DBS Full year 2024 report and thoughts

DBS 

 DBS is a leading financial services group in Asia with a presence in 19 markets. Headquartered and listed in Singapore, DBS is in the three key Asian axes of growth: Greater China, Southeast Asia and South Asia. The bank's "AA-" and "Aa1" credit ratings are among the highest in the world.

Income report

Net Interest Income

Net Interest Income (NII) is a profit metric equal to the difference between a bank’s total interest income and the interest expense incurred.

Commercial book net interest income rose 5% to SGD 15.0 billion from higher net interest margin and balance sheet growth.

 

Non-interest income

Non-interest income is the revenue a bank or financial institution earns from activities beyond traditional lending and interest-earning assets. 

 

Commercial book net fee income grew 23% to a record SGD 4.17 billion. The increase was led by wealth management fees, which rose 45% to a new high of SGD 2.18 billion from broad-based growth in investment products and bancassurance, as well as the consolidation of Citi Taiwan. Card fees grew 19% to SGD 1.24 billion from the consolidation of Citi Taiwan and from higher spending.

Commercial book other non-interest income increased 21% to SGD 2.16 billion from record treasury customer sales and property disposal gains. Excluding the property disposal gains, commercial book other non-interest income grew 15%.

Return of Equity: 18% (good competition advantage)

Return of Invested Capital: 12.35% (Fruitful return)


Balance Sheet

Asset quality was sound. Non-performing assets rose 4% in constant-currency terms from the previous quarter to SGD 5.04 billion as new non-performing assets were partially offset by repayments and write-offs. The NPL ratio of 1.1% was little changed.

For the fourth quarter, specific allowances were SGD 229 million or 20 basis points of loans, while general allowances of SGD 20 million were written back. For the full year, specific allowances were SGD 559 million or 13 basis points of loans and general allowances of SGD 63 million were taken.

Cash Flow

Liquidity remained ample with liquidity coverage ratio of 147% and net stable funding ratio of 115%, both above the regulatory requirement of 100%.

The reported Common Equity Tier-1 ratio was 17.0% based on transitional arrangements, while the pro-forma ratio on a fully phased-in basis was 15.1%. The leverage ratio was at 6.7%, more than twice the regulatory minimum of 3%.

Free Cash Flow: $14.4B ( uptrend)

 DBS's cost-income ratio remained stable at 40% for the 2024. 

                                                                            Future growth (Short term)

DBS plans to boost assets under management for its wealth business to S$500 billion. DBS is also aiming to double the number of wealthy clients with assets worth at least S$1 million and above by end 2026, he said, adding the bank grew its affluent and high-net-worth clients by more than 50% over the last two years.

DBS Group, Singapore's largest bank, plans to cut around 4,000 temporary and contract positions over the next three years as artificial intelligence (AI) takes on more roles, with the reduction occurring through natural attrition as projects conclude.

DBS has also increased the number of relationship managers catering to Russian customers, while other banks have pulled back from that market since Moscow’s full-scale invasion of Ukraine three years ago and the imposition of sanctions on high-profile Russians. The number of Russian-speaking DBS bankers in Singapore has risen to nine. Thailand is another market where DBS is seeking to win new clients, with a plan to double the number of relationship managers focused on the country by next year.


Thoughts

With the laying off of 4000 staff for next three years, DBS may improve cost-income ratio using AI. Focusing on wealth business will help less reliant on NII. Non-income interest will be the growth in DBS, More ultra- net worth will deposit their money into bank and we can foresee the macro market remains uncertainty. 

The business cycle of bank maybe still strong full year 2025, projection of 2 rates cut for the year. I believe the structure of the business remains unchanged depesite new CEO arrival.  I am waiting for the share price to drop more so I can buy in, as the current price is overvalued considering Fed rate cut still continue in the coming future.

Overall, we can expect improving the cost-income rate, Non-income interest and acquisition are priorities for the new CEO. 

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