Bank of Singapore’s DBS earnings rebound, set to rise as rate outlook improves

A DBS logo is pictured outside an office in Singapore January 5, 2016. REUTERS/Edgar Su

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  • Net profit of S$1.39 billion in the fourth quarter, up 37% year-on-year; lack of estimates
  • Provisions for loan losses show a sharp decline
  • CEO expects single-digit or higher loan growth in 2022
  • Stocks are trading near record highs, up 14% year-to-date

SINGAPORE, Feb 14 (Reuters) – DBS Group (DBSM.SI) posted strong business momentum after its profit hit a record high last year, cementing a recovery for Southeast Asia’s biggest lender then that pandemic-affected economies rebound and drive loan growth and asset quality.

Singapore’s lenders are also expected to be the big beneficiaries of rising interest rates, while the city-state’s economy is expected to grow 3% to 5% this year after posting its fastest annual pace in over a decade in 2021.

Jefferies analyst Krishna Guha said while the bank’s fourth-quarter profit was slightly below estimates due to weaker-than-expected non-interest revenue, growth in other revenue measures was “exceptional.”

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“The outlook for 2022 is in line with our current inputs, but for credit costs, and will likely be the next driver of positive earnings revisions,” Guha said in a note.

DBS, Singapore’s first bank to report this season, said net profit for October-December rose to S$1.39 billion ($1.03 billion) and followed a particularly weak year hit by the pandemic when profit fell to its lowest level in three years in the fourth quarter.

The result, however, missed an average estimate of S$1.47 billion from four analysts polled by Refinitiv, and was also 18% lower than in the third quarter, hit by a 41% drop in non-interest income. . DBS shares were down 0.6% in Monday morning trading.

“We look forward to the year ahead with a prudently managed balance sheet that is poised to benefit from rising interest rates,” DBS CEO Piyush Gupta said in a statement, adding that the bank expects loan growth in single digits or better. year, after posting a 9% increase last year.

DBS, which derives most of its profits from Singapore and Hong Kong, reached a deal last month to pay S$956 million to buy Citigroup’s (CN) consumer business in Taiwan, as it strengthens regional acquisitions to fuel growth. Read more

The Singaporean lender’s annual profit rose 44% to a record S$6.8 billion, loan growth of 9%, the highest in seven years, and an increase in wealth management fees and transaction banking services offset the impact of lower interest rates.

Provisions for loan losses fell to S$33 million last quarter from S$577 million a year earlier.

Buoyed by an improving outlook for banks, investors have driven Singapore bank shares higher this year, with DBS and its smaller rival UOB (UOBH.SI) trading at record highs.

($1 = 1.3464 Singapore dollars)

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Reporting by Anshuman Daga; Editing by Diane Craft and Stephen Coates

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