DBS Is Offering 6% Yield
DBS Is Offering 6% Yield
DBS Holdings Ltd (D05) has recently published its 1H 2024 financial report. In this article, we will deep dive into its performances.
In case you missed it:
DBS Holdings Ltd (DBS) has recently published its 1H 2024 financial report. In this article, we will deep dive into its performances.
🏢 Market cap: $101.1B
🔥 Dividend yield: 6.07%
📒 Price to book: 1.61
💰 Price to earnings: 9.6
💸 Return on Equity: 13.15%
📢 EPS 5Y Growth: 12%
🔎 DPU 5Y Growth: 12.95%
Financial Highlights
DBS Bank's 1H24 earnings have come in ahead of market expectations, thanks to improving fee income and strong cost management. The bank's net interest margins (NIMs) have also held up better than its peers, showcasing the strength of its franchise. However, the bank faces potential headwinds as the Federal Reserve implements rate cuts, which could put pressure on its margins.
The appointment of Ms. Tan Su Shan as the new CEO-designate signals continuity and stability for the bank, as she is already a key contributor to the group's current culture and business mix. Her focus on driving growth in North Asia, pursuing new opportunities in India, and maintaining the bank's commitment to capital returns should be key priorities going forward.
Dividend per share (DPU)
The DPU chart below is self-explanatory. DBS has been increasing its DPU over the years. If we compare to 2020 Covid period, DBS’ DPU has gone up by more than 3X!
Yield
DBS is offering an attractive 6.04% yield. And this way above its average yield of 4.5%!
Price to earnings
In terms of price to earnings valuation, DBS is valued at 9.6. The current valuation is also below its 5-years average of 11.2.
Earnings per Share
EPS is strong as well. DBS has been delivering strong growth over the years, partly driven by the high interest income.
Value Proposition
DBS is the largest bank in Southeast Asia by assets, with a strong presence in large corporate loans, cash management, and wealth management. The bank has a dominant market share of over 50% in Singapore dollar CASA (current and savings account) deposits, thanks to its robust heartland banking franchise. Additionally, the bank has a strong USD funding base through its Hong Kong operations, providing it with a diverse source of liquidity.
The bank's current strategy emphasizes its commercial banking focus, following its earlier attempts to transform into a universal bank prior to the Global Financial Crisis, which had yielded mixed results. DBS has also been an early adopter of technology and automation, leveraging these capabilities to create new revenue streams and drive cost savings.
Risk and Competitor Analysis: Navigating Challenges
While DBS's Net Interest Margin (NIM) resilience is commendable, the bank faces potential headwinds as funding costs rise and interest rate cuts loom. The erosion of low-cost deposits, with the CASA ratio dropping from 52% in 1Q23 to 46% currently, could put downward pressure on the bank's NIMs, especially in the face of potential Fed rate cuts.
Additionally, the bank's asset quality bears close monitoring, as NPLs in Hong Kong and Greater China have seen a 31% year-on-year increase, despite the overall benign asset quality. While systemic stress has not been observed, this remains a key risk to watch.
Amidst these challenges, DBS faces competition from its regional peers, who are also vying for market share and exploring new growth avenues. However, the bank's strong balance sheet, high CET1 ratio, and focus on returning capital to shareholders continue to provide it with a solid foundation and dividend visibility, even as interest rates decline.
Comparing DBS to UOB and OCBC, DBS’ key financial metrics are slightly better than its competitors.
Conclusion:
DBS Bank's resilience shines through in its ability to navigate the shifting tides of the financial landscape. Its solid financial performance, focus on cost management, and commitment to capital returns have all contributed to its strong position. While the bank faces potential headwinds, its strategic vision, technological prowess, and experienced leadership team provide it with the tools to capitalize on emerging opportunities and maintain its position as a leading player in the Southeast Asian banking sector. DBS is currently under our dividend portfolio, we will look out for potential entries when the price is attractive.
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Disclaimer: This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any form. Please do your own research and seek advice from a qualified financial advisor. From time to time, I have positions in all or some of the mentioned stocks when publishing this article. This is a disclosure - not a recommendation to buy or sell stocks.