(Bloomberg) -- DBS Group Holdings Ltd. unveiled a multi-billion dollar share-buyback program, as wealth management fees and markets trading income drove third-quarter profit.
Southeast Asia’s biggest lender said the S$3 billion ($2.25 billion) buyback is underpinned by a strong capital position and earnings generation. This follows a series of record earnings and above-peer returns to investors in recent years under the tenure of Chief Executive Officer Piyush Gupta, who will retire in March. His successor Tan Su Shan said she will continue the approach of returning capital.
DBS shares rose almost 6% in Singapore trading, the most since November 2020, outpacing gains by its local rivals Oversea-Chinese Banking Corp. and United Overseas Bank Ltd. Its stock has gained more than 36% this year.
While the share repurchase program is a “positive surprise,” the value creation is limited given the lender’s high valuation, Morgan Stanley analysts led by Nick Lord said after the earnings. DBS is trading at more than 1.7 times its book value, the highest among the three major Singapore-based banks.
Similar to other firms, DBS periodically buys back its stock in open market. This is the first time however such a repurchase will be canceled. Post-buyback, DBS will retain about S$6 billion in excess capital, according to Bloomberg Intelligence analyst Rena Kwok.
DBS Bold S$3 Billion Buyback Optimizes Capital Use: Credit React
DBS also said its net income expanded 15% to S$3.03 billion in the three months ended Sept. 30, the bank said in a statement. That beat the S$2.74 billion average estimate by analysts surveyed by Bloomberg. Its earnings echo that of global banks including HSBC Holdings Plc and Standard Chartered Plc whose wealth businesses have helped them deliver better-than-expected profits.
An interim dividend of 54 Singapore cents a share for the third quarter was also declared, reflecting a dividend yield of 5.5%, according to the statement.
Still, the 2025 outlook may not be as bright. Next year’s net profit is expected to be below this year’s levels due to a global minimum tax of 15%, according to Gupta. Net interest margin will see a slight decline that could be mostly offset by loan growth, he added.
Non-interest income for the commercial book will grow at “high-single digits” next year, led by wealth management fees and treasury customer sales, Gupta said.
OCBC and UOB will report their earnings on Friday.
DBS Sees Wealth Fees Doubling by 2027 as the Rich Head to Asia
Other earnings highlights:
- Net interest margin at 2.11%, lower than from previous quarter and a year ago
- Commercial book’s net interest income up 3% at S$3.8 billion
- Allowances for credit and other losses down 40%
- Wealth fees at S$609 million, a 55% increase from a year ago
- Wealth management AUM at S$401 billion, from S$353 billion a year ago
- Markets trading income highest in ten quarters
- Return on equity at 18.7%, from 18.2% last year
- Cost-income ratio for 2025 projected in low 40% range; stood at about 39% for first nine months
--With assistance from Manolo Serapio Jr. and Eduard Gismatullin.
(Updates with share price gains in third paragraph.)
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