DBS Q1 profit up 3 per cent to record $1.27 billion, beating estimates, on strong loan growth

SINGAPORE (Bloomberg, Reuters) - DBS Group Holdings, Southeast Asia's largest lender, posted first-quarter profit on Monday that beat analysts' forecasts, helped by a double-digit rise in loan growth and strong wealth management fees.

Loans grew by 11 per cent in the first quarter, defying market expectations of a slowdown, due to demand from regional corporate borrowing and secured consumer credit.

DBS however reported a slower rise in trade loans, which have been a driver of CEO Piyush Gupta's growth strategy. "Despite a slowdown in trade volumes, the bank's first-quarter earnings reached a record high," said Gupta in a statement, referring to the $1.27 billion net profit including exceptional items.

DBS said core net profit excluding exceptional items for the January-March period came to $1.13 billion, against an average forecast of $1.03 billion from six analysts polled by Reuters. That compares with a core net profit of $1.03 billion in the same period a year earlier.

Including a one-time gain from a property disposal in Hong Kong, net profit jumped to $1.27 billion from $1.23 billion a year earlier.

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

Net fee and commission income advanced 10 per cent to $560 million as wealth-management income jumped 43 per cent.

Bad loan charges rose 20 per cent to $181 million, but fell 14 per cent from the fourth quarter.

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 per cent of DBS's revenue last year.

"Considering the still-weak macro environment in the region and especially Singapore, the numbers were strong," said Kevin Kwek, a Sanford C. Bernstein analyst.

Lenders "will benefit from the rising interest-rate environment," Ivan Tan, a Standard & Poor's analyst in Singapore, said before the results. "Impacts will be much more prominent from the second quarter."

The three-month Singapore interbank offered rate, or Sibor, more than doubled in the first quarter to exceed 1 per cent for the first time since 2008.

Selling the property investment in Hong Kong allowed DBS to book a one-time gain of $136 million, it said.

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

Shares of DBS gained 2.3 per cent this year, following a 20 per cent rally in 2014, which was the stock's third consecutive annual increase. The benchmark Straits Times Index advanced 4.4 per cent since December.

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

Greater China contributed 30 per cent 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.