Broker Name and Date of Report

• Broker: CGS International Securities
• Date: October 15, 2024

3Q24 Financial Overview

DBS Group is expected to report a net profit of S$2.8 billion for 3Q24, representing a 1% quarter-on-quarter (qoq) increase and a 7% year-on-year (yoy) growth. Loan demand remained robust, though overall loan growth may be slightly impacted by repayments and a stronger Singapore dollar relative to the US dollar. A slight contraction in loan growth of -0.3% qoq is expected.

Net Interest Margin (NIM) Stability

DBS is likely to see a blended NIM decrease by around 2 basis points (bp) qoq to 2.12%. While its commercial book NIM remained steady due to asset repricing, its markets trading segment registered margin-dilutive but earnings-accretive transactions. The bank’s NIM performance reflects market conditions, specifically the softening of HIBOR towards the end of 3Q24.

Wealth Management as Key Driver

Wealth management is expected to be a significant growth driver for DBS in 3Q24. This segment likely saw a strong uptick in fee income, benefiting from conducive market conditions. Wealth management fees grew by 16% qoq and 53% yoy, reflecting sustained demand for investment products amid easing interest rates. Additionally, treasury customer sales are projected to trend higher during the quarter.

Treasury Income and Credit Costs

Treasury income at DBS is estimated to have increased by 7% qoq, with the customer sales portion benefiting from favorable market conditions. Credit costs are expected to remain stable at 13bp in 3Q24, consistent with trends observed over the past two quarters, indicating that portfolio risks remain well managed.

Dividend Strategy and Basel IV Implementation

DBS is expected to maintain a dividend payout of S$0.54 per share for 3Q24. The bank’s capital strategy, including its plans for future dividends, will likely be a key focus for investors during the earnings briefing. Additionally, DBS will begin reporting its Basel IV figures starting from 3Q24, providing insights into its transitionary and fully-loaded capital adequacy positions.

Key Risks and Opportunities

• Upside risks include sustainable growth in wealth management and treasury income, which could bolster DBS’s overall financial performance.
• Downside risks revolve around the potential for significant asset quality deterioration, stemming from the elevated interest rate environment, which could strain borrowers and increase impairments. However, DBS’s asset quality remains robust, particularly its exposure to Mainland China’s property sector, which is largely limited to loans to state-owned enterprises (SOEs) and represents less than 1% of its total group loans.

This summary is based entirely on the information provided in the report dated October 15, 2024, by CGS International Securities.