DBS Group Holdings share price set for magical run with Temasek Holdings?

Crisis? What crisis? DBS Group Holdings rubbished all talks of impending economic crisis by staging yet another blockbuster performance – net profit surged 28% to a record $5.63 billion. Total income increased 11% to $13.2 billion from loan and fee income growth. Despite the continued business momentum, DBS Group Holdings share price suffered an embarrassing loss of form throughout 2018. On this note, would DBS Group Holdings return to winning form in 2019?

Return of DBS Group Holdings share price

From a high of $30.80 in May 2018, DBS Group Holdings share price suffered a stunning meltdown to a low of $22.80 in October 2018. Following that 26% correction, DBS Group Holdings share price never really recovered. Many investors may be waiting at the sidelines and adopting a wait-and-see approach as a result of the shares volatility.

DBS Group Holdings

Notwithstanding the volatility in the share price, it certainly seemed that the strong US market blew away any lingering doubts on the growth prospect of DBS Group Holdings, which had seized the opportunity to grow its loans to 6% to $345 billion against the backdrop of rising interest rate hikes. Net interest margin increased 10 basis points to 1.85% with higher interest rates in Singapore and Hong Kong.

On the back of the impressive financial performance, what can investors expect from DBS Group Holdings share price going forward? In this article, I will share key data driving the big boys’ movements and how they had influenced DBS Group Holdings share price in the latter half of 2018. I will also explain why DBS Group Holdings share price may be well-positioned for an explosive surge in 2019, based on its solid business fundamentals. As a matter of fact, behind the scene, there was a fierce battle between institutional funds and short-sellers on DBS Group Holdings shares.

Return-on-Equity (ROE) at turning point

Piyush Gupta’s team certainly redeemed themselves as return on equity (ROE) for FY2018 reached 12.1%, a record high since the historical high of 2007. In the second half of the year, DBS launched an aggressive share buy-backs program in an apparent bid to enhance the ROE.

As Temasek Holdings is a major share-holder of DBS, Piyush Gupta obviously needs to report to Temasek Holdings for his performance. One of the key metrics for judging management performance is the ROE. While DBS business had improved in the past few years, the Return-on-Equity (ROE) had actually declined, falling from 10.7 in FY2014 to 9.3 in FY2017. This is the lowest among the three banks as OCBC recorded ROE of 10.8 while UOB’s was 9.7.

The falling ROE stood out like sore thumb for DBS, so I guess the management resorted to buying back shares from the open market in a bid to improve the performance metric of the management. Given that DBS stock had fallen a fair bit in recent weeks, this was indeed time opportune to buy back DBS stock at reasonable price level.

On 6 July 2018, DBS kick-started the shares buyback mission. For the past six months, DBS bought back 12.3 million shares. This provided the basis for the recent DBS stock price performance. While the key intention of the shares buyback may be to strengthen the ROE, the aggressive shares buyback had inadvertently lend support for DBS stock.

Light at end of tunnel?

The big boys had previously shot DBS Group Holdings share price based on [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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Updated: February 22, 2019 — 5:28 am

5 Comments

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  1. Hi. May I know where you find information on institutional buying? My understanding is SGX only provides data in short selling and not institutional buying.

  2. Hi Mr Ang,

    Thank you for subscribing as member and reading the article. Regarding your query, the data for institutional buying can be accessed in SGX website by clicking on the “Research & Education” tab, then click on “Research” and then “Fund Flows Report”. Hope this helps.

    Regards,
    Gerald
    https://www.sgwealthbuilder.com

  3. Hi

    I wonder if the acquisition of DBS Vickers is a concern for its future growth, considering the further product extension to the current bankers who had to sell savings, insurance and now investment products. It appears they are targeting the median income group segment to upset them more products since they already have a huge database. Like to hear your comments. Vested interest.

  4. Hi Desmond,

    I would encourage you to sign up as member so that I can answer your queries. Thanks.

    Regards,
    Gerald
    https://www.sgwealthbuilder.com

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