DBS forecasts stable loan growth this year

South-East Asia’s biggest bank reports record annual profit for 2018

SINGAPORE: DBS Group Holdings Ltd, South-East Asia’s biggest lender, forecast stable loans growth for 2019 after a robust increase in net interest margin drove an 8% rise in quarterly profit and a record annual profit.

After three years of strong loans growth, Singapore’s banks face tougher times as the city-state’s export-reliant economy slows, partly due to a trade war between China and the United States.

Data released yesterday showed Singapore’s exports fell 10.1% in January from a year earlier, the biggest drop in over two years.

DBS, nearly 30% owned by state investor Temasek Holdings, forecast mid-single-digit loans growth and high single-digit income growth for this year.

Loans grew 6% in constant-currency terms to S$345bil (US$254.4bil) last year.

The bank reported a net profit of S$1.32bil for October-December versus S$1.22bil a year earlier, and in line with an average estimate of S$1.34bil from three analysts, according to data from Refinitiv.

Full-year profit jumped 28% to a record S$5.63bil as Singapore banks benefited from higher interest rates.

“We believe the result reads well for peers, for which street expectations are a lot lower,” Jefferies analyst Krishna Guha said in a report, referring to the quarterly numbers.

DBS kicked off the reporting season for Singapore banks, with smaller peers OverseaChinese Banking Corp and United Overseas Bank reporting results on Friday.

CEO Piyush Gupta said in a statement that DBS’s return on equity of 12.1% for 2018 was near its historical high of 2007, when interest rates were twice the current levels and capital requirements were less stringent.

DBS’s shift towards high-returns businesses and moves to boost profitability of its franchises would help it “navigate the challenges of the coming year”, he said.

The bank’s net interest margin, a key gauge of profitability, improved by nine basis points to 1.87% in the latest quarter.

Total income rose 6% as loan growth and a rise in net interest margin were moderated by a decline in treasury markets income, DBS said.