6,391m$4,721m-26.1%

On a full-year basis, the bank’s total income remained stable at S$14,592m – its net interest income declined by 5.7% (due to a 27 basis point reduction in its net interest margin to 1.62%, with most of the decline in the second and third quarters of the year as central banks slashed interest rates at the end of the first quarter, offset by a constant currency loan growth of 4%), offset by a 31.7% y-o-y improvement in its other non-interest income (attributed by gains from investment securities which tripled to S$963m as profits were realised on part of the bond portfolio intended to benefit from the lower interest rates.)

My Thoughts: During the bank’s AGM on FY2019 on 30 April 2020(a summary of it can be found here), CEO Piyush Gupta was of the opinion that the bank’s total income for the financial year 2020 would be flat, with total expenses comparable with the previous year. Looking at the bank’s latest y-o-y results, it was ‘spot on’.

Also, considering that the bank’s results in FY2019 was a record breaking one, coupled with the massive headwinds posed by the ongoing Covid-19 pandemic, to have a set of results like what we have seen in the two tables above (Q4 FY2019 vs. Q4 FY2020, as well as FY2019 vs. FY2020) was still a pretty resilient one in my opinion.

Key Financial Ratios (Q3 FY2020 vs. Q4 FY2020, and FY2019 vs. FY2020)

Moving on, let us take a look at some of the key financial ratios reported by the bank for the fourth quarter, as well as for the full-year under review – where I will be comparing the ratios against that recorded in the previous quarter three months ago (i.e. Q3 FY2020 ended 30 September 2020), as well as that recorded a year ago (i.e. FY2019 ended 31 December 2019):

Q3 FY2020 vs. Q4 FY2020:

The following table is the bank’s financial results recorded in Q4 FY2020 ended 31 December 2020 compared again the ratios recorded three months ago (i.e. Q3 FY2020 ended 30 September 2020) to find out if it has improved or deteriorated:

Q3 FY2020 vs. Q4 FY2020:

Q3 FY2020Q4 FY2020Difference (in
Percentage Points)
Net Interest
Margin (%)
1.53%1.49%-0.04pp
Return on
Assets (%)
0.81%0.63%-0.18pp
Return on
Equity (%)
10.0%7.7%-2.3pp
Non-Performing
Loans Ratio (%)
1.6%1.6%

FY2019 vs. FY2020:

FY2019FY2020Difference (in
Percentage Points)
Net Interest
Margin (%)
1.89%1.62%-0.27pp
Return on
Assets (%)
1.13%0.75%-0.38pp
Return on
Equity (%)
12.5%8.6%-3.9pp
Non-Performing
Loans Ratio (%)
1.5%1.6%+0.1pp

My Thoughts: Looking at the key financial ratios reported by the bank in the two tables above, it was a weaker one (which is pretty much expected because of the headwinds posed by the ongoing pandemic) – the decline in its net interest margin was due to the central bank’s slashing of interest rates; another ratio to note is its return on equity, which fell quite considerably as well.

The only positive thing I would say is its non-performing loans ratio, which remained consistent at 1.6% (when you compare the ratio recorded for Q3 FY2020 against Q4 FY2020.)

Dividend Payout to Shareholders

A dividend payout of 18.0 cents/share was declared by the bank for the current quarter under review. Just like in the previous quarters of the financial year 2020, you can opt to receive shares of the bank (the price will be the average of the closing prices on 07 and 08 April 2021) instead of cash.

If you are a shareholder of the bank, you will want to take note of the following dates:

Ex-Date: 07 April 2021
Record Date: 08 April 2021
Payout Date: 24 May 2021

In Conclusion

No doubt the latest year’s results was a weaker one, but we need to bear in mind that in the financial year under review (i.e. FY2020), there were lots of headwinds relating to Covid-19 pandemic and as a result, the bank had to set aside general allowances of S$3.07 billion for the whole year (which was four times more than the allowances set in the previous year), and this led to its net profit falling by more than 20% compared to last year.

As far as the bank’s dividend payouts are concerned, it was also a reduced one compared to last year as banks were advised by the Monetary Authority of Singapore (MAS) to cap its total dividend payouts to 60.0% of what was paid out in FY2019 (official note can be found here.) We await for further advice from the MAS regarding the bank’s dividend payouts for the financial year 2021 ahead.

Taking the above into consideration, I personally felt that the bank’s results on the whole was a stable one. Looking ahead, with Singapore having largely kept the outbreak under control, and with the population starting to receive vaccinations, I am of the view that we may see a recovery ahead (even though it may be a slow one as many countries are currently experiencing another wave of outbreak and subsequently the re-introduction of the various lockdown measures.) In terms of dividend payouts, I am of the view that it could be higher in the financial year ahead (along the lines of 80% to 90% of what was paid out in FY2019.)

With that, I have come to the end of my review of DBS Group Holdings’ latest set of results. Tomorrow is reunion dinner, with the first day of Chinese New Year coming up a day after – I’d like to take this opportunity to wish you and your family a very happy and prosperous Year of the Ox ahead. To my non-Chinese readers, here’s wishing you a fantastic long weekend ahead with your loved ones!

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

 

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