DBS Q1 profit down 2% but beats estimates; CEO says loan demand in first half of 2025 to stay strong
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The fall in DBS' quarterly net profit, its first in three years, was due to higher tax expenses.
PHOTO: ST FILE
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SINGAPORE - DBS warned of heightened uncertainty arising from US President Donald Trump’s trade war and tariff actions, but said it would stay nimble to capture opportunities and manage risks.
Singapore’s largest bank on May 8 posted a 2 per cent fall in net profit for the first quarter to $2.89 billion.
While this was the lender’s first year-on-year drop in earnings since the first quarter of 2022, it beat the $2.87 billion forecast by analysts in a Bloomberg poll.
The drop was due to higher tax expenses from the implementation of a 15 per cent global minimum tax in January, said DBS. Pre-tax, profit hit a record $3.44 billion, up 1 per cent from a year ago.
In the light of tariff uncertainties, general allowances of $205 million were taken as a prudent measure to strengthen general provision reserves.
The bank’s return on equity (ROE) was 17.3 per cent, down from 19.4 per cent a year ago.
Speaking at a results briefing on May 8, DBS chief executive Tan Su Shan said the year started off strong, but macro uncertainties from the US tariffs have weighed on the bank’s performance.
“We had a strong start to the year, with broad-based business growth led by wealth management, and ROE above 17 per cent despite the impact of the global minimum tax,” said Ms Tan.
She added: “Recent escalations in trade tensions have heightened macroeconomic risks and market volatility. As uncertainty persists, we will stay nimble to capture opportunities while prudently managing risks.”
In fact, DBS will likely benefit from shifts in trade and supply chains, as intra-regional trade within Asia and Asia’s trade with the Middle East and Europe pick up, said Ms Tan.
“The good news is that trade outside the US still remains pretty robust, and you work towards that shift in focus from just selling to the US or the West to looking at trade flows outside the US.”
DBS is projecting a loan growth of 5 per cent to 6 per cent in 2025, but that depends on loan demand in the second half of 2025, said Ms Tan.
The bank expects loan demand in the first half of 2025 to stay strong, but cautioned that it may soften if the trade war continues.
Funding could be deployed into non-loan assets if loan demand weakens in the second half of 2025, said DBS.
“If this trade war continues and we get to a pretty bad scenario, don’t be surprised that these non-trade loans and the deals that corporates want to do will be paused,” said Ms Tan.
“That said, we want to continue to garner more deposits and then deploy them into other kinds of assets.”
Ms Tan also now expects three US Federal Reserve rate cuts in 2025, up from two previously. She said this could reduce the bank’s net interest margins.
However, this would be offset by balance sheet growth, particularly in Casa (current account and savings account) volumes, said Ms Tan.
Meanwhile, market trading will benefit because of its lower funding costs, she added.
Therefore, DBS has kept its forecast for net interest income in 2025 to come in higher than in 2024.
Commercial book non-interest income growth is now forecast to be in the mid-to-high single digits, compared with the high single digits previously projected.
Net profit for 2025 will come in below 2024’s, mainly due to the global minimum tax, DBS said, reiterating the guidance it gave previously.
The bank declared a total dividend of 75 cents per share for the first quarter, comprising an ordinary dividend of 60 cents (up from 54 cents a year ago) and a capital return dividend of 15 cents.
DBS shares closed 0.8 per cent up at $43.09 on May 8 after an intraday high of $43.72.
During the quarter, it commenced share buyback under the $3 billion programme announced in November 2024. So far, about $260 million of shares, representing around 9 per cent of the programme, has been bought back, the bank said.
Its commercial book net interest income rose 2 per cent year on year to $3.72 billion, as a nine-basis-point decline in net interest margin was more than offset by balance sheet growth.
Net fee income increased 22 per cent to $1.28 billion as wealth management fees grew on strong market sentiment and higher assets under management, while loan-related fees rose with increased activity.
DBS’ results followed those of UOB, which on May 7 posted a stable yet weaker-than-expected first-quarter net profit and paused giving 2025 earnings guidance
OCBC Bank is slated to release its first-quarter earnings report on May 9.
