DBS Group Holdings share price (SGX: D05) in crisis

Lifetime Membership Troubles come in troops for DBS Group Holdings share price. Looking back, the counter smashed a record high of $32.60 on 5 November following a splendid bull run. It certainly seemed that the sky was the limit for DBS Group Holdings share price. But unexpectedly, the wheels came off the wagon for DBS Group Holdings after the bank reported a subpar 9MFY2021 financial result that saw net income interest falling 9% year-on-year. The following Monday (8 November), DBS Group Holdings share price turned bearish.

Shortly after the release of the latest financial result, the bank suffered one of its worst service disruptions in the past decade, prompting Monetary Authority of Singapore (MAS) to mull taking regulatory actions against the bank in the coming days. The outage led to temporary crisis of confidence on DBS Group Holdings share price.

Just when investors thought that the worst was over for DBS Group Holdings share price, another nightmare unfolded. On 26 November, investors woke up to stunning revelation of a new COVID-19 variant that may be more contagious than the Delta variant. What spooked investors is that the variant could render current vaccines ineffective given its significant mutations. Due to the uncertainties, Straits Times Index (STI) suffered a carnage, and DBS Group Holdings share price was not spared from the market sell-offs.

From my assessment, I do not foresee the new variant to have a major impact on DBS’ core banking business. According to CEO Piyush Gupta, the loan exposure in FY2020 for aviation, oil and gas and SME sectors amounted to $6 billion, $23 billion and $39 billion. The major bulk of its loan portfolio is still concentrated in housing and building and construction. Hence, even if the authorities tighten the public health measures in the coming days, they are unlikely to cause a major impact on DBS’ business. So the recent roiling of DBS Group Holdings share price could be a knee-jerk reaction by the market.

Incidentally, CEO Piyush Gupta decided to pare down his stake in the bank lately. On 8 November, the CEO sold 50,000 shares at $32.50. Then on 19 November, the CEO sold another 50,000 shares at $32.50. The sale amounted to $3.25 million and took place at a time when DBS Group Holdings share price was trading at the near record level. Interestingly, CEO Piyush Gupta decided to encash his shares following his 5 November conference call for 3^rd quarter financial result. In that conference call, the management revealed that for a 100 basis point US dollar rate hike, DBS would be raking in “a $2 billion increase in net interest income, the bulk of which will be in the first year”.

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Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. Furthermore, I am not vested and have never invested in DBS Group Holdings share before. Whether DBS Group Holdings share price will surge or collapse has no impact on me. Thus, this article is not meant to induce readers to make any form of investment decisions.

DBS Group Holdings share price to hit top gear in 2022?

While the coronavirus variant threatens to throw a spanner in the works for DBS Group Holdings share price, I do think that the current dip may be a good opportunity for investors to accumulate before the counter turns bullish again in 2022. The transcript of the latest conference call revealed that the US Federal Reserves interest rate hike will be a formidable tailwind for DBS Group Holdings share price, potentially pushing the counter to a high of $50 in 2022.

Net profit amounted to $5.4 billion for 9MFY2021. Assuming DBS recorded net profit of $1.5 billion in 4^th quarter, the full-year net profit would be $6.9 billion. This would translate to earning per share of $2.70. Applying a PE multiple of 15, the projected DBS Group Holdings share price by end of FY2021 should be [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.]