DBS Group Holdings relied on lending to boost its fourth-quarter profit as financial market turbulence hit its trading, wealth and investment banking operations.
Net profit climbed 10 per cent to $1.32 billion in the three months ended Dec 31, slightly missing the $1.34 billion average estimate of analysts surveyed.
Net interest margin gained nine basis points from a year earlier to 1.87 per cent, but only one basis point from the previous quarter, while loans expanded 7 per cent to $345 billion.
DBS is giving a final dividend of 60 cents per share, bringing the full-year payout to $1.20 per share. This is lower than last year's total payout of $1.43, which was boosted by a special dividend of 50 cents.
DBS' Treasury Markets unit saw a pre-tax loss of $54 million because of lower contributions from equity and credit activities. The loss was bigger than the $50 million posted in the second quarter, which chief executive officer Piyush Gupta described at the time as the worst since he joined the bank a decade ago.
Wealth management income shrank 4 per cent to $218 million, the lowest in two years.
For the full year, net profit rose 28 per cent to a record $5.63 billion on higher interest rates. Net interest income rose 15 per cent to $8.96 billion, while loans grew 6 per cent to $345 billion.
The loan pipeline looks good this year, Mr Gupta said in a Bloomberg Television interview yesterday. While the outlook for interest rates is the biggest risk for DBS this year, net interest margins will continue to widen even after the US Federal Reserve signalled a pause in its monetary tightening, Mr Gupta said. Any Fed policy reversal, however, would be a "headwind", he added.
DBS shares rose yesterday as investors bet it would continue to benefit from loan growth and higher interest rates even as risks linger from the US-China trade dispute.
"Margin picked up, loan growth wasn't badly affected by trade wars, credit quality remained stable," said Sanford C. Bernstein analyst Kevin Kwek. "That being said, trade war challenges remain, so until that is resolved in some fashion, markets won't be pricing in a full recovery."
DBS shares closed 1.65 per cent higher at $25.20, outperforming the broader market, which was up 0.81 per cent. Shares of OCBC Bank and United Overseas Bank, which are due to report earnings on Friday, rose 1.65 per cent and 0.74 per cent respectively.
Separately, DBS is in discussions on forming a China securities business partnership and expects to ink a deal this year, Mr Gupta said. Regulatory clearances could take longer, he added.
"We are actively talking to people about trying to put together something on the securities front" focusing on the Greater Bay area, he said, adding that the bank will continue to support Chinese companies that are expanding abroad.
BLOOMBERG, THE BUSINESS TIMES