DBS Q1 net profit up 1% to record $1.21b

DBS chief financial officer Chng Sok Hui and DBS chief executive officer Piyush Gupta speaking at a media conference  on May 2, 2017.
DBS chief financial officer Chng Sok Hui and DBS chief executive officer Piyush Gupta speaking at a media conference on May 2, 2017.ST PHOTO: FELINE LIM

SINGAPORE - Singapore's top lender DBS Group announced on Tuesday (May 2) that net profit for first-quarter 2017 rose to a record S$1.21 billion, up 1 per cent from a year ago as fee income climbed to a record.

The bank's first-quarter earnings beat the average analyst forecast of S$1.09 billion according to Thomson Reuters estimates.

Net interest income came in nearly flat at S$1.831 billion, down slightly from S$1.833 billion a year ago. The impact of softer Singapore-dollar interest rates was offset by higher loan volumes, which rose 7 per cent in constant-currency terms to S$298 billion from growth in corporate, trade and Singapore housing loans, said the bank.

Net fee income rose 16 per cent to S$665 million. The growth was led by a 26 per cent increase in wealth management fees to a quarterly high of S$222 million from stronger sales of unit trusts and other investment products.

Other non-interest income fell 15 per cent or S$68 million to S$390 million due to lower trading gains and a non-recurring net gain of S$38 million a year ago.

Productivity gains resulted in 1 per cent reduction in expenses and a one percentage point improvement in the cost-income ratio compared to a year ago.

Specific allowances eased from recent quarters as non-performing loan formation moderated. Allowance coverage of non-performing assets was at 103 per cent.

Compared to the previous quarter, the amount of non-performing assets fell slightly to S$4.83 billion. The non-performing loan rate was unchanged at 1.4 per cent. Non-performing loan formation, which had been elevated in recent quarters due to stresses in the oil and gas support services sector, moderated and was offset by recoveries and write-offs.

Specific allowance charges amounted to S$200 million or 26 basis points of loans, compared to 38 basis points for full-year 2016.

"We have had a good start to the year," said DBS CEO Piyush Gupta in a press release.

"Earnings were maintained at the quarterly high achieved a year ago as business momentum and productivity gains were sustained, offsetting the impact of a lower net interest margin. Our business pipeline is healthy, consistent with the recent improvement in economic data for key markets. While asset quality pressures appear to be moderating, we remain vigilant to continued headwinds in the oil and gas support services sector.'

Including one-time items, net profit was S$1.25 billion. As previously announced, there was a gain of S$350 million from the divestment of PWC Building in Singapore. The amount was set aside as general allowances, raising general allowance reserves to S$3.49 billion.

In addition, S$10 million of integration costs for the retail and wealth management business acquired from ANZ was accrued. The general allowance and integration cost charges had a tax impact of S$45 million.

Last week, United Overseas Bank reported first-quarter net profit rose 5.4 per cent from a year ago to S$807 million, beating expectations.

No. 2 lender Overseas Chinese Banking Corp will report its first-quarter results on May 9.