DBS lowers bar for Singapore lenders with Q2 profit miss

SINGAPORE: DBS Group Holdings Ltd, South-East Asia’s biggest lender, reported lower-than-expected second quarter profit, sending its shares to an almost one-month low and raising concerns for the outlook of regional banks.

The Singapore-based lender trimmed its forecast for loan growth this year and said the benefits of higher business volumes were moderated by a drop in trading income during the second quarter.

Singaporean banks reported record profits last year but their prospects have been clouded by curbs on property investment imposed in July and a slowdown in economic growth due to international trade tensions, analysts said.

DBS, which is about 29%-owned by Singaporean state investor Temasek Holdings, kicked off the quarterly results reporting season for lenders in the regional financial hub. United Overseas Bank reports results today, followed by Oversea-Chinese Banking Corp next week.

DBS said net profit came in at S$1.37 bil in the three months ending June versus S$1.14 bil a year earlier, and an average estimate of S$1.47 bil from three analysts, according to Thomson Reuters I/B/ E/S.

DBS’ net interest margin, a key gauge of profitability, increased 11 basis points to 1.85%.

The bank however eased its loan growth forecast to 6% to 7% for this year, from a previous estimate of 8%.

Total income rose 10% while net interest income was up 18%. However, DBS said trading income declined 23% to S$227 mil as wider credit spreads created challenges.

“Amidst heightened uncertainty and market volatility, business momentum was sustained in the second quarter,” DBS CEO Piyush Gupta said in a statement.