SINGAPORE: DBS Group Holdings Ltd, South-East Asia’s biggest lender, forecast stable loans growth for 2019 after a robust increase in net interest margin drove an 8% rise in quarterly profit and a record annual profit.
After three years of strong loans growth, Singapore’s banks face tougher times as the city-state’s export-reliant economy slows, partly due to a trade war between China and the United States.
Data released yesterday showed Singapore’s exports fell 10.1% in January from a year earlier, the biggest drop in over two years.
DBS, nearly 30% owned by state investor Temasek Holdings, forecast mid-single-digit loans growth and high single-digit income growth for this year.
Loans grew 6% in constant-currency terms to S$345bil (US$254.4bil) last year.
The bank reported a net profit of S$1.32bil for October-December versus S$1.22bil a year earlier, and in line with an average estimate of S$1.34bil from three analysts, according to data from Refinitiv.
Full-year profit jumped 28% to a record S$5.63bil as Singapore banks benefited from higher interest rates.
“We believe the result reads well for peers, for which street expectations are a lot lower,” Jefferies analyst Krishna Guha said in a report, referring to the quarterly numbers.
DBS kicked off the reporting season for Singapore banks, with smaller peers Oversea-Chinese Banking Corp and United Overseas Bank reporting results on Friday.
CEO Piyush Gupta said in a statement that DBS’s return on equity of 12.1% for 2018 was near its historical high of 2007, when interest rates were twice the current levels and capital requirements were less stringent.
DBS’s shift towards high-returns businesses and moves to boost profitability of its franchises would help it “navigate the challenges of the coming year”, he said.
The bank’s net interest margin, a key gauge of profitability, improved by nine basis points to 1.87% in the latest quarter.
Total income rose 6% as loan growth and a rise in net interest margin were moderated by a decline in treasury markets income, DBS said. — Reuters
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