DBS Group Holdings in the central business district of Singapore.
Nicky Loh | Bloomberg | Getty Images
SINGAPORE – DBS Group Holdings, the largest bank in Singapore and Southeast Asia, reported second-quarter earnings on Thursday that exceeded expectations as the economic recovery hits its home market.
The bank’s net income for the April-June quarter rose 37% year over year to $ 1.7 billion (US $ 1.26 billion). According to Refinitiv analyst estimates, this exceeded an average forecast of 1.42 billion Singapore dollars.
Compared to the previous quarter, however, net income was 15% lower.
DBS shares in Singapore rose around 0.7% on Thursday.
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Piyush Gupta, CEO of DBS, said better-than-expected performance across all businesses helped offset headwinds from lower interest rates. He said the bank had seen improvements in lending business, as well as fee income from investment banking and wealth management.
“It was like that everything else started very solidly and offset the headwinds from the interest rate,” Gupta told CNBC’s “Capital Connection”.
“The zero interest rate environment is clearly taking its toll. And for a bank like us, which has giro and savings deposits for a long time … this headwind is pretty big,” he added.
DBS announced a dividend of 33 Singapore cents per share for the second quarter. That’s up from 18 Singapore cents a share in the previous quarter after the Monetary Authority of Singapore removed a cap on dividend payments.
Here are the other highlights from the results report:
- The bank’s provisions for potential loan losses decreased to $ 79 million in the second quarter from $ 849 million a year earlier.
- The net interest margin, a measure of the profitability of lending, was 1.45% for the second quarter. That is less than 1.62% a year ago.
- Customer loans rose to around $ 397 billion in the first six months of 2021, 6% more than the same period last year.
Outlook for the banks in Singapore
The release of DBS’s second quarter results ended the financial reporting season for Singapore-listed banks.
On Wednesday, two smaller Singapore banks – Oversea-Chinese Banking Corp and United Overseas Bank – reported financial results that beat estimates.
OCBC, Singapore’s second largest bank, reported a 59% year-over-year increase in net income to $ 1.16 billion in the second quarter. UOB’s net income for the period was approximately $ 1 billion, up 43% from a year ago.
The outlook for the Singapore banking trio has improved this year as the economic recovery fueled credit demand while a rebound in financial markets helped their wealth management businesses earlier in the year.
But worsening Covid-19 outbreaks in parts of Asia could hit consumers, the DBS CEO said.
“I think there will be more stress in the consumer portfolio, there the increasing pandemic could have some impact than with SMEs,” said Gupta, referring to small and medium-sized enterprises.