DBS Group Holdings pointed to heightened economic uncertainty in this half of the year with concerns that United States-China trade tensions could have an impact on its operations.
In a slide presentation on DBS' results to the media yesterday morning, chief executive Piyush Gupta said that while the impact of the first wave of the rising US-China trade spat has been benign, the second phase is "uncertain". He added that he is concerned over the possibility of "spillover effects" as it could wind up as a confidence issue, which could hit equity markets, yield curves and credit spreads.
Mr Gupta also said a DBS analysis showed that there was zero impact from the US' first set of tariffs on US$50 billion (S$68.3 billion) of Chinese goods.
But for the latest threat to slap tariffs on US$200 billion of Chinese imports, including on consumer goods like vacuum cleaners and washing machines, it is not clear how much that will impact the supply chain, he added.
Also, regional headwinds to watch include the deleveraging moves out of China and weakening Asian currencies.
Closer to home, DBS expects "some impact" on property loan growth in light of the new cooling measures. The bank has a 31 per cent share of the Singapore housing loan market.
Mr Gupta also sees a hit looming for the consumer mortgage book: "We originally anticipated putting on about $4 billion consumer mortgages, with the slowdown and given what happened in the last set of tightening measures, I anticipate we'll probably give up about half a billion dollars in new loan booking in the second half of this year, so probably come in at $3.5 billion instead of $4 billion."
AT A GLANCE
TOTAL INCOME: $3.2 billion (+10%)
NET PROFIT: $1.33 billion (+ 18%)
INTERIM DIVIDEND PER SHARE: 60 cents (+81.8%)
His remarks come as DBS reported an 18 per cent gain in net profit for the second quarter, but that missed expectations as stronger net interest income was offset in part by a fall in non-interest income on lower trading income.
Net profit for the three months to June 30 stood at $1.33 billion compared with $1.13 billion last year. This was driven by higher net interest income and fee income and translated to an annualised earnings per share of $2.10, up from $1.76.
The results missed estimates against a $1.44 billion average forecast in a Bloomberg survey of six analysts.
Net interest income rose 18 per cent to $2.22 billion, with loans growing 12 per cent and net interest margin (NIM) increasing by 11 basis points to 1.85 per cent.
The bank has cut its loan growth outlook for the year to 6 to 7 per cent from 8 per cent, on the back of expectations of lower trade loans. But it expects a stronger NIM pick-up, bringing it higher by one to two basis points above previous guidance of 1.85 per cent for the full year.
Its non-performing loan ratio stood at 1.6 per cent, up from 1.5 per cent a year ago.
Non-interest income fell 6 per cent to $979 million. Trading income declined 23 per cent to $227 million, reflecting "trading headwinds" from a flatter yield curve and wider credit spreads. A lower gain from investment securities also contributed to the decline in other non-interest income.
The bank also reported its lowest recorded income from treasury markets - down 59 per cent from a year ago to $107 million, due to some "structural impact" from exchange trading and high frequency activities.
Net fee income increased 11 per cent to $706 million, led by growth in wealth management and cards.
It declared first-half dividends of 60 cents, up from 33 cents a year ago as earlier guided.
DBS shares closed down 44 cents to $26.50 after the results were announced yesterday.