UPDATE: DBS 4Q18 net profit rose despite wealth management declines, but missed some forecasts

DBS ATM in SingaporeDBS ATM in Singapore

This article was originally published on Monday, 18 February 2019 at 7:47 A.M. SGT; it has since been updated.

Singapore’s largest bank DBS said on Monday that its fourth quarter net profit rose 8 percent on-year to S$1.32 billion, boosted by loan growth and a higher net interest margin (NIM), which was partially offset by a decline in treasury markets income. The results missed some analysts’ forecasts.

“Business momentum was maintained over the course of the year despite heightened economic uncertainty and financial market volatility in the second half,” DBS said in a filing to SGX before the market open on Monday.

UOB KayHian had forecast net profit of S$1.29 billion for the quarter, while CGS-CIMB had estimated it would come in at S$1.32 billion.

Net interest income for the quarter was S$2.33 billion, up 11 percent on-year, as the NIM was 1.87 percent, up from 1.78 percent in the year-ago quarter, amid higher interest rates in Singapore and Hong Kong, DBS reported. NIM is the difference between what banks charge for loans and the cost of their funds.

UOB KayHian had forecast net interest income of S$2.31 billion, while CGS-CIMB had estimated S$2.32 billion; both had forecast NIM of 1.87 percent.

Non-interest income was S$915 million, down 4 percent on-year, DBS said. CGS-CIMB had forecast non-interest income of S$902 million.

“Increases in card, transaction service and loan-related fees were offset by declines in investment banking, wealth management and brokerage fees,” DBS said in the statement, adding fee income was affected by weakness in financial markets.

In the outlook, CEO Piyush Gupta was upbeat, pointing to the bank’s return on equity, which increased to 12.1 percent, near the historical high it touched in 2007, when interest rates were double current levels and capital requirements weren’t as stringent.

“The structural improvements we have made to the profitability of our franchise – a shift towards higher-returns businesses, deeper customer relationships and more nimble execution – put us in good stead to navigate the challenges of the coming year,” Gupta said in the statement.

For the full year, DBS reported net profit rose 28 percent on-year to S$5.63 billion, a record, with net interest income coming in at S$8.96 billion, up 15 percent on-year, and non-interest income at S$4.23 billion, rising 2 percent on-year. NIM for the full year was 1.85 percent, it said.

Maybank KimEng forecast full-year net profit of S$6.01 billion, with net interest income of S$9.24 billion and non-interest income of S$4.13 billion. It estimated the full-year net interest margin would come in at 1.84 percent.

Daiwa forecast full-year net profit of S$5.73 billion, with net interest income of S$8.99 billion. It forecast a net interest margin of 1.87 percent.


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