By BLOOMBERG
DBS Group Holdings Ltd, Southeast Asia’s largest bank, posted a 6% gain in third-quarter profit (3Q) as interest margins at a four-year high boosted net interest income to a record.
Net income advanced to S$1.07 billion (RM3.22 billion) for the three months ended Sept 30 from S$1.01 billion a year earlier, the Singapore-based bank reported in a statement Monday. That compared with the S$990 million average of seven analysts’ estimates compiled by Bloomberg. Net interest income rose 13% to S$1.81 billion.
While Singaporean lenders are benefiting from domestic interest rates close to the highest levels since 2008, weakening regional economies from their home market to China and Southeast Asia have dragged on lending this year. Oversea-Chinese Bank Corp last week forecast annual loan growth in the “low-single digit” percentage range as it reported a higher nonperforming loan ratio.
DBS reported “overall positive results against a tough environment,” Kevin Kwek, a Singapore-basedSanford C. Bernstein & Co analyst, wrote in an e-mail Monday.
The company’s shares gained 0.4% as of 9:05 am local time, compared with the benchmark Straits Times Index’s 0.6% drop. The lender is the last of Singapore’s three publicly traded banks to report quarterly profit.
Higher rates
The bank’s loans grew 9%in the September quarter largely because of currency effects, DBS reported. Its net interest margin, a measure of lending profitability, rose 10 basis points to 1.78% from a year ago, and from 1.75% in the previous quarter. DBS also reduced higher-cost deposits, it said.
A climb in the three-month Singapore interbank offered rate, or Sibor, this year has helped support interest margins. While the rate has dropped from its Sept 17 peak of 1.14% to 1.07% as of Friday, it’s still more than double its level from a year earlier amid expectations the U.S. Federal Reserve will soon move to increase interest rates.
“While the Singapore banks are facing slower loan demand, we believe margins will remain stable over the next few quarters with potential upside when US interest rates rise,” Sharnie Wong, an analyst at Barclays Plc in Hong Kong, wrote Monday in an e-mailed report. “Asset quality so far remained manageable.”
Greater China
Net fee and commission income declined 7% to S$517 million as investment-banking fees slumped 65% from a “high base” a year ago, the bank said. From the previous quarter, net fee income retreated 11 percent as market volatility cut wealth management, investment banking and brokerage fees, it said.
DBS set aside higher provisions for credit and other losses in China, where data at the weekend showed the nation’s manufacturing industry contracted for a third straight quarter. The bank more than doubled such allowances for its Greater China business, which posted a 39% drop in net income for the third quarter.
That figure excludes its Hong Kong business, which was the second-largest income contributor afterSingapore with a 46% increase in profit. Net income from Singapore grew just 1.6%, DBS said.
Singapore’s gross domestic product grew an annualized 0.1% in the three months through September from the previous quarter, the trade ministry said Oct 14. While the expansion was unexpected, the city narrowly avoided a technical recession following a 2.5% contraction in the April-June period.
“In a quarter marked by slower regional growth and intense market volatility, the bank’s earnings continued to hold strong,” DBS chief executive Piyush Gupta said in an e-mailed statement.
— By Chanyaporn Chanjaroen
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