DBS shares rise with positive outlook from analysts, CEO

• DBS Group (SGX: D05) share price hits S$26.07 a share, up 0.3%
• Analysts are bullish on a firmer recovery ahead, supported by lower provisions
• DBS CEO Piyush Gupta is also optimistic about asset quality and conditions
• Net profit last year had fallen 26% on higher allowances and lower NIM
• Trade DBS, long or short, with an IG account today

DBS shares gain on promising outlook

Shares of DBS Group sustained their uptrend on Thursday, following upbeat comments on the year ahead despite a decline in 2020 earnings.

The stock advanced 0.3% to trade at S$26.07 by 09:12 SGT, after rising 0.3% at Wednesday’s close

DBS CEO Piyush Gupta said on Wednesday he is ‘feeling more optimistic about the overall quality of the portfolio and asset conditions now’ than three or six months ago. He also sees ‘a good chance that allowances will come in at the lower end of the S$3-5 billion range’.

Net profit for the fourth quarter last year fell 33% year-on-year to S$1.01 billion, weighed down by lower net interest margin (NIM) and higher allowances.

For the whole of 2020, net profit tumbled 26% to S$4.72 billion due to a 27 basis point drop in NIM and a quadrupling of allowances to S$3.07 billion.

Rebound ahead stirs optimism

OCBC analysts maintained their ‘buy’ call on DBS shares while raising the fair value to S$29.50, to reflect a firmer recovery outlook ahead with double-digit fee income growth expected.

This also considering that the bulk of the pressure on net interest margin (NIM) from last year’s rate cuts looks to be ‘largely played out’, OCBC wrote, predicting that NIMs are expected to come in at 1.45% to 1.5% ahead.

There was some recovery in business momentum in the fourth quarter, with brighter spots from resilient fee income and broad-based loans growth across the non-trade corporate, housing, and wealth management segments.

The OCBC research team also noted that January 2021 started on a strong note for DBS, with higher income from a year ago, driven by treasury markets and fee income growth, while loans and deposit growth momentum are also strong.

Moody’s Investors Service vice president, senior credit officer, Eugene Tarzimanov, said: ‘DBS wrapped up a turbulent 2020 with a very strong balance sheet, supported by good asset quality, high capital and excess liquidity.’

‘We expect credit costs to decrease in 2021 as DBS has already completed the bulk of provisioning, with asset risks receding and economic conditions improving,’ Tarzimanov added.

Meanwhile, RHB continued to see DBS as one of its top ‘buy’ ideas, and gave a target price of S$30. RHB analysts said the Singapore lender is on its way to a sustained recovery in return on equity in 2021 and 2022, helped by lower provisions and a pick-up in economic activities.

How to trade DBS shares with IG

Are you feeling bullish or bearish on DBS’ stocks?

Either way you can buy (long) or sell (short) the asset using derivatives like CFDs offered on IG's industry-leading trading platform in a few easy steps:

1. Create a live or demo IG Trading Account, or log in to your existing account
2. Enter <DBS Group> in the search bar and select the instrument
3. Choose your position size
4. Click on ‘buy’ or ‘sell’ in the deal ticket
5. Confirm the trade