DBS' Q4 profit up 14% at $1.51b, just above analysts' estimate

DBS Bank's net profit for the fourth quarter was just above the average estimate of $1.48 billion from five analysts, according to Refinitiv data. It is one of the first major Asian banks to flag risks to earnings from the virus.
DBS Bank's net profit for the fourth quarter was just above the average estimate of $1.48 billion from five analysts, according to Refinitiv data. It is one of the first major Asian banks to flag risks to earnings from the virus.PHOTO: REUTERS

Bank sees revenue impact of 1-2%, assuming virus outbreak is controlled by summer

DBS Group reported a 14 per cent boost in net profit to $1.51 billion for the fourth quarter from a year ago, on the back of broad-based business momentum, though it flagged risks to earnings due to the widening coronavirus outbreak.

The bank's net profit for the fourth quarter was just above the average estimate of $1.48 billion from five analysts, according to data from Refinitiv. Earnings per share on an annualised basis stood at $2.31 for the quarter, up from $2.01.

DBS is one of the first major Asian banks to flag the risks to earnings from the virus, which has claimed more than 1,100 lives and spread across the region.

A day earlier, the bank said one employee working at its main Marina Bay Financial Centre office had been infected with the coronavirus, resulting in all DBS employees on the affected floor vacating the premises. A family member of the infected DBS employee was confirmed yesterday to also have caught the virus.

The Straits Times understands that offices with workers who had been confirmed to have the coronavirus need to be evacuated so that professional cleaners can disinfect the place properly.

Workers can return to their offices as quickly as the next day, depending on the type of chemicals used.

DBS chief executive Piyush Gupta yesterday said the bank was on track to meet its previous 2020 guidance prior to the outbreak of the coronavirus.

Assuming the virus is controlled by the summer, DBS is expecting a revenue impact of around 1 per cent to 2 per cent, and special provisions could rise by a few basis points of loans, said Mr Gupta.

On its latest results review, he said: "Our record performance with return on equity at a new high of 13.2 per cent demonstrates a franchise that delivers high quality results. The increased quarterly dividend proposed by the board reflects the enhanced capacity of our business to generate earnings and reward shareholders."

DBS shares closed flat at $25.42 yesterday.

Directors recommended a final dividend of 33 cents per share, subject to shareholders' approval at the annual general meeting on March 31. This will bring the full-year payout to $1.32 per share - an increase of 10 per cent. The dividends will be paid on April 21.

For the quarter, DBS' total income increased 7 per cent on the year to $3.46 billion from loan growth and a double-digit improvement in fee income.

Net interest income rose 4 per cent from a year ago to $2.43 billion, while loans also grew 4 per cent in constant-currency terms.

Net interest margin (NIM) was little changed from a year ago at 1.86 per cent, but fell 4 basis points (bps) from the previous quarter due to lower interest rates.

NIMs are a key gauge of profitability for banks, measuring the difference between income earned from loans and the interest paid to depositors.

Net fee income grew 17 per cent from a year ago to $741 million, led by wealth management and investment banking fees.

Other non-interest income rose 5 per cent year on year to $294 million due to higher gains on investment securities.

The non-performing loan ratio was stable at 1.5 per cent. Specific allowances were $199 million, or 21 bps of loans, which DBS said was in line with recent quarterly trends.

On a full-year basis, DBS recorded a 14 per cent jump in net profit to $6.39 billion, while total income rose 10 per cent to reach a new high of $14.5 billion, again from broad-based business momentum.

THE BUSINESS TIMES, BLOOMBERG

• Additional reporting by Aw Cheng Wei

A version of this article appeared in the print edition of The Straits Times on February 14, 2020, with the headline 'DBS' Q4 profit up 14% at $1.51b, just above analysts' estimate'. Print Edition | Subscribe