DBS 3Q FY 2016 Result Quick Summary

DBS Bank posted their 3Q FY 2016 earning report in summary below. It was a resilient 3Q operating performance underpinned by income growth and cost containment. These strong operating results provide substantial headroom for higher allowances to be taken as prudent measure. 

• Net Profit increase 2% to $1.071 billion
• Total Income stable on quarter to $2.93 billion
• Expenses decline 7% on quarter to $1.2 billion
• Profit before allowances increase 6% on quarter to $1.73 billion

The marginally increase of 2% net profit was due to an increase in general and specific allowances. Profit before allowances increase 19% y-o-y led by higher contributions from wealth management and investment banking. The asset quality continued to be sound. Non-Performing Loan (NPL) rate rose moderately to 1.3%. Allowance coverage was at 100% and 204% with collateral. Total allowances more than doubled to $169 million, which were taken as a prudent measure. The strong balance sheet is sufficient to weather further NPL increases. The exposure of Oil & Gas sector has come off to $3 billion from the previous quarter of $20 billion. Exposure in Commodity sector has also come off to $14 billion. DBS Bank is very well positioned for challenges ahead.

Today, DBS also announced that they are acquiring the wealth management and retail banking business of Australia and New Zealand (ANZ) Bank in Singapore, Hong Kong, China, Taiwan and Indonesia for $110 million above book value. This acquisition is expected to add $23 billion to its wealth Assets Under Management (AUM), bringing the total to $182 billion.

Over the years, DBS had consistently proven their ability to successfully integrate multiples wealth and retail acquisitions and partnerships across the region. This acquisition makes good strategic sense to cement their position as a leading wealth manager in the region.

Keppel Corporation 3Q FY 2016 Result Quick Summary

Keppel Corporation posted their 3Q FY 2016 earning report in summary below. 3Q earnings decline 38% to $225 million from $363 million a year ago. Keppel said the higher contribution from its property division at 55% helped to partially offset lower profits from Offshore & Marine division at 26%. This is due to the lower volume of work, deferment of some projects and the suspension of Sete Brasil contracts.

• Net Profit fall of 38% for 3Q 2016 to $225 million
• Earnings Per Share was 35.3 cents, down 43% from 9M 2015's 61.7 cents
• Annualised Return on Equity of 7.6%
• Economic Value Added decreased to $39 million from $456 million
• Cash inflow of $552 million, compared to cash outflow of $784 million a year ago
• Net gearing was 0.57x

Keppel Corporation faces a challenging environment on

• Slow global growth
• Continuing challenges in offshore sector despite gradual recovery in oil price
• Resilient urbanisation trends in Asia

Although there is a gradual recovery in oil prices from the February 2016's low of US$27 per barrel to the recent US$50 per barrel, offshore & marine division is still far from full recovery. Keppel Corporation had been looking to grow their LNG business to complement the loss in profits from their offshore & marine division. They see a promising future for the LNG market over the long term.

The only good news for 3Q result is the cash inflow of $552 million in this quarter as compared to cash outflow of $306 million for 1Q and $262 million for 2Q. This was due mainly on the reduction in the working capital requirements. They had been laying off close to 8000 or 26% of their workforce for the first 9 months of the year.

The Group will continue to execute and focus on its multi-business strategy, they will remain poised for new opportunities to deliver sustainable value for their customers and shareholders in the long run.