CIMB is maintaining its “add” call on DBS with a lower target price of $17.96 as the lender’s good results should spur stock price performance.
“We still fear that DBS has credit quality issues in 2017-18 from the oil and gas sector as current asset quality worries on China and trade finance look overblown for the bank,” says lead analyst Kenneth Ng in a Wednesday report.
In 1Q, DBS posted net profit of $1.2 billion beat CIMB’s estimate by 12% and consensus by 19%. Main 1Q16 positives came from non-interest income and lower-than-expected loan allowances. Fee income was 3% higher on-year as new bancassurance fees helped bolster wealth management contributions and arrested the declines of trade fees, brokerage and internet banking.
“With all banks challenged at the topline, DBS’s delivery of record quarterly fee income looks to be a catalyst for outperformance,” adds Ng.
Meanwhile, allowances were less than expected while provisions were lower. Non-Performing Loans ratio edged up slightly to 1.0% from 0.9% in 4Q. Special Provisions were flat and there were also no General Provisions this quarter.
Lower Risk-Weighted Assets improved DBS’s fully phased-in CET1 to 13.2% from 12.4% in 4Q. 1Q16 ROE was also a very decent 11.9%, much better than peers’ 10% ROE.
DBS closed at $15.35 on Tuesday.
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“We still fear that DBS has credit quality issues in 2017-18 from the oil and gas sector as current asset quality worries on China and trade finance look overblown for the bank,” says lead analyst Kenneth Ng in a Wednesday report.
In 1Q, DBS posted net profit of $1.2 billion beat CIMB’s estimate by 12% and consensus by 19%. Main 1Q16 positives came from non-interest income and lower-than-expected loan allowances. Fee income was 3% higher on-year as new bancassurance fees helped bolster wealth management contributions and arrested the declines of trade fees, brokerage and internet banking.
“With all banks challenged at the topline, DBS’s delivery of record quarterly fee income looks to be a catalyst for outperformance,” adds Ng.
Meanwhile, allowances were less than expected while provisions were lower. Non-Performing Loans ratio edged up slightly to 1.0% from 0.9% in 4Q. Special Provisions were flat and there were also no General Provisions this quarter.
Lower Risk-Weighted Assets improved DBS’s fully phased-in CET1 to 13.2% from 12.4% in 4Q. 1Q16 ROE was also a very decent 11.9%, much better than peers’ 10% ROE.
DBS closed at $15.35 on Tuesday.
Click Here To Register For Free Trial Services OR Give A Missed Call : +6531581402 Follow Us On Twitter : www.twitter.com/epicresearchsg Like Us On Facebook : www.facebook.com/EpicResearchSingapore Need Any Assistance Feel Free To Mail Us at : info@epicresearch.sg
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