Here’s why you can forget an income rebound for DBS in H2

For starters, Swiber will likely have a contagion impact.

DBS’ net earnings in H2 will likely drop compared to H1, as analysts expect fee income to fall and provisions for Swiberlinked associates to grow.

According to a report by CIMB, DBS kept loan growth at mid single-digit for FY16, with net interest margin (NIM) to come off 2-5bp from current levels.

Management reasoned that unfavourable exchange rates earlier in the year slammed average loan balances in Q2.

However, DBS expects exchange rates to improve in Q3 and help prop up net interest income (NII) as NIM comes off.

“We think fee income could be weaker in H2 as IB fees appear unsustainable, while provisions could increase from contagion of Swiberlinked names. CIR guidance was at 44-45%; we think it could come in at the higher end,” revealed DBS.
 

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