DBS's 2Q23 Net Profit Soared 48% YoY to A New High of S$2.69 Billion
On August 3, DBS announced a remarkable performance in the second quarter of 2023. The company's total income surpassed S$5 billion for the first time, representing an impressive YoY increase of 35%. Furthermore, the net profit soared by 48% YoY to S$2.69 billion, with an ROE of 19.2%, both hitting new highs.
“We achieved another set of record results as second-quarter and first-half earnings reached new highs with return on equity at 19%. The commercial book benefited from higher interest rates and broad-based growth in non-interest income activities, which was moderated by higher funding costs for Treasury Markets.,”DBS CEO Piyush Gupta said.
1. Commercial book total income recorded a 40% increase to S$4.87 billion in 2Q23, driven by higher net interest margin (NIM) and broad-based non-interest income growth.
1) 2Q commercial book net interest income rose to S$3.58 billion, with a YoY growth of 54% and QoQ growth of 6%. The NIM rises for the sixth consecutive quarter to 2.81%, up by 96bp YoY and 12bp QoQ.
2) The net fee income of DBS's commercial book increased by 7% year-on-year in 2Q, signaling the first YoY growth in six quarters. Within this segment, wealth management fees saw a significant increase of 12%, reaching S$377 million, driven by higher sales of bancassurance and investment products. Card fees also grew thanks to increased spending on travel. Loan-related fees experienced YoY growth as well. However, the overall growth in net fee income was partly offset by a 5% decline in transaction service fees, primarily due to a decrease in trade finance-related fees.
2.Treasury Markets trading income declines 34% YoY to S$177m due to higher funding costs
3. DBS maintained a stable cost-income ratio of 38% in the second quarter of 2023, representing a 6% improvement from last year. Total expenses increased by 16% YoY due to higher staff costs.
DBS's asset quality remained resilient, with the non-performing loan (NPL) ratio unchanged quarter-on-quarter at 1.1%. The non-performing assets (NPAs) were stable at S$4.99 billion compared to the previous quarter, as new non-performing loan formation remained low and was offset by repayments and write-offs.
The total allowance reserves at DBS amounted to S$6.33 billion, resulting in an allowance coverage ratio of 127%. After considering collateral, the allowance coverage ratio increased to 224%.
DBS's capital position remained robust, with a Common Equity Tier-1 (CET1) ratio of 14.1%, indicating a healthy level. Additionally, the company's leverage ratio stood at 6.5%, which is more than twice the regulatory minimum requirement of 3%.
DBS's liquidity remained robust, with a liquidity coverage ratio (LCR) of 146% and a net stable funding ratio (NSFR) of 116%. Both ratios were comfortably above the regulatory requirements of 100%.
The Board has declared an interim one-tier tax-exempt dividend of 48 cents for each DBSH ordinary share for the second quarter of 2023 (the “2Q23 Interim Dividend”), which brings the first-half dividend to 90 cents per share. The dividend growth was in line with guidance, reflecting the company’s stronger growth prospects for the year.
DBS CEO Piyush Gupta said,“While there is some macroeconomic uncertainty, our prospects for the rest of the year are anchored on a franchise with a proven ability to capture business opportunities. Our longstanding prudence in building general allowance reserves and maintaining strong capital ratios will position us well to withstand headwinds.”
Source: DBS
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