SINGAPORE (BLOOMBERG) - Singapore's biggest lender DBS Group Holdings reported strong earnings growth for the fourth quarter as interest income surged on improved margin to offset higher expenses in the period.
In the three months to Dec 31, net profit shot up 20 per cent year-on-year to S$1 billion, beating the S$965 million average estimate of eight analysts surveyed by Bloomberg. Revenue in the quarter rose 13 per cent to S$2.65 billion.
DBS' full-year net profit - including one-off gain from property divestment - rose to a record high of S$4.45 billion as 12-month revenue jumped 12 per cent to S$10.8 billion, crossing the S$10 billion mark for the first time.
A net interest income growth of 11 per cent to S$1.85 billion was the key growth driver in the fourth quarter. Net interest margin in the period was up by 13 basis points from a year ago to 1.84 per cent, even while loans grew by 3 per cent.
This helped offset a 10 per cent jump in expenses to S$1.24 billion as the bank continued to invest in technology.
Non-interest income was 19 per cent higher at S$795 million. Net fee income rose 6 per cent to S$485 million, DBS said in its results announcement on Monday (Feb 22).
The bank's credit quality remained stable, with non-performing loan ratio unchanged at 0.9 per cent in the fourth quarter compared with a year ago.
However, DBS' non-performing assets hit S$2.79 billion at the end of 2015, up 9.5 per cent compared with 2014. Allowances for credit and other losses jumped 17 per cent to S$247 million in the fourth quarter, highlighting the banking system's increased focus on vulnerable accounts amid economic headwinds.
OCBC and UOB also reported pressure on their loan books, due partly to exposure to the struggling oil and gas sector. OCBC chief executive Samuel Tsien said last week that close to half of the bank's S$12.4 billion oil and gas portfolio is under more stress. UOB projected that some S$2 billion of its oil and gas exposure may become vulnerable this year if oil prices stay low.
Both banks stressed that there is no systemic risk due to ample provision coverage, a view DBS chief executive Piyush Gupta underlined when announcing the results on Monday (Feb 22).
He added: "While unsettled financial markets in recent weeks have created short-term uncertainty, the region's economic fundamentals are sound and the risks associated with slower growth are manageable."
The board has recommended a final dividend of 30 cents, unchanged from last year and payable in May with shareholders' approval.