DBS Profit Rises as Fee Businesses Offset Slower Lending

DBS Group Holdings Ltd., Southeast Asia’s largest bank, posted a third straight quarter of profit growth as higher fees from wealth management and investment banking offset the slowest loan expansion in almost two years.

Net income rose 17 percent to S$1 billion ($782 million) for the three months ended Sept. 30 from S$862 million a year earlier, the Singapore-based bank said in an exchange statement today. That beat the S$975 million average of four analysts’ estimates compiled by Bloomberg.

Chief Executive Officer Piyush Gupta is seeking growth in overseas markets and from fee-generating businesses such as wealth management to counter the lowest lending margins in Southeast Asia. DBS acquired Societe Generale SA’s Asian private-banking business this year.

“Non-interest income is clearly being driven by trade and wealth management, and that’s exactly what you want to be seeing,” Paul Dowling, principal analyst at Sydney-based bank research firm East & Partners Pty, said by phone. “Slower loan growth has obviously been conditioned by weak demand among corporates to borrow.”

Shares of DBS rose 0.8 percent to S$18.48 as of 1:22 p.m. local time. The stock gained 8.1 percent this year, more than the benchmark Straits Times Index’s 2.8 percent advance.

United Overseas Bank Ltd., which reported profit after the market closed yesterday, climbed 2.1 percent to S$22.93, the highest intraday level since Sept. 15. UOB’s third-quarter net income rose 19 percent to S$866 million, beating estimates.

Private Banking

DBS said its non-interest income climbed 23 percent in the quarter to S$912 million from a year earlier as investment-banking fees more than doubled. Trading income grew 44 percent, while wealth management increased 39 percent, the lender said.

The company completed the acquisition of Societe Generale’s Asian wealth-management business earlier this month. The Singaporean lender’s private bank increased assets under management by about S$13 billion to S$88 billion following the purchase, Tan Su Shan, the bank’s head of wealth management and consumer banking, said in an interview on Oct. 21.

DBS and its rivals are seeking to expand beyond their traditional lending markets to counter the lowest margins in Southeast Asia. Banks in Singapore had an average 12-month net interest margin of 1.77 percent, compared with Indonesia’s region-leading 5.46 percent, according to filings compiled by Bloomberg this week.

DBS’s net interest margin widened for the third straight quarter in the three months to September to 1.68 percent from 1.6 percent a year earlier. That helped boost net interest income, the difference between what DBS makes on deposits and pays on loans, by 14 percent to S$1.6 billion.

Lending Slowdown

The company expects NIM to stay at the current levels for the rest of the year, Gupta told reporters in Singapore today.

Customer loans in the third quarter expanded 8.3 percent from a year earlier to S$262 billion, the slowest rate since the final quarter of 2012. DBS expects loan growth of 7 percent this year and at least 8 percent in 2015, Gupta said.

Monthly loan growth at banks in Singapore this year through August slowed to an average 13.2 percent from a year earlier, from 2013’s 17.7 percent, as lending to the housing sector and companies slowed, data from the Monetary Authority of Singapore showed.

Oversea-Chinese Banking Corp., Southeast Asia’s second-largest lender, said yesterday profit climbed 62 percent to S$1.23 billion, as it absorbed loans from its Wing Hang Bank Ltd. acquisition and booked a gain from a stake in a Chinese bank.

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