Third-quarter net profit up 4% on quarter to SGD 1.30 billion; fee income rises 17% to pre-Covid levels
Nine-month total allowances quadruple on year to SGD 2.49 billion, including general allowances of SGD 1.50 billion
Singapore, Hong Kong, Indonesia, India, China, Taiwan, Regional, 05 Nov 2020 - DBS Group reported net profit of SGD 1.30 billion for third-quarter 2020, up 4% from the previous quarter. Business momentum improved as fee income rebounded 17% to pre-Covid levels, softening the impact of lower interest rates as well as a decline in trading income from a high base. Total income fell 4% to SGD 3.58 billion while profit before allowances was 9% lower at SGD 2.04 billion.
Total allowances of SGD 554 million were taken during the quarter. Together with the SGD 1.94 billion set aside during the first half, total allowances for the nine months quadrupled from a year ago to SGD 2.49 billion. Three-fifths or SGD 1.50 billion were general allowances conservatively set aside to fortify the balance sheet against macroeconomic risks. The charge increased general allowance reserves by 60% since end-2019 to SGD 4.02 billion, 32% more than the minimum requirement set by MAS and SGD 1.2 billion above the amount eligible for consideration as Tier-2 capital. Specific allowances for the nine months amounted to SGD 990 million or 30 basis points of loans, with the third-quarter amount at SGD 318 million. Total allowance reserves amounted to SGD 6.99 billion, boosting allowance coverage to 107% and to 200% when collateral was considered.
Net profit for the nine months declined 24% from a year ago to SGD 3.71 billion due to the higher allowances. Total income increased 2% to SGD 11.3 billion as loan growth, an increase in Treasury Markets income and higher investment gains offset the impact of a lower net interest margin. Expenses fell 2%, and the positive jaw of four percentage points resulted in an improvement in the cost-income ratio from 42% to 40%. Profit before allowances increased 5% to SGD 6.75 billion.
Third-quarter net interest income declined 6% from the previous quarter to SGD 2.17 billion. Net interest margin fell nine basis points to 1.53% as the impact of global interest rate cuts in March and April was more fully felt. Loans were stable in constant currency terms at SGD 371 billion. Underlying loan momentum remained healthy. Further drawdowns of non-trade corporate loans were offset by the repayment of short-term facilities made in the first half. While Singapore housing loans dipped due to the lagged impact of the circuit breaker in the second quarter, new bookings rebounded strongly in the third quarter. For the nine months, net interest income fell 3% to SGD 6.96 billion as loan growth was offset by a lower net interest margin.
Fee income increased 17% from the previous quarter to SGD 798 million, the third-highest quarter on record, as economic activity recovered. Wealth management fees rose 25% to SGD 380 million, the second-highest quarterly amount, as sales of investment and insurance products increased with improved market sentiment in a low interest rate environment. Card fees grew 22% to SGD 160 million as consumer spending picked up with an easing of lockdowns, but remained 21% below a year ago. Investment banking fees were also higher. Transaction service and loan-related fees were in line with average pre-Covid quarterly levels. For the nine months, fee income was unchanged at SGD 2.31 billion as increases in wealth management, brokerage and loan-related fees were offset by lower card and investment banking fees.
Other non-interest income fell 18% from the previous quarter to SGD 608 million as trading income declined from a high base. For the nine months, other non-interest income was 31% higher at SGD 2.06 billion as profits were realised on investment securities, which had appreciated with lower interest rates.
Expenses rose 4% from the previous quarter to SGD 1.54 billion due to Covid-related support for staff as well as non-recurring occupancy costs. Compared to a year ago, expenses were 5% lower as general expenses, such as for travel and marketing, declined. For the nine months, expenses fell 2% to SGD 4.58 billion. A decline in general expenses and bonus accruals was offset by an increase in base salary costs from a higher headcount.
Asset quality was in line with recent quarterly trends. Non-performing assets rose 3% from the previous quarter to SGD 6.52 billion as new NPA formation was moderated by repayments and write-offs. The NPL rate was at 1.6%.
Deposits increased 1% in constant currency terms from the previous quarter to SGD 447 billion. Current and savings accounts (Casa) rose 5% or SGD 16 billion during the quarter, bringing the growth since end-2019 to 29% or SGD 70 billion and enabling higher-cost fixed deposits to be let go. Casa deposits accounted for 69% of total deposits, an increase of three percentage points from the previous quarter and ten percentage points since end-2019. The liquidity coverage ratio of 135% and net stable funding ratio of 123% were both above regulatory requirements.
The Common Equity Tier-1 ratio rose 0.2 percentage points from the previous quarter to 13.9% due to profit accretion and a stable risk-weighted asset base. The ratio was above the group’s target operating range as well as regulatory requirements. The leverage ratio of 6.9% was more than twice the regulatory minimum of 3%.
In line with MAS’ guidance for local banks to moderate their dividends for 2020, the Board declared a quarterly dividend of SGD 18 cents per share for the third quarter, for which the scrip dividend scheme will be applicable. Scrip dividends will be issued at the average of the closing share prices on 12 and 13 November 2020.
DBS CEO Piyush Gupta said, “The third quarter’s results reflect a recovery in business momentum as regional economies emerge from lockdowns. The rebound in fee income to pre-Covid levels has enabled us to cushion the full impact of lower interest rates. At the same time, the accelerated build-up of allowances has strengthened our ability to meet the challenges of an uneven economic recovery in the coming year. In the longer term, Asia’s fundamentals remain undiminished. With ample liquidity and healthy capital, we remain well positioned to support customers and the community.”
About DBS
DBS is a leading financial services group in Asia with a presence in 18 markets. Headquartered and listed in Singapore, DBS is in the three key Asian axes of growth: Greater China, Southeast Asia and South Asia. The bank's "AA-" and "Aa1" credit ratings are among the highest in the world.
Recognised for its global leadership, DBS has been named “World’s Best Bank” by Euromoney, “Global Bank of the Year” by The Banker and “Best Bank in the World” by Global Finance. The bank is at the forefront of leveraging digital technology to shape the future of banking, having been named “World’s Best Digital Bank” by Euromoney. In addition, DBS has been accorded the “Safest Bank in Asia” award by Global Finance for 12 consecutive years from 2009 to 2020.
DBS provides a full range of services in consumer, SME and corporate banking. As a bank born and bred in Asia, DBS understands the intricacies of doing business in the region’s most dynamic markets. DBS is committed to building lasting relationships with customers, and positively impacting communities through supporting social enterprises, as it banks the Asian way. It has also established a SGD 50 million foundation to strengthen its corporate social responsibility efforts in Singapore and across Asia.
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 29,000 staff, representing over 40 nationalities. For more information, please visit www.dbs.com.
Total allowances of SGD 554 million were taken during the quarter. Together with the SGD 1.94 billion set aside during the first half, total allowances for the nine months quadrupled from a year ago to SGD 2.49 billion. Three-fifths or SGD 1.50 billion were general allowances conservatively set aside to fortify the balance sheet against macroeconomic risks. The charge increased general allowance reserves by 60% since end-2019 to SGD 4.02 billion, 32% more than the minimum requirement set by MAS and SGD 1.2 billion above the amount eligible for consideration as Tier-2 capital. Specific allowances for the nine months amounted to SGD 990 million or 30 basis points of loans, with the third-quarter amount at SGD 318 million. Total allowance reserves amounted to SGD 6.99 billion, boosting allowance coverage to 107% and to 200% when collateral was considered.
Net profit for the nine months declined 24% from a year ago to SGD 3.71 billion due to the higher allowances. Total income increased 2% to SGD 11.3 billion as loan growth, an increase in Treasury Markets income and higher investment gains offset the impact of a lower net interest margin. Expenses fell 2%, and the positive jaw of four percentage points resulted in an improvement in the cost-income ratio from 42% to 40%. Profit before allowances increased 5% to SGD 6.75 billion.
Third-quarter net interest income declined 6% from the previous quarter to SGD 2.17 billion. Net interest margin fell nine basis points to 1.53% as the impact of global interest rate cuts in March and April was more fully felt. Loans were stable in constant currency terms at SGD 371 billion. Underlying loan momentum remained healthy. Further drawdowns of non-trade corporate loans were offset by the repayment of short-term facilities made in the first half. While Singapore housing loans dipped due to the lagged impact of the circuit breaker in the second quarter, new bookings rebounded strongly in the third quarter. For the nine months, net interest income fell 3% to SGD 6.96 billion as loan growth was offset by a lower net interest margin.
Fee income increased 17% from the previous quarter to SGD 798 million, the third-highest quarter on record, as economic activity recovered. Wealth management fees rose 25% to SGD 380 million, the second-highest quarterly amount, as sales of investment and insurance products increased with improved market sentiment in a low interest rate environment. Card fees grew 22% to SGD 160 million as consumer spending picked up with an easing of lockdowns, but remained 21% below a year ago. Investment banking fees were also higher. Transaction service and loan-related fees were in line with average pre-Covid quarterly levels. For the nine months, fee income was unchanged at SGD 2.31 billion as increases in wealth management, brokerage and loan-related fees were offset by lower card and investment banking fees.
Other non-interest income fell 18% from the previous quarter to SGD 608 million as trading income declined from a high base. For the nine months, other non-interest income was 31% higher at SGD 2.06 billion as profits were realised on investment securities, which had appreciated with lower interest rates.
Expenses rose 4% from the previous quarter to SGD 1.54 billion due to Covid-related support for staff as well as non-recurring occupancy costs. Compared to a year ago, expenses were 5% lower as general expenses, such as for travel and marketing, declined. For the nine months, expenses fell 2% to SGD 4.58 billion. A decline in general expenses and bonus accruals was offset by an increase in base salary costs from a higher headcount.
Asset quality was in line with recent quarterly trends. Non-performing assets rose 3% from the previous quarter to SGD 6.52 billion as new NPA formation was moderated by repayments and write-offs. The NPL rate was at 1.6%.
Deposits increased 1% in constant currency terms from the previous quarter to SGD 447 billion. Current and savings accounts (Casa) rose 5% or SGD 16 billion during the quarter, bringing the growth since end-2019 to 29% or SGD 70 billion and enabling higher-cost fixed deposits to be let go. Casa deposits accounted for 69% of total deposits, an increase of three percentage points from the previous quarter and ten percentage points since end-2019. The liquidity coverage ratio of 135% and net stable funding ratio of 123% were both above regulatory requirements.
The Common Equity Tier-1 ratio rose 0.2 percentage points from the previous quarter to 13.9% due to profit accretion and a stable risk-weighted asset base. The ratio was above the group’s target operating range as well as regulatory requirements. The leverage ratio of 6.9% was more than twice the regulatory minimum of 3%.
In line with MAS’ guidance for local banks to moderate their dividends for 2020, the Board declared a quarterly dividend of SGD 18 cents per share for the third quarter, for which the scrip dividend scheme will be applicable. Scrip dividends will be issued at the average of the closing share prices on 12 and 13 November 2020.
DBS CEO Piyush Gupta said, “The third quarter’s results reflect a recovery in business momentum as regional economies emerge from lockdowns. The rebound in fee income to pre-Covid levels has enabled us to cushion the full impact of lower interest rates. At the same time, the accelerated build-up of allowances has strengthened our ability to meet the challenges of an uneven economic recovery in the coming year. In the longer term, Asia’s fundamentals remain undiminished. With ample liquidity and healthy capital, we remain well positioned to support customers and the community.”
[END]
About DBS
DBS is a leading financial services group in Asia with a presence in 18 markets. Headquartered and listed in Singapore, DBS is in the three key Asian axes of growth: Greater China, Southeast Asia and South Asia. The bank's "AA-" and "Aa1" credit ratings are among the highest in the world.
Recognised for its global leadership, DBS has been named “World’s Best Bank” by Euromoney, “Global Bank of the Year” by The Banker and “Best Bank in the World” by Global Finance. The bank is at the forefront of leveraging digital technology to shape the future of banking, having been named “World’s Best Digital Bank” by Euromoney. In addition, DBS has been accorded the “Safest Bank in Asia” award by Global Finance for 12 consecutive years from 2009 to 2020.
DBS provides a full range of services in consumer, SME and corporate banking. As a bank born and bred in Asia, DBS understands the intricacies of doing business in the region’s most dynamic markets. DBS is committed to building lasting relationships with customers, and positively impacting communities through supporting social enterprises, as it banks the Asian way. It has also established a SGD 50 million foundation to strengthen its corporate social responsibility efforts in Singapore and across Asia.
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 29,000 staff, representing over 40 nationalities. For more information, please visit www.dbs.com.
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