DBS Group Holdings, South-east Asia's biggest lender, beat market estimates yesterday to post a record quarterly profit, as strong net interest income offset weakness in wealth management, brokerage and investment banking fees.
First-quarter profit rose 8.5 per cent on a year earlier, while DBS, the first Singapore bank to kick off the sector's results, said the macro-economic environment had stabilised.
"We were positively surprised by strength in trading gains," Jefferies analyst Krishna Guha said in a report.
"Overall, core driver was in line with expectations. We expect similar trends for peers as well."
Net profit came in at $1.65 billion for the three months to end-March, up from $1.52 billion a year earlier and higher than an average estimate of $1.48 billion from four analysts, according to Refinitiv I/B/E/S.
DBS shares advanced 3.61 per cent to close at $28.40 yesterday.
Chief executive Piyush Gupta said in a statement: "We have had a good start to the year, as business momentum was sustained and non-interest income recovered from the recent weakness."
After three years of strong loans growth, Singapore's banks are gearing up for tougher times as the city-state's export-reliant economy slows, partly due to a trade war between China and the United States, analysts say.
DBS said its loans grew 1 per cent in the latest quarter from the fourth quarter. Non-trade corporate loans rose 3 per cent, while trade loans declined 4 per cent.
"The record earnings and return on equity progression demonstrate the strengthened profitability of our franchise from digitalisation, a shift towards higher-returns businesses and more nimble execution," Mr Gupta said.
The bank's return on equity rose to 14 per cent, its highest in more than a decade.
Net interest margin rose five basis points to 1.88 per cent, in line with higher interest rates in Singapore and Hong Kong.
The increase in lending income stems from rising domestic interest rates, which analysts expect will also benefit smaller rivals United Overseas Bank and Oversea-Chinese Banking Corporation when they report their results in the coming days.
The boost from rising rates may start to fade later this year following the US Federal Reserve's dovish tilt, leaving Singapore banks more reliant on fee income.
DBS' weak results in wealth management contrast with solid performances by Swiss private banking titans UBS Group AG and Credit Suisse Group. The lender reported a 5 per cent drop in fees from servicing the rich, to $315 million.
DBS also declared a 30 cents per share dividend, consistent with the fiscal 2018's full-year payout of $1.20 per share.
The first-quarter dividend will be paid on May 31.
Mr Gupta singled out the Singapore mortgage market as a weak spot. "For the first time in a long, long time, we actually show a shrinkage in our mortgage loan book in the first quarter," he said.
"Our bookings continue to be soft, and the amount of refinancing transactions in the market is actually very low, about half of what they were a year ago." REUTERS, BLOOMBERG