DBS share price: 4 key considerations ahead of Q1 earnings

When is DBS Group’s Q1 2020 financial results out?

Singapore bank DBS Group is set to announce its first quarter earnings for the three months ended 31 March 2020, on Thursday 30 April 2020.

DBS, which has a presence in 18 markets, is the largest financial services conglomerate in Southeast Asia with a market capitalisation of over S$49 billion.

Here are four things that investors should know ahead of the upcoming financial report.

1. DBS Group CEO: revenue impact of 1-2% for FY2020

Group CEO Piyush Gupta had provided the following guidance for the 2020 financial year in the company’s most recent quarterly report:

‘Pre-virus, outlook on track to previous guidance. Assuming virus is controlled by summer, full year revenue impact of around 1-2% – specific provisions could rise by a few basis points of loans; general provisions provides cushion’.

Prior to the virus outbreak, the group was on track to hitting its original guidance of a mid-single digit loan growth rate for FY2020.

Gupta also noted that some revenue headwinds are expected to come from a slowing card business on the back of lower consumer spending, as well as lower wealth management and treasury sales in the small and medium enterprise segment.

He cautioned that there could be ‘more permanent revenue loss’ from consumer consumption and services in the travel, hospitality, retail, and aviation sectors. He said the expected loss will ‘impact their numbers for this year…it’s not just a shift by three to four months’.

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2. DBS’ earnings beat analyst estimates in all four 2019 quarters

The lender’s net profit for the full 2019 fiscal year rose a solid 14% to S$6.39 billion. Total income had increased 10% to S$14.5 billion from broad-based business momentum despite external headwinds. Return on equity advanced from 12.1% to a record 13.2%.

Earnings for all four quarters of 2019 also beat Refinitiv analyst estimates.

Q1’s net profit of S$1.65 billion beat the average estimate of S$1.48 billion, Q2’s net profit of S$1.60 billion outdid estimates of S$1.47 billion, Q3’s net profit of S$1.63 billion surpassed a S$1.57 billion consensus, while Q4’s S$1.51 billion exceeded expectations of S$1.48 billion.

For the upcoming Q1 FY2020 report, Refinitiv analysts have given a S$1.13 billion consensus prediction for net profit and a earnings per share estimate of S$0.46. These are 31.7% and 28.9% respectively lower than estimates for the same quarter one year prior.

In terms of share price, DBS Group shares are down 26.2% year-to-date, with most of the drop having occurred between February and March 2020 during the peak of the coronavirus outbreak.

The average share price target for DBS based on five analyst estimates is S$22.338 per share. Of these, two have rated the DBS stock a ‘buy’.

As at 10:45 SGT on 29 April 2020, DBS Group shares are trading at S$19.13 per share, based on IG trading data.

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3. DBS has no retrenchment plans for 2020

Gupta also said in a 09 April 2020 statement that the company, which employs over 28,000 people as at the end of 2019, is not planning any layoffs this year.

‘While these are clearly challenging times for all, DBS recognises the key role that we play in support of employees, customers, shareholders and the community. Our capital and liquidity positions are strong,” said Gupta.

He added: ‘Given the resilience of our franchise, we do not envisage having to undertake any retrenchment exercise because of the Covid-19 situation.”

4. DBS donated S$13 million in Covid-19 relief

On 16 April, the bank announced that it would be donating S$10.5 million to help regional communities that have been impacted by Covid-19.

Through its 'Stronger Together Fund’, the bank sought to provide about 4.5 million meals and care packs to affected individuals across its six key markets, namely Singapore, Hong Kong, China, India, Indonesia and Taiwan.

In India and Indonesia, where medical supplies are severely lacking, DBS said it will also fund the procurement of diagnostic test kits, ventilators and protective gear to help in the fight against Covid-19.

In addition to its donations, across the region, DBS is also rallying employees behind the cause, with a pledge to match funds raised.

In Singapore, the Covid-19 situation has resulted in an increase in demand for food support as more people are placed on no-pay leave or made redundant. To address this, DBS partnered with The Food Bank Singapore and ItsRainingRaincoats in an S$2.5 million initiative to provide some 200,000 meals to the elderly, low-income and migrant workers.

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