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DBS Group - Treasury rebounded; cost discipline
Wednesday, May 20, 2009
DBS's 1Q09 core net profit of S$456m was above our expectation (S$406m) and Street estimate (S$342m). Key positives were: 1) resilient fee income; 2) a strong rebound in treasury (even if deemed low-quality earnings); and 3) commendable cost-control. Key negative was a sharper-than-expected asset quality deterioration. DPS of 14cts was maintained in 1Q09, implying a high 68% payout. Lower dividends later this year are possible, in our opinion. We raise our FY09-11 EPS estimates by 7-24%, building in higher non-NII forecasts and lower costs. Our target price has been raised from S$11.57 (1.1x P/BV) to S$13.20 (now based on 1.25x P/BV), on raised earnings forecasts. Maintain Outperform.
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