SINGAPORE - DBS Group Holdings, the largest bank in South-east Asia by assets, reported on Feb 7 record earnings for 2023, with the board proposing one bonus share for every 10 shares held.

The board has also proposed a final dividend of 54 cents per share for the fourth quarter, an increase of six cents from the previous payout. This brings the ordinary dividend for 2023 to $1.92 per share, an increase of 42 cents from 2022.

The bonus shares will qualify for dividends, starting from the first quarter of 2024, and will increase the pace of capital returns to shareholders, the bank said.

Barring unforeseen circumstances, the annualised ordinary dividend going forward will be $2.16 per share over the enlarged share base, from $1.92 per share for financial year 2023.

Based on DBS’ closing price on Feb 6, the post-bonus annualised dividend yield would be 7.5 per cent.

DBS shares surged on news of the bonus issue and dividend payout, hitting a session high of $32.59 before closing 80 cents or 2.5 per cent higher at $32.45.

The bank’s earnings before one-off items rose 2 per cent year on year to $2.39 billion in the October to December quarter. Including one-off expenses for the integration of Citibank Taiwan and its corporate social responsibility commitment, net profit slipped 3 per cent on year to $2.27 billion.

During the quarter, DBS set aside an inaugural contribution of $100 million as part of a recently announced corporate social responsibility commitment of up to $1 billion over 10 years to support vulnerable communities.

Full-year net profit before the one-off items rose 26 per cent to a record $10.3 billion, while the return on equity climbed to a new high of 18 per cent from 15 per cent in 2022.

Analysts in a Bloomberg poll had projected net profit of around $2.4 billion for the fourth quarter, and $10.3 billion for the full year.

Chief executive officer Piyush Gupta said the franchise and digital transformations carried out over the past decade have reaped substantial benefits in a higher interest rate environment.

“While interest rates are expected to soften and geopolitical tensions persist, our franchise strengths will put us in good stead to sustain our performance in the coming year,” he said.

At a media briefing on the results, the CEO said DBS should be able to maintain its net profit “in the $10 billion range” in 2024, despite the market’s expectations that interest rates will ease later in the year.

Mr Gupta said the bank is keeping its 2024 guidance for net interest income at around 2023 levels, and for return on equity at 15 per cent to 17 per cent. Fee income growth is expected to be “double-digit” as the group’s wealth management benefits from Citi Taiwan and strong net new money inflows.

DBS also continues to see net new money inflows from China and other places, thanks to the robust anti-money laundering regime in Singapore, said Mr Gupta.

For the full year, total income grew 22 per cent, exceeding $20 billion for the first time, driven by a higher net interest margin, increased fee income and record treasury customer sales.

Fourth-quarter total income rose 9 per cent year on year to $5.01 billion from higher net interest income.

Net interest margin for the quarter stood at 2.75 per cent, compared with 2.61 per cent a year ago and 2.82 per cent in the preceding quarter.

Loans were 1 per cent higher than a year ago and stable over the quarter.

Other non-interest income rose 22 per cent in the quarter to $390 million on higher treasury customer sales to wealth management customers.

Expenses rose 12 per cent from a year ago and 8 per cent from the previous quarter to $2.21 billion.

Compared with the third quarter, net profit fell 9 per cent due to a lower net interest margin and seasonally lower non-interest income. 

Mr Yeap Jun Rong, market strategist at IG, said DBS’ overall results showed that its earnings momentum has peaked, with year-on-year profit growth softening over the past two quarters.

He noted that the 2024 net interest margin is “guided to be slightly below the 2023 exit margin of 2.13 per cent as the tailwind from the higher rate environment continues to unwind”.

However, Mr Yeap said the bank remains well-positioned to weather any downturn with its strong balance sheet. DBS common equity Tier 1 capital ratio has improved to 14.6 per cent in the fourth quarter, which is ahead of its minimum regulatory requirement and provides a strong capital buffer to weather any downturn.

He added that in terms of valuation, DBS remains the priciest among the three Singapore banks, but he reckoned this is justifiable based on its profitability and operational efficiency, with DBS carrying the highest return on equity among the trio.

UOB is scheduled to unveil its results on Feb 22, and OCBC Bank on Feb 28.