DBS Q4 net profit misses forecasts on bad debt charges and lower trading income

SINGAPORE - DBS Group announced on Tuesday (Feb 10) that its fourth-quarter earnings rose 4 per cent from year ago to $838 million as 9 per cent increase in total income to $2.34 billion was offset by higher allowances for bad debts and lower trading income.

After a 4.5 per cent rise in core fourth-quarter net profit, Singapore's biggest bank made record full-year earnings. But net profit for the three months to Dec 31 was $838 million, below an average forecast of $931 million from six analysts polled by Reuters.

DBS said bad debt provisions rose 40 per cent to $211 million as specific allowances increased to $157 million from $91 million a year ago. This was the highest level since the quarter ending June 2013, according to Thomson Reuters data. Allowances for Greater China excluding Hong Kong quadrupled to $40 million. In its presentation slides, DBS said China and commodities markets would be key risks to watch.

Net trading income fell 44 per cent to $92 million in the quarter from a year earlier because of "less favorable trading conditions," the bank said. That dragged other non-interest income down by 20 per cent to $207 million. Allowances for credit and other losses climbed 40 per cent to S$211 million.

Net interest income rose 15 per cent to $1.67 billion while fee income increased 5 per cent to $459 million, led by higher contributions from wealth management, cards and investment banking.

Earnings per share (EPS) for the quarter stood at 1.30 (excluding one-off items), unchanged from last year. Including one-off items, EPS fell from 1.37 cents a year ago.

For the full year, net interest income rose 14 per cent to $6.32 billion, while net profit (excluding one-off items) grew 10 per cent year-on-year to $3.85 million. One-time items amounted to $198 million, comprising a gain of S$223 million from the divestment of a stake in the Bank of the Philippine Islands less a donation of $25 million to the National Gallery Singapore.

Including one-off items, full-year net profit saw a 10 per cent growth from $3.67 billion a year ago to a record $4.05 billion.

Said DBS CEO Piyush Gupta: "DBS hit a new milestone, with full-year profit exceeding $4 billion in 2014. This is testament to the strength and resilience of the franchise. We believe that the multiple business engines we've built are sustainable and scalable.

"As the way in which people do banking is rapidly changing, we are also stepping up our investments in digital banking."

The board has proposed a final dividend of 30 cents per share for approval at the forthcoming annual general meeting, bringing the full-year payout to 58 cents per share, unchanged from a year ago.