The absence of a one-off gain might have pulled down first-quarter earnings for DBS Group Holdings, but it still performed better than expected.
South-east Asia's largest bank posted a 5 per cent drop in net profit for the period to $1.2 billion.
Excluding the one-time gain in the same period last year when DBS sold a property, net profit rose 6 per cent - a record first quarter.
The bottom line surpassed the $1.04 billion average estimate of analysts polled by Bloomberg.
Revenue, or total income, rose 5 per cent to $2.87 billion, as net interest income grew 8 per cent to $1.83 billion, on the back of better net interest margin and bancassurance.
DBS chief executive Piyush Gupta told a press briefing the bank said it would benefit substantially this year from a year-on-year net interest margin improvement, and this would come in the early part of the year.
He added: "We indicated the value of the bancassurance deal with Manulife would start kicking in very early. It's not just the amortisation of the one-time fee that we get, it's also performance-related income."
DBS gets US$1.2 billion (S$1.6 billion) from Canada's Manulife in a 15-year distribution deal that started on Jan 1. He added that the access fee of US$1.2 billion will be amortised equally every quarter, over the 15 years, giving a $27 million uplift every quarter, based on 2015 results.
At current levels of the interest rates and foreign exchange, we will continue to get a net interest margin uplift for the next several months and, certainly, into the third quarter of this year.
DBS CHIEF EXECUTIVE PIYUSH GUPTA
DBS Bank had a better first quarter than its two smaller rivals - OCBC Bank and United Overseas Bank (UOB) - which performed below market expectations.
OCBC Bank posted a 14 per cent drop to $856 million in first-quarter net profit, below the $899 million average forecast; UOB's first-quarter net profit was a 4.4 per cent dip to $766 million, just shy of a $767 million forecast.
At DBS, loans inched down 1 per cent in constant-currency terms to $274 billion. A 23 per cent drop in trade loans was offset by a 3 per cent rise in non-trade loans from corporate borrowing, and a 13 per cent rise in local housing loans.
He said the loans book faced stronger headwinds than expected.
Net interest margin rose 16 basis points to 1.85 per cent, in line with higher Singdollar interest rates.
The non-performing loans ratio grew slightly to 1 per cent, while specific allowances rose 6 per cent to $170 million, in line with DBS' expectations.
Despite greater risk aversion in the quarter, non-interest income dipped 2 per cent to $1.03 billion, which DBS said was comparable to the quarterly high a year ago, "when financial market activities were boosted by favourable central bank policy actions".
Net fee income was up 3 per cent to $574 million, but trading income was affected by volatility in the financial markets, falling 12 per cent to $315 million - owing to lower treasury customer activity.
On the other hand, wealth management fees rose 5 per cent to $176 million, as bancassurance income soared 63 per cent to $98 million.
Total expenses grew 7 per cent to $1.27 billion. DBS said this was a "further deceleration in year-on-year cost growth from 10 per cent in the previous quarter, and 14 per cent in the first three quarters of 2015".
The reasons behind the smaller increase in cost were a slower growth in headcount and more efficient operations.
Earnings per share for the quarter was $1.92, up from $1.84 a year earlier, while net book value was $16.39 per share as at March 31, up from $15.82 as at Dec 31.
Mr Gupta said: "At current levels of the interest rates and foreign exchange, we will continue to get a net interest margin uplift for the next several months and certainly, into the third quarter of this year.''
DBS shares closed seven cents higher at $15.35.