SINGAPORE - DBS Group Holdings reported healthy earnings growth in the third quarter as net interest income jumped to a record high, with a favourable interest rate environment pushing up the bank's profit margins.
But DBS was not invulnerable to market volatility in the period ended Sept 30, as fee income took a hit.
DBS' net profit was up 6 per cent year-on-year to $1.07 billion, on the back of an 8 per cent rise in revenue to $2.71 billion.
This beat the $990 million average estimate for net profit of seven analysts surveyed by Bloomberg News.
The solid third quater drove the nine-month net profit up 8 per cent to $3.45 billion, a record high for the bank.
"In a quarter marked by slower regional growth and intense market volatility, the bank's earnings continued to hold strong. Significantly, net interest margin is at a four-year high," DBS chief executive Piyush Gupta said in the bank's results announcement on Monday (Nov 2).
Net interest margin rose 10 basis points year-on-year and three basis points from last quarter to 1.78 per cent, the highest since second quarter 2011, as Singapore-dollar loans were repriced in line with higher interbank and swap offer rates.
As a result, net interest income in the quarter jumped 13 per cent year-on-year to a high at $1.81 billion. Loans grew 9 per cent to $285 billion, or 3 per cent in constant-currency terms as trade loans were lower.
Non-performing loan ratio was 0.9 per cent, unchanged through the past 12 months, and non-performing assets stood at $2.55 billion, up from $2.53 billion a year ago.
Fee and commission income however was down 5 per cent year-on-year to $589 million, "as market volatility during the quarter reduced wealth management, investment banking and brokerage fees", the bank noted in a statement.
Investment banking income was down 65 per cent as a result to $31 million, while wealth management income dropped 4 per cent to $137 million.
The lower fee income reflected the same market conditions that hit OCBC and UOB, both of which saw their earnings hit by investment and trading-related losses.
Commenting on the bank's earnings outlook, Mr Gupta cautioned that Asia's growth will remain slow amid the headwinds in China as stimulus measures have yet to show any immediate effect.
But DBS will be able to sustain slower but steady growth, he added, and its solid portfolio quality will buffer the bank against tail events.