DBS Group Holdings Ltd., Southeast Asia’s largest bank, posted a 15 percent gain in second-quarter profit as its net interest margin rose to a three-year high and fee income climbed to a record.
Net income advanced to S$1.12 billion ($816 million) for the three months ended June 30 from S$969 million a year earlier, the Singapore-based bank reported in a statement Monday. That compared with the S$1.07 billion average of nine analysts’ estimates compiled by Bloomberg. The company boosted its dividend payout.
Domestic interest rates close to the highest levels since 2008 have allowed Singaporean lenders to increase charges to borrowers. The banks still face the prospect of weaker loan growth this year as the city’s economy contracts amid an Asia-wide slowdown led by China.
“The above-estimate second-quarter net income boded well for DBS but I’m still concerned about the potential of further slowdown in loan growth, which could offset some of the improvement in net interest margins,” Bernard Aw, a strategist at IG Asia Pte. in Singapore, said Monday in an e-mail.
DBS’s net interest margin in the April-June period rose to 1.75 percent, the highest in 13 quarters, from 1.67 percent a year earlier. Chief Executive Officer Piyush Gupta said at a briefing following the results that he expects to maintain that margin level for the rest of the year.
The bank’s shares sank 1.2 percent to S$21.14 as of 12:22 p.m. local time, compared with the benchmark Straits Times Index’s 0.8 percent drop. DBS has risen 2.7 percent this year, the only advance among the three publicly traded Singapore banks, following a 20 percent rally in 2014.
The lender is the first of the three lenders to post quarterly earnings. Oversea-Chinese Banking Corp. and United Overseas Bank Ltd. are due to report their results on Friday.
DBS’s second-quarter net interest income climbed 12 percent to S$1.7 billion, while fees and commissions grew 16 percent to S$582 million, the lender reported.
It declared a first-half dividend of 30 Singapore cents per share, up from 28 cents a year ago, as “a reflection of our confidence in the sustainability of our earnings,” Gupta said in a statement.
Loans grew 1 percent in the second quarter from the previous three months in constant-currency terms. Gupta said before a media briefing on Monday that he expects loan growth of 5 percent this year.
The economic slowdown in Asia and a slump in commodities prices have combined to curb loan demand. Singapore’s gross domestic product fell an annualized 4.6 percent in the three months through June from the previous quarter, the trade ministry said July 14.
“While Singaporean banks are relatively more sheltered, they also cannot be fully independent from this trend,” Kenneth Ng, an analyst at CIMB Securities in Singapore, said before the earnings report.
DBS’s allowances for bad loans and other losses rose 7 percent to S$137 million in the second quarter from a year ago, mostly driven by Greater China excluding Hong Kong, the bank said. Still, the amount was 24 percent lower than the previous quarter.
The company had a mortgage market share of 25.3 percent as of May, Gupta said at the briefing. New mortgage bookings amounted to S$3 billion in the second quarter, the strongest in three to four years, and up from S$2 billion in the previous period, he said.