FILE PHOTO: A DBS bank signage is pictured in Singapore September 5, 2017. REUTERS/Edgar Su/File Photo

April 29, 2019

By Anshuman Daga

SINGAPORE (Reuters) – DBS Group Holdings Ltd, Southeast Asia’s biggest lender, beat market estimates on Monday to post a record quarterly profit, as strong net interest income offset weakness in wealth management, brokerage and investment banking fees.

First quarter profit rose 8.5 percent on a year earlier, while DBS, the first Singapore bank to kick off the sector’s results, said the macro-economic environment had stabilized.

“We were positively surprised by strength in trading gains,” Jefferies analyst Krishna Guha said in a report. “Overall, core driver was in line with expectations, we expect similar trends for peers as well,” he added.

Net profit came in at S$1.65 billion ($1.21 billion) for the three months to end-March, up from S$1.52 billion a year earlier and an average estimate of S$1.48 billion from four analysts, according to Refinitiv I/B/E/S.

DBS shares advanced 2.8 percent to the highest since June 2018, outperforming a 0.8 percent rise in the broader market.

“We have had a good start to the year as business momentum was sustained and non-interest income recovered from the recent weakness,” CEO Piyush Gupta said in a statement.

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

DBS said its loans grew 1 percent in the latest quarter from the fourth quarter. Non-trade corporate loans rose 3 percent while trade loans declined 4 percent.

“The record earnings and return on equity (ROE) progression demonstrate the strengthened profitability of our franchise from digitalization, a shift towards higher-returns businesses and more nimble execution,” Gupta said.

The bank’s return on equity rose to 14 percent, its highest in more than a decade. Net interest margin rose five basis points to 1.88 percent, in line with higher interest rates in Singapore and Hong Kong.

(Reporting by Anshuman Daga; editing by Richard Pullin)