(Bloomberg) -- Singapore’s largest bank DBS Group Holdings Ltd. surprised shareholders with a S$3 billion ($2.3 billion) new share buyback program, and signaled more such moves may come. The stock hit a record high.
The bank has up to S$5 billion in excess capital after the repurchase is completed, Chief Executive Officer Piyush Gupta told reporters after delivering another earnings beat for the quarter ended Sept. 30.
“We still have a lot of capital to return,” Gupta said. “We have to use all three engines - step-up in dividends, special dividends as well as buybacks to the extent we can.”
With the move, Gupta is paving the way for leaving the bank on a high when he steps down in March after more than 15 years at the top. He is credited for turning the once-staid lender into a tech-savvy shop that delivers above-peer returns. Even a spate of digital banking disruptions last year did little to turn off investors, who have pushed DBS’ share prices 37% higher this year.
DBS shares rose more than 7% in Singapore, the most since June 2020, to a record high. This outpaced gains by local rivals Oversea-Chinese Banking Corp. and United Overseas Bank Ltd.
The new buyback program is on top of DBS’s usual approach of doling out dividends. The bank has doubled its ordinary dividends to S$6.1 billion on an annualized basis since 2019. His successor Tan Su Shan said she is committed to keep the approach of returning capital.
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.
When asked about deals given the bank’s hefty dry powder, Gupta said it isn’t ruling this out with DBS continuing to look out for opportunities in “the markets that matter to us - India, Indonesia, China, Taiwan, maybe Malaysia if the new regime is more forthcoming.”
“We’re principled in our acquisitions,” he said. “It must make economic sense.”
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.
Results were “solid all-around,” said JPMorgan Chase & Co. analyst Harsh Wardhan Modi. “We expect robust results and capital management to drive upside, on top of its high-for-long outlook.”
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.
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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 CEO comment, share price gains throughout.)
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