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DBS Group Holdings Ltd’s Latest Earnings Update: Record Income And A Decade-High Return On Equity

Lawrence Nga

This morning, Singapore’s largest bank, DBS Group Holdings Ltd (SGX: D05), released its 2018 third quarter earnings update.

Here are 10 things that investors should know about the bank’s latest results:

1. Net interest income for the third quarter of 2018 improved by 15% year-on-year to S$2.27 billion. Total income for the same period increased by 10% to S$3.38 billion as a result, which was a record high.

2. Profit before allowances climbed 5% from a year ago to S$1.89 billion. Profit before allowances grew at a slower pace compared to total income because of higher expenses.

3. Net profit was up 72% from a year ago to S$1.41 billion, driven by higher profit before allowances and lower allowances for credit and other losses (DBS’s allowances came in 71% lower year-on-year at S$236 million.

4. Customer loans and deposits were up by 8% (to S$340.4 billion) and 7% (to S$388.3 billion), respectively, compared to a year ago.

5. DBS’s net interest margin for 2018’s third quarter improved from 1.73% a year ago to 1.86%. The higher interest margin was driven by higher interest rates in Singapore and Hong Kong.

6. DBS’s cost-to-income ratio stepped up from 41.1% in the third quarter of 2017 to 43.9%, mainly because of higher staff costs. In general, the lower the cost-to-income ratio is, the better. But it’s worth noting that DBS’s cost-to-income of 43.9% in the reporting quarter is still healthy.

7. The non-performing loans (NPL) ratio improved from 1.7% in 2017’s third quarter to 1.6%.

8. DBS’s annualised return on shareholders’ equity improved tremendously from 7.1% in the third quarter of 2017 to a decade-high level of 12.2% in the reporting quarter. Meanwhile, the bank’s book value per share inched up from S$17.43 to S$17.56 over the same period.

9. DBS’s Common Equity Tier 1 capital adequacy ratio (CAR), Tier 1 CAR, and Total CAR as of 30 September 2018, were 13.3%, 14.4% and 16.2% respectively. These ratios were well above the regulatory requirement of 6.5%, 8%, and 10%.

10. In DBS’s latest earnings update, CEO Piyush Gupta shared the following comments on the bank’s latest performance and outlook:

“Third-quarter business momentum was sustained amidst heightened geopolitical and economic headwinds. Year-to-date earnings per share is the highest in our history while return on equity is the best in more than a decade. As we celebrate our fiftieth anniversary, we are pleased to be named Best Bank in the World by Global Finance and World’s Best Digital Bank by Euromoney. We are well positioned to continue capitalising on Asia’s long-term prospects while navigating short-term uncertainties.”

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn't own shares in any companies mentioned. The Motley Fool Singapore has a recommendation on DBS Group Holdings.