Compared to the previous quarter, net profit fell 3% as the uncertain market outlook resulted in a paring of treasury activities. Liquidity buffers were also enhanced for contingencies.
For the nine months, net profit rose 4% to a record SGD 2.70 billion. The performance was underpinned by record net interest and non-interest income, partially offset by higher allowances.
Third-quarter earnings little changed from a year ago
Net interest income rose 6% from a year ago to a record SGD 1.41 billion. Loans expanded 19% or SGD 39 billion to SGD 242 billion as trade loans, corporate borrowing and secured consumer loans increased. Net interest margin fell seven basis points to 1.60% from lower loan spreads and yields on investment securities.
Non-interest income increased 11% to SGD 744 million. Fee income grew 9% to SGD 462 million, led by higher contributions from trade and transaction services, wealth management and cards. Trading income was 45% higher at SGD 188 million from higher trading gains and cross-selling. Income from treasury customer flows was 4% higher at SGD 228 million.
Total income rose 7% to SGD 2.15 billion. Expenses increased by 5% to SGD 949 million and the cost-income ratio improved to 44%. Profit before allowances grew 9% to SGD 1.20 billion.
Total allowances tripled to SGD 151 million. General allowances increased from SGD 15 million a year ago to SGD 57 million in line with faster loan growth. Specific allowances, which had been exceptionally low at seven basis points of loans a year ago, rose to 15 basis points of loans or SGD 93 million.
Third-quarter earnings 3% lower than previous quarter
Net interest income was 2% higher than the previous quarter. Loans rose 3% from growth in trade loans and secured consumer loans while net interest margin was little changed. Non-interest income declined 20%. Uncertainty in financial markets resulted in lower contributions from stockbroking, investment banking and trading activities. Trading income fell 44% as treasury positions were reduced and treasury customer flows were lower. Fee income from annuity businesses, including trade and transaction services, wealth management, cards and loan-related activities, was maintained at the previous quarter’s levels.
Total income fell 7% while expenses were 4% lower. Total allowances declined 38% as both general and specific allowances were lower.
Nine-month earnings rise 4% from a year ago
For the nine months, total income and profit before allowances reached new highs, growing by double-digit percentage terms.
Net interest income grew 3% to a record SGD 4.12 billion. The impact of a 19% increase in loan volumes was partially offset by lower net interest margin. Non-interest income rose 26% to SGD 2.66 billion, which was also a record. Fee income increased 20% to SGD 1.45 billion as all fee segments were higher, with wealth management and trade and transaction services recording new highs. Trading income rose 68% to SGD 932 million from higher trading gains and customer flows. Income from treasury customer flows increased 12% to a record SGD 805 million and accounted for 49% of total treasury income.
Total income increased 11% to a record SGD 6.78 billion, faster than an 8% rise in expenses to SGD 2.89 billion. Profit before allowances grew 13% to SGD 3.89 billion.
The improvement was partially offset by a doubling of total allowances to SGD 619 million. General allowances increased as a result of faster loan growth while specific allowances increased from exceptionally low levels a year ago.
Balance sheet remains strong
Asset quality remained healthy. The non-performing loan rate was unchanged from the previous quarter at 1.2%. The allowance coverage of non-performing assets was maintained around recent quarters’ levels at 136% and at 192% if collateral was considered.
Liquidity continued to be strong. Deposits grew 3% or SGD 9 billion during the quarter and 13% or SGD 30 billion over the past 12 months to SGD 270 billion. The loan-deposit ratio was stable from the previous quarter at 89%. Other sources of liquidity, including commercial papers, also rose during the quarter. Liquidity buffers were enhanced as total funding increased faster than loans during the quarter.
Unrealised marked-to-market gains on the available-for-sale investment portfolio increased from SGD 96 million in the previous quarter to SGD 121 million.
The Core Equity Tier 1 ratio of 13.3%, Tier 1 ratio of 13.3% and total capital adequacy ratio of 15.9% were each 0.4% points higher than the previous quarter’s levels. The increase was due to updates to internal credit ratings and a reduction in market risk positions.
DBS CEO Piyush Gupta said, “DBS turned in yet another strong quarter despite the challenging market environment. Our portfolio is sound and asset quality remains healthy. We are well placed to navigate the market uncertainties ahead, and will be prudent and vigilant as we continue to grow our franchise across the region.”
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About DBS DBS - Living, Breathing Asia
DBS is a leading financial services group in Asia, with over 250 branches across 16 markets. Headquartered and listed in Singapore, DBS has a growing presence in the three key Asian axes of growth: Greater China, Southeast Asia and South Asia. The bank's capital position, as well as "AA-" and "Aa1" credit ratings, is among the highest in Asia-Pacific. DBS has been recognised as “Asia’s Best Bank” by The Banker, a member of the Financial Times group, and “Best Managed Bank in Asia-Pacific” by The Asian Banker. The bank has also been named “Safest Bank in Asia” by Global Finance for five consecutive years from 2009 to 2013.
DBS provides a full range of services in consumer, SME and corporate banking activities across Asia. As a bank born and bred in Asia, DBS also understands the intricacies of doing business in the region’s most dynamic markets. These market insights and regional connectivity have helped to drive the bank’s growth as it sets out to be the Asian bank of choice. DBS believes that building lasting relationships with its customers is an integral part of banking the Asian way.
With its extensive network of operations in Asia and emphasis on engaging and empowering its staff, DBS presents exciting career opportunities. The bank acknowledges the passion, commitment and can-do spirit in all of our 19,000 staff, representing over 30 nationalities. For more information, please visit www.dbs.com.
