DBS First-Quarter Profit Rises 6 Percent, Beats Estimates

  • Average net income forecast from analysts was S$1.04 billion
  • Peers Oversea-Chinese, UOB have reported lower profits

DBS Group Holdings Ltd., Southeast Asia’s largest bank, announced a 6 percent increase in first-quarter profit, beating analyst expectations, as its earnings were bolstered by higher net interest income. Its shares jumped.

Net income rose to S$1.2 billion ($897 million) for the three months ended March 31 from S$1.13 billion a year earlier, the Singapore-based bank reported Tuesday. That beat the average forecast of S$1.04 billion in a Bloomberg survey of six analysts.

DBS was the only one of Singapore’s three large banks to report a rise in first-quarter earnings, with lenders around the region pressured by an economic slowdown and a collapse in commodity prices. Its two smaller rivals, Oversea-Chinese Bank Corp. and United Overseas Bank Ltd., both posted lower profit in statements last week.

Net interest income rose 8 percent to S$1.83 billion from a year earlier. The net interest margin, a gauge of lenders’ profitability, was higher at 1.85 percent, compared with 1.69 percent a year ago and 1.84 percent in the previous quarter.

“A decent set of results overall with manageable asset quality and strong non-interest income,” Melissa Kuang, an analyst at Goldman Sachs Group Inc. in Singapore, wrote in a report.

DBS stock rose 2.2 percent to S$15.6 as of 9:03 a.m. after earlier gaining as much as 2.6 percent, the biggest intraday increase since April 13.

Net fee and commission income rose 3 percent to S$574 million, as higher revenue from wealth management and credit cards offset a slump from investment banking and trade services.

Slowdown Effects

Despite the higher profit, DBS’s results showed some effects from the regional economic slowdown. Its non-performing loan ratio edged up to 1 percent of the total portfolio, from 0.9 percent in both the previous quarter and the first quarter of last year.

While total allowances for credit and other losses fell 6 percent, that masked an increase in specific provisions for bad debts, which rose to S$170 million from S$160 million a year ago.

The bank’s profit in the first quarter of 2015 was boosted by a one-off gain from a property sale. Including the item, its net profit would have fallen 5 percent from S$1.27 billion a year ago.

After Tuesday’s gain, DBS stock has fallen 6.7 percent this year. The shares fell 19 percent last year, mainly on investors’ concerns about Singapore banks’ exposure to the oil and gas sector, ending a three-year period of annual gains.

OCBC, DBS’s closest competitor, said last week first-quarter profit dropped 14 percent, as provisions for bad loans more than doubled and the contribution from its insurance unit declined. UOB’s net income fell 4.4 percent to S$766 million as gains in net interest income were offset by a dip in earnings from wealth management, trading and investment.

Before it's here, it's on the Bloomberg Terminal.