Net interest income up 15% as loans grow 20% from year ago
Net interest income rose 15% from a year ago and 5% from the previous quarter to SGD974 million, primarily due to higher asset volumes.Customer loans rose 20% from a year ago and 9% from the previous quarter to SGD94.3 billion, led by corporate borrowing in Singapore and the region. Singapore housing loans grew for a third successive quarter as the number of new loan applications and the amount of loan disbursements continued to expand. With customer loans rising faster than customer deposits, the loan-deposit ratio climbed to 69% from 66% in both comparative periods.
Net interest margins were 2.21%, rising three basis points from the previous quarter a result of higher loan yields and lower deposit costs in Singapore, although these were partially offset by narrower spreads between prime lending rates and funding costs in Hong Kong.
Non-interest income higher from both fee and trading activities
Fee income rose 18% from a year ago and 2% from the previous quarter to SGD309 million. The growth in fees during the quarter was led by loan syndication and stockbroking activities. Wealth management fees also increased as a result of higher sales of unit trusts which rose 34% from the previous quarter to SGD1.24 billion.
Other non-interest income was better compared to recent quarters. Net trading income from trading businesses amounted to SGD169 million, compared to SGD123 million a year ago and SGD68 million in the previous quarter. There was particularly strong demand from corporate and SME customers for products to hedge their foreign exchange risks during the quarter.Gains from sales of debt and equity investment securities were also higher during the quarter, amounting to SGD121 million compared to SGD38 million a year ago and SGD92 million in the previous quarter.
Cost-income ratio falls to 43%
Expenses rose 17% from a year ago and 5% from the previous quarter to SGD658 million. As in recent quarters, the largest increase was from staff costs, which rose 20% from a year ago and 18% from the previous quarter as a result of higher salary base and bigger bonus accruals in line with the Group’s better performance. Computerisation costs were 22% above a year ago due to higher charges for major ongoing projects, but they were 7% below the previous quarter. As income rose more than costs, the cost-income ratio fell to 43% from 44% a year ago and 45% in the previous quarter.Asset quality improves further.
The non-performing loan rate declined to 1.5% from 2.1% a year ago and 1.7% in the previous quarter. The amount of total non-performing assets (including debt securities and contingent liabilities) fell 17% from a year ago and 5% from the previous quarter to SGD1.46 billion.
Specific allowances for loans fell to SGD1 million for the quarter as new charges were offset by write-backs in a benign credit environment. This compared with a charge of SGD40 million a year ago and SGD59 million in the previous quarter. With an expanded loan base and higher off-balance sheet exposure, DBS took general allowances amounting to SGD102 million, compared with SGD14 million a year ago and SGD11 million in the previous quarter.
Total cumulative allowances amounted to 125% of total non-performing assets, the highest in DBS' history, compared to 100% a year ago and 115% in the previous quarter.Return on equity rose to 13.0% from 12.2% a year ago and the previous quarter, while return on assets improved to 1.21% from 1.14% a year ago and 1.13% in the previous quarter.
The capital adequacy ratio stood at 13.6%, with the tier-1 ratio at 9.6%, compared with 14.5% and 10.2% respectively in the previous quarter as risk-weighted assets increased with a higher loan base.
DBS Vice-Chairman and CEO Jackson Tai said, "Our Asia customer franchise delivered yet another quarter of consistent growth, even in the face of strong margin pressure. Our results were encouraging across businesses and geography, led by higher loan volumes, stronger treasury results and continued growth in fees. We were disciplined in keeping costs in line with the rise in operating income, resulting in higher returns on equity and assets to our shareholders.
"The Board declared a dividend of 20 cents per share, unchanged from the previous quarter but 18% higher than the 17 cents per share paid a year ago.
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About DBS
Headquartered in Singapore, DBS is one of the largest financial services groups in Asia with operations in 15 markets. The largest bank in Singapore as measured by assets, and a leading bank in Hong Kong, DBS' "AA-" and "Aa1" credit ratings are among the highest in the Asia-Pacific region. DBS has leading positions in corporate, SME and consumer banking, treasury and markets, wealth management, securities brokerage, equity and debt fund raising. Beyond the anchor markets of Singapore and Hong Kong, DBS serves corporate, institutional and retail customers through its operations in China, India, Indonesia, Malaysia, Thailand and The Philippines. More information about DBS Group Holdings and DBS Bank can be obtained from our website www.dbs.com.
