SINGAPORE (REUTERS) - DBS Group Holdings, South-east Asia's biggest lender, reported that higher wealth management fees drove a forecast-beating 15 per cent rise in third-quarter profit, but cautioned growth will slow next year due to the impact of lower interest rates.
The Singapore bank said on Monday (Nov 11) it expects its net interest margin, a key gauge of profitability, to fall by about 7 basis points in 2020. It was 1.90 per cent for the three months ended Sept. 30.
Singapore's banks face a challenging outlook as interest rates soften and lending moderates after robust growth in recent years.
DBS made a net profit of $1.63 billion for the quarter, compared with $1.41 billion a year earlier and an average estimate of $1.57 billion from five analysts, according to Refinitiv data.
Annualised earnings per share stood at $2.50 for the quarter, up 15.7 per cent from $2.16 a year ago.
Net interest income rose 8 per cent to $2.46 billion in the quarter and wealth management fees jumped 22 per cent to $357 million.
"Growth was driven by higher fees and trading gains, good cost control and flat margins, partially offset by higher credit costs and one-offs," said Krishna Guha, an analyst at Jefferies Singapore.
DBS' revenue and profit growth will be in the low single digits next year, while fee and commission income should continue to expand in double digits, chief executive officer Piyush Gupta said.
"Next year is going to be lower growth just because the interest rate impact on our book is going to filter through," Mr Gupta told a news conference.
"Given the global environment and the interest rates headwinds, we are still quietly optimistic that we should be able to continue to deliver decent performance into next year."
Last week, peer Oversea-Chinese Banking Corp posted its weakest quarterly profit this year after booking a one-off charge at its Indonesian banking unit.
DBS said it made extra allowances of $61 million given "ongoing political and economy uncertainty". This resulted in total allowances growing by 8 per cent to $254 million for the quarter, and rising by 15 per cent to $581 million for the nine months ended Sept 30.
It added that the performance of its business in Hong Kong was "resilient", but reported a 13 per cent decline in net profit from its operations there compared to the second quarter because of higher allowances and weaker trading income.
DBS has declared an interim dividend of 30 cents per share for the third quarter, unchanged from the previous quarter. It will be paid on Nov 29 after books closure on Nov 19.
Shares of DBS were trading down nine cents or 0.3 per cent at $26.52 as at 9.35am on Monday, after the results were announced.
With additional information from The Business Times