DBS Bank bets on economic rebound, falling credit costs lead to sharp rise in profits Reuters

Anshuman Daga

Singapore (Reuters)-After Singapore’s DBS Group (OTC:) Holdings reported a 37% quarterly net profit increase, loan growth was strong and credit costs fell, as Southeast Asia’s largest banks benefited from the rebound in their main domestic markets.

The bank, together with local peers OCBC Bank and United Overseas Bank (OTC:), exceeded market expectations, but the industry’s continuous performance has slowed sharply, highlighting the challenge of maintaining growth.

Stanford C. Bernstein Senior Analyst Kevin Kwek commented on DBS Bank: “Considering that as interest rates fall, the net interest margin has fallen by more than 40 basis points from the level before COVID. The overall figure is okay, and the cost is largely expected.”

DBS shares rose 1.2% to a record S$30.95 in a flat market. The stock has risen 23% so far this year.

The global banks HSBC and Standard Chartered Bank (OTC:) have also reduced their credit losses in the global economic recovery after booking huge provisions due to the coronavirus pandemic last year.

DBS CEO Pius Gupta said in a statement: “As the economy recovers from the pandemic, business momentum and asset quality are better than expected.” He expects business momentum in the next few quarters. Will last.

As Singapore’s economy recovers from the worst recession in history, demand for mortgages and loans has improved, and the booming market has boosted banks’ wealth management business. This helps alleviate the impact of the weak net interest margin in a low interest rate environment.

According to data from Refinitiv, DBS’ reported profit for the period from April to June increased from S$1.25 billion in the same period last year to S$1.7 billion, exceeding the S$1.42 billion expected by the average of five analysts. Profits were down 15% from the record first quarter.

This is the 10th consecutive quarter that DBS Bank reported higher profits than market expectations.

After the Bank of Singapore lifted the bank’s dividend cap last week, the bank increased its dividend payments, citing improved global economic prospects.

The reserve for potential loan losses fell to SGD 79 million from SGD 849 million a year ago. Gupta said the bank’s asset quality was better than expected.

Moody’s (NYSE:) Investor Services expects DBS Bank to maintain its very strong credit indicators this year.

($1 = 1.3512 Singapore Dollar)