SINGAPORE (REUTERS, BLOOMBERG) - DBS Group Holdings, South-east Asia's biggest lender, beat market estimates on Monday (April 29) 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," he added.
Net profit came in at $1.65 billion for the three months to end-March, up from $1.52 billion a year earlier and an average estimate of $1.48 billion from four analysts, according to Refinitiv I/B/E/S.
DBS shares advanced 2.8 per cent on Monday morning to the highest since June 2018, outperforming a 0.8 per cent rise in the broader market .
"We have had a good start to the year as business momentum was sustained and non-interest income recovered from the recent weakness," CEO Piyush Gupta said in a statement.
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 percent while trade loans declined 4 per cent.
"The record earnings and return on equity (ROE) progression demonstrate the strengthened profitability of our franchise from digitalisation, a shift towards higher-returns businesses and more nimble execution," 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 percent, 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 Corp when they report results in 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's 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 Singapore cents per share dividend, consistent with the fiscal 2018's full-year payout of $1.20 per share.
The bank said its board has decided to pay dividends on a quarterly basis instead of semi-annual dividends from fiscal 2019 onwards to provide shareholders with a more regular income stream.
The first-quarter dividend will be paid on May 31.