Following UOB (where the Singapore bank have released its Q1 FY2023 business update on 27 April, and you can read my review about it here), DBS Group Holdings (SGX:D05) is the second of the trio of Singapore-listed banks to release its Q1 FY2023 business updates early this morning (with OCBC doing so before trading hours on 10 May.)

The bank needs no further introduction, as almost all of us Singaporeans have a savings account with it. Apart from Singapore, do you know that DBS also have a business presence a total of 19 markets? Another thing about the bank you probably do not know is that it has been accorded the ‘Safest Bank in Asia’ award by Global Finance for 14 consecutive years from 2009 to 2022 (what a feat that is!)

In this post, you’ll find a review of some of the bank’s key financial figures, its key financial ratios, as well as its dividend payouts for the current quarter under review.

Let’s begin:

Key Financial Figures (Q1 FY2022 vs. Q1 FY2023)

The bank have shifted to half-yearly reporting of its full financial results. Hence for the first quarter, it only provided a snippet of it, and you can find some of the important ones to take note of in the table below, where I will be comparing them against that reported in the same time period last year (i.e. Q1 FY2022):

Q1 FY2022Q1 FY2023% Variance
– Net Interest
Income (S$’mil)
**
$2,187m$3,271m+49.6%
– Net Fee & Commission
Income (S$’mil)
$891m$851m-4.5%
– Other Non-Interest
Income (S$’mil)
^^
$603m$814m+35.0%
Total Income
(S$’mil)
$3,681m$4,936m+34.1%
Net Profit
(S$’mil)
$1,801m$2,571m+42.8%
** Net interest income is inclusive of net interest income of S$182m in Q1 FY2022 and a loss of -S$113m in Q1 FY2023 from Treasury Markets.

^^ Other non-interest income is inclusive of S$249m in Q1 FY2022, and S$382m in Q1 FY2023 from Treasury Markets.

My Observations: Apart from the small 4.5% decline in its net fee and commission income (which can be attributed to a 11% decline in wealth management fees with all the decline occurring in January due to base effects, but the loss was mitigated by a 21% growth in credit card fees from higher spending including for travel, along with a 2% increase in investment banking fees), I’m sure you’ll agree with me that the Singapore-headquartered bank’s latest set of results for the 1st quarter was a sparkling one – particularly, its net profit, at S$2,571m, was a record for the bank.

The 49.6% surge in its net interest income was attributed by a 66 basis point jump in net interest margin (from 1.46% in Q1 FY2022 to 2.12% in Q1 FY2023), along with corporate loan growth led by Singapore real estate acquisition financing transactions, with the 35.0% jump in other non-interest income due to a higher treasury income.

Key Financial Ratios (Q4 FY2022 vs. Q1 FY2023)

Whenever I study at a bank’s financial ratios, my attention turns to the following 4:

(i) net interest margin – the difference between interest the bank charges its lenders (who take up loans) and the interest it pays its depositors (people who put their money with the bank);

(ii) return on assets – it is the amount of profit (in percentage terms) the bank generates for every dollar of asset it owns – it is a measure of the bank’s efficiency in using its assets to generate profits;

(iii) return on equity – the amount of profits (in percentage terms) the bank is able to generate for every dollar of shareholders’ money it uses;

(iv) non-performing loans ratio – expressed in percentage terms, it is a measure of the proportion of loans not being paid back by the borrowers as agreed.

In the following table, I will be comparing these 4 financial ratios reported for the current quarter under review (i.e. Q1 FY2023 ended 31 March 2023), against that reported in the previous quarter 3 months ago (i.e. Q4 FY2022 ended 31 December 2022):

Q4 FY2022Q1 FY2023Difference (in
Percentage Points – pp)
Net Interest
Margin (%)
2.05%2.12%+0.07pp
Return on
Assets (%)
1.23%1.41%+0.18pp
Return on
Equity (%)
17.2%18.6%+1.4pp
Non-Performing
Loans Ratio (%)
1.1%1.1%

My Observations: Just like its key financial figures in the previous section, the bank’s latest set of key financial ratios was also equally impressive – particularly, its Return on Equity, at 18.6%, was a record. Non-performing loans ratio continues to remain at a low of 1.1%.

Dividend Payout to Shareholders

DBS Group Holdings Limited is the only Singapore-listed bank that pays out a dividend to its shareholders once every quarter.

For the first quarter, as per the management’s guidance when it released its Q4 and full-year 2022 results (you can read my review about it here), a dividend payout of 42.0 cents was declared – a 16.7% increase from its payout of 36.0 cents/share declared in the same time period last year (i.e. Q1 FY2022.)

If you are a shareholder of DBS, do take note of the following dates on its dividend payout:

Ex-Date: 09 May 2023
Record Date: 10 May 2023
Payout Date: 22 May 2023

CEO Piyush Gupta’s Comments (taken from the Bank’s Trading Update)

“We delivered a record performance and benefited from safe haven deposit inflows during a quarter marked by increased market volatility. Our ability to sustain business momentum as well as customers’ trust in a time of market stress are the result of our solid capital position, prudent risk management, diversified business lines and nimble execution, underpinned by an ongoing digital transformation. Our multi-faceted franchise.”

Closing Thoughts

DBS’ latest quarter results certainly did not disappoint – Personally, I felt that its results was a very solid one, where it saw its net profits and Return on Equity hitting new highs – at S$2,571m, and 18.6% respectively, mostly attributed to a huge 49.6% growth in its net interest margin (as a result of a continued high interest rate environment, combined with loan growth.)

In terms of dividend payout for the quarter, it was per its guidance provided when it released its results for the fourth quarter back in mid-February.

With that, I have come to the end of my review of DBS’ business update for the first quarter of FY2023. Hope you’ve found the contents presented above useful, and do take note that everything you’ve just read above is purely for educational purposes only, and do not represent any buy or sell calls for the bank’s shares. As always, please do your own due diligence before you make any investment decisions.

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

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