DBS reports 2Q18 net profit rose 20 percent to S$1.37 billion, below some analysts’ forecasts

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DBS, Southeast Asia’s largest bank, reported on Thursday its second-quarter net profit rose 20 percent on-year to S$1.37 billion, boosted by  double-digit percentage increases in net interest income and fee income, but still below some analysts’ forecasts.

UOB KayHian had forecast net profit for the quarter of S$1.414 billion, while Daiwa had projected S$1.447 billion. Deutsche Bank had estimated S$1.409 billion.

Net interest income rose 18 percent on-year in the quarter to S$2.224 billion, while fee income increased 11 percent on-year to S$706 million, DBS said in a filing to SGX before the market open on Thursday. The bank said its results were moderated by weak trading income.

Trading income declined 23 percent on-year to S$227 million in the quarter on headwinds from a flatter yield curve and wider credit
spreads, it said.

UOB KayHian had forecast net interest income of S$2.208 billion, while Daiwa had forecast it at S$2.217 billion. UOB KayHian had forecast fee income of S$729 million, while Daiwa had forecast S$720 million. Both UOB KayHian and Daiwa had forecast net trading income of S$280 million.

Other non-interest income fell 32 percent on-year in the quarter to S$273 million due to lower trading income and gains from investment securities, DBS said. The segment also fell 44 percent from the previous quarter, which had included a property disposal gain, it said.

The net interest margin rose to 1.85 percent in the second quarter from 1.74 percent in the year-earlier period, and up 2 basis points from the first quarter, amid higher interest rates in Singapore and Hong Kong. it said.

Expenses rose 12 percent on-year in the quarter to S$1.418 billion, it said.

“Business momentum over the quarter was healthy as consumer and non-trade loan growth, underlying net interest margin progression and
overall fee income trends were sustained,” DBS said.

First-half net profit at record

For the first half, DBS reported record net profit of S$2.893 billion, up 23 percent on-year.

“Broad-based growth in loans and fee income, as well as a higher net interest margin, propelled total income to a new high of S$6.56 billion, up 13 percent. Specific allowances halved, in line with non-performing asset formation,” it said.

For the first half, loans increased 12 percent on-year, or by S$35 billion, to S$338 billion from growth across trade, corporate and consumer loans, including S$9 billion from the consolidation of the retail and wealth management business of ANZ, DBS said.

Net interest margin in the first half improved by 10 basis points to 1.84 percent, it said.

“The record first-half earnings demonstrate once again the breadth and quality of our franchise, while the higher returns demonstrate the
improved profitability of our businesses as interest rates and credit costs normalise,” DBS CEO Piyush Gupta said in a press release.

“Amidst heightened uncertainty and market volatility, business momentum was sustained in the second quarter. While there are gathering clouds, the region’s prospects remain intact, enabling us to continue capturing growth opportunities and generating stronger shareholder returns in the coming quarters,” he added.

DBS declared a first-half dividend of 60 Singapore cents per share, compared with 33 Singapore cents a year earlier, it said.

This article was originally published on Thursday 2 August 2018 at 7:19 A.M. SGT; it has since been updated.