DBS reports 15% profit growth and unveils S$3 billion share buyback plan: Our Quick Take

DBS 3Q24 earnings and dividend highlights

DBS has announced its earnings for third quarter of 2024. Key highlights include: 

• Net profit reached record S$3.03 billion in 3Q 2024, up 15% YoY and 8% QoQ, driven by strong balance sheet growth and wealth management fees
• Nine-month net profit grew 11% to S$8.79 billion with robust 18.8% return on equity (ROE)
• Quarterly dividend maintained at S$0.54 per share, bringing nine-month dividend to S$1.62 per share
• Board announces significant new S$3 billion share buyback programme

DBS reported a profit of $3.03 billion for the July-September quarter, marking a 15% increase from the same period last year. 

This strong performance was powered by growth across its main businesses, particularly in wealth management fees and trading activities. 

Higher treasury customer sale and the strongest markets trading income in ten quarters also boosted DBS' profit. 

For the first nine months of 2024, DBS earned a total profit of $8.79 billion, up 11% from the previous year.

DBS' group net interest margin dipped slightly to 2.11% in 3Q24 from 2.14% in 2Q24. 

However, this was offset by strong growth in is fee income. Total fee income surged to S$1.315 billion in 3Q24, representing a 25% increase year-on-year. 

This was led by a 55% year-on-year increase in wealth management fee income to S$609 million. This was driven by an increase in asset under management to S$401 billion from S$396 billion in 2Q24 and S$353 billion in 3Q24, as well as conversion into investments. 

The bank's loan quality remained healthy, with problem loans making up just 1% of total lending, lower than 1.1% in the previous two quarters. This suggests that despite economic uncertainties, DBS's customers are maintaining their ability to repay their loans.

DBS' cost-income-ratio also remains stable at 39% in 3Q24 and 9M24. 

DBS declared a quarterly dividend of 54 cents per share, unchanged from the previous quarter. 

Additionally, DBS announced a $3 billion share buyback programme, where the bank will purchase and cancel its own shares from the market. The buybacks will be carried out at management’s discretion and subject to market conditions, and marks the first time that repurchased shares are cancelled.

DBS expects 2025 group net interest income to be around 2024 levels. Group net interest income is expected to be stable from 2024, with loan growth helping to offset a slight decline in the group net interest margin. However, its net profit is expected to be lower than 2024 due to a global minimum tax of 15%. 

Beansprout's Quick Take on DBS earnings

The strong earnings reported and share buyback programme announced are likely to be taken positively by investors.

In particular, the strong growth in wealth management fee income appears to have more than offset the decline in net interest margin, which should help to allay concerns about the potential impact of further interest rate cuts on DBS' profit.

The share buyback programme also signals management's confidence in the bank's financial position and could help support the stock price.

DBS' current dividend yield of 5.5% stands above its historical average. DBS current price-to-book valuation of 1.77x is also above its historical average. 

Shareholders can expect to receive their dividend payment on 25 November, with the bank's shares trading ex-dividend from 14 November.

Related links:

• DBS share price and share price target
• DBS dividend forecast and dividend history

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