In 4Q17, DBS's earnings came in line with expectations. Excluding one-time items from mainly due to integration costs for ANZ banking businesses, 4Q17 core net profit of $1.2 billion 33% higher than the previous year.
4Q17 NIM of 1.78% was also 5bps wider q-o-q and 7bps higher y-o-y. Management has guided for wider NIM in 2018 vs 2017 while RHB is forecasting 2018 and 2019 NIM of 1.82% and 1.85% respectively.
In a Thursday report, RHB analyst Leng Seng Choon says, "We are forecasting 10% total income growth in 2018, close to management’s guidance of low double-digit."
Loans were higher by 3% q-o-q in 4Q17, with housing loans – which makes up 22% share of total loans – up 5% q-o-q. Loans were up 7% y-o-y. For 2018, RHB has a loan growth forecast which is close to management’s guidance of 7-8%.
4Q17’s NPL ratio of 1.7% was unchanged q-o-q. 4Q17’s credit cost of 25bps was a significant reduction from 3Q17’s 195bps.
"We had expected a significant fall in 4Q17 credit cost, after the huge jump in 3Q17. We forecast NPL to fall to 1.6% by end-2018," says Leng.
DBS's board has declared a final dividend of 60 cents/share plus a special dividend of 50 cents/share. Looking ahead, management said it is reasonable to assume $1.20/share annual dividend.
"Our target price of $25.00 implies 1.3 times FY18 book value, which is marginally higher than the five-year average of 1.15 times," says Leng.
As at 4.55pm, shares in DBS are up $1.40 to $26.76.
