DBS Q1 profit falls 29% as loan-loss provisions surge amid coronavirus pandemic

DBS maintained its quarterly dividend at 33 cents.
DBS maintained its quarterly dividend at 33 cents.PHOTO: ST FILE

SINGAPORE (BLOOMBERG, REUTERS) - DBS Group Holdings, Singapore and South-east Asia's largest lender, posted its first quarterly profit decline since 2017 as the coronavirus pandemic and oil price slump triggered a spike in loan-loss provisions.

Net income fell 29 per cent to $1.17 billion in the three months ended March 31 from $1.65 billion a year earlier, the bank said on Thursday (April 30). That compares with the $1.19 billion average estimate of six analysts surveyed by Bloomberg. DBS last posted a quarterly profit decline in the third quarter of 2017.

The bank maintained its proposed dividend at 33 cents for the first quarter.

DBS joins a host of international banks including JPMorgan Chase & Co and HSBC Holdings in setting aside hefty provisions for bad debts, as the pandemic cripples the global economy and slashes profits among the lenders' corporate customers.

Allowances for loan losses surged to $1.09 billion in January-March from $76 million a year earlier. They were well above an average estimate of $605 million, according to Refinitiv data.

DBS said it set aside the allowances "to accelerate the build-up of reserves", with two-thirds of the amount kept for general allowances to anticipate a "deeper and more prolonged economic impact from the pandemic." The remainder was for specific allowances, mainly for new exposures recognised as non-performing during the quarter.

Before allowances, DBS' profit rose 20 per cent to a record $2.47 billion, with total income up 13 per cent from loan growth, stronger fee income and higher investment gains.

Its net interest income grew as key interest rates were resilient despite the US Federal Reserve's cut in March.

In presentation notes on Thursday, DBS chief executive officer Piyush Gupta said full-year profit before allowances will be around 2019 levels after factoring in declines for the rest of the year.

He said  in a statement: “While the economic outlook remains uncertain and credit risks have increased, the digital investments we have made have strengthened the resilience and efficiency of our franchise and we remain committed to serving our customers. We will maintain a solid balance sheet with ample capital, liquidity and loss allowance reserves that give us strong buffers to absorb external shocks.”

Oversea-Chinese Banking Corp (OCBC) and United Overseas Bank (UOB) will report first-quarter results next week.

With additional information from The Straits Times