DBS’s Best Quarterly Net Beats Estimates on Interest Income

DBS Group Holdings Ltd., Southeast Asia’s largest lender, posted first-quarter profit that beat analysts’ forecasts on higher net interest income and a one-time gain from selling a property investment in Hong Kong.

Net income rose 3 percent to a record S$1.27 billion ($953 million) for the three months ended March 31 from S$1.23 billion a year earlier, the Singapore-based bank reported Monday. That compares with the average forecast of S$1.05 billion in a Bloomberg survey of five analysts.

Rising domestic interest rates, which climbed to a six-year high in the first quarter, give Singaporean banks scope to impose greater charges on borrowers. That may help offset any slowdown in lending as the economy cools in a city that generated 62 percent of DBS’s revenue last year.

“Considering the still-weak macro environment in the region and especially Singapore, the numbers were strong,” Kevin Kwek, a Sanford C. Bernstein analyst who’s based in the city, said Monday in an e-mailed reply to questions.

DBS is the first Singaporean bank to release first-quarter earnings. Oversea-Chinese Banking Corp. and United Overseas Bank Ltd. are due to report their results Thursday.

Shares of DBS dropped 0.5 percent to S$20.97 at 1:51 p.m. local time, the first decline in four days as the stock traded without its latest dividend payout. The benchmark Straits Times Index added 0.1 percent. DBS gained 1.8 percent this year.

Rising Rates

Net interest income rose 14 percent to S$1.7 billion as loans rose 11 percent from a year earlier. The net interest margin, a measure of lending profitability, increased three basis points to 1.69 percent, DBS said.

DBS will see the full benefits from rising local interest rates from the second quarter, when the bank accounts for the gain in charges to borrowers, Chief Executive Officer Piyush Gupta said Monday at a press briefing. The three-month Singapore interbank offered rate more than doubled in the first quarter to exceed 1 percent for the first time since 2008.

“We are really confident of the prospects for the rest of the year,” said Gupta. “Our headline loan number will be slower than we originally signaled, but we tend to more than make up for it across the rest of the activities with a margin increase that we hope to be able to get.”

Selling the property investment in Hong Kong allowed DBS to book a one-time gain of S$136 million. Net fee and commission income advanced 10 percent to S$560 million as wealth-management income jumped 43 percent.

Insurance Business

DBS is expanding its presence in Asia to reduce its reliance on its home turf, where gross domestic product grew an annualized 1.1 percent in the three months through March from the previous quarter. That compares with a 4.9 percent rate in the preceding quarter.

Greater China contributed 30 percent of the lender’s revenue in 2014, while 8 percent was from other parts of Asia and the rest of the world, according to its annual report.

Gupta projects revenue from DBS’s bancassurance business to rise to about S$500 million in the next couple of years from an expected S$250 million this year. The lender has a 15-year accord to sell insurance products for Manulife Financial Corp., Canada’s largest life insurer, starting Jan. 1.

“The bancassurance business is increasingly beginning to be important to us,” Gupta said.

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