SINGAPORE - Quarterly net profits at DBS Group Holdings have soared past the $1 billion mark for the first time.
A healthy rise in net interest income as well as trade, loan and wealth management fees helped to boost the group's first-quarter earnings to a record $1.03 billion, 9 per cent higher than in the same period a year earlier.
DBS chief executive Piyush Gupta said this is an important milestone for the lender and a remarkable one considering the exceptional quarter it had in the same period last year.
"We made $950 million in that quarter, which itself had been a record. It had been anchored by two big things: We had an elephant deal that contributed substantial revenues and it was also the best trading quarter for the whole market, including DBS, for a long time," he noted.
"Therefore, this quarter, we not only had to replace that elephant deal, (but) we also had to make up for the fact that the markets were relatively unfavourable."
The bank pulled it off, raking in net profit of $1.23 billion in the three months to March 31, including one-off items.
Total income rose 6 per cent from a year earlier to a new high of $2.45 billion.
Non-interest income dropped 3 per cent overall to $963 million owing to lower stockbroking commissions, investment banking fees and trading gains.
But non-interest income from customer activities rose. Fee income rose 1 per cent to a record $510 million as fees from trade and transaction services, wealth management, cards and loan activities all chalked up healthy gains.
Treasury customer income was also strong, rising 20 per cent to a record $335 million from increased corporate, institutional and individual customer activity.
"DBS previously guided that returns from the trade business had improved; this set of results provided the evidence," noted CIMB Research analysts Kenneth Ng and Jessalynn Chen.
"DBS appears to have reined in its US dollar balance sheet and lent only when returns were good."
Net interest income also grew, up 12 per cent year on year to $1.49 billion. Loans increased 13 per cent to $253 billion.
DBS said the growth was broad-based and included Singapore corporate borrowing, regional trade loans and secured consumer loans.
Net interest margin, a measure of the profitability of a bank's lending, climbed to 1.66 per cent, the highest in six quarters.
Excluding one-off items, earnings per share was $1.69, up from $1.58 a year earlier.
Net book value was $14.14 per share, up from $13.35 a year ago.
Looking ahead, Mr Gupta said headwinds could come from a weakening Chinese yuan.
"When the (yuan) appreciates, a lot of exporters would want to hedge their export flows because an appreciating (yuan) is not good for them," he noted.
"But when the (yuan) starts depreciating, the incentive for exporters to hedge reduces, and as the (yuan) has been depreciating over the last six to eight weeks, that hedging incentive comes off."
This, in turn, would lead to a slowdown in treasury activity.
But Mr Gupta added: "Nonetheless, as we look forward, between the improved net interest margin, the balance sheet that is on track and the deal pipeline that we see, we feel we should be able to counter-effect the impact of some slowdown in treasury and markets customer activity, if that indeed does come to pass."
DBS shares closed 10 cents higher at $16.94.
This article was published on May 1 in The Straits Times.
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