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Q4 net profit surges to S$2.34 billion, beats estimates
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Annual profit soars 20% to record S$8.2 billion
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Total net interest margin 2.05%, up from 1.43%
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Retains full-year outlook for mid-single-digit loan growth
(Adds comment from news conference and quotes from analyst)
By Anshuman Daga and Yantoultra Ngui
SINGAPORE, Feb 13 (Reuters) - DBS Group , which
has seen its net interest margins hit highs for the decade on
rising interest rates, expects rates to moderate, its chief
executive said, as Southeast Asia's largest bank by assets
reported record quarterly and full-year profit.
Singapore lenders, like global peers, are benefiting
from higher interest rates, but analysts said that as the cycle
peaks and economic growth falters, rising bank profits could be
curbed.
At a news conference on Monday, DBS Chief Executive Piyush
Gupta said U.S. interest rate increases are likely to moderate,
though he doesn't expect rate cuts this year.
Gupta warned that there was a downside risk of 5 to 7 basis
points to the group's peak net interest margin guidance of 2.25%
due to factors including outflows to treasury bills and a
strengthening Singapore dollar.
Still, he said the business pipeline remained strong and
asset quality was robust. "China's opening up was quicker and
swifter than anybody expected. You will see some tailwinds from
there," said Gupta.
DBS reported a stronger-than-expected 68% rise in quarterly
profit thanks to a sharp increase in net interest margins and it
retained its full-year outlook for mid-single-digit loan growth.
The lender, which earns most of its profit from Singapore
and Hong Kong, announced a special dividend of 50 Singapore
cents per share. The last time DBS paid out a special divided
was in 2017.
DBS, the first Singapore bank to report this season, said
October-December net profit rose to a record S$2.34 billion
($1.76 billion) compared with an average estimate of S$2.16
billion from three analysts, according to Refinitiv data.
But DBS shares fell 1.6% on Monday in a weak broader market .
"Underlying results are mixed with weaker-than-expected
pre-provision operating profit offset by better credit costs.
Refreshed guidance (is) unlikely to drive further upside in
forward earnings," Jefferies analysts said in a note.
DBS reported a total net interest margin, a key gauge of
profitability, of 2.05% for the latest quarter, up from 1.43% in
the same period a year earlier.
Singapore banks, among the most well capitalised in the
world, are on track to report record full-year results as they
benefited from an early rebound in the city-state's pandemic-hit
economy last year.
DBS' annual profit soared 20% to a record S$8.2 billion.
Smaller peers OCBC and UOB , which report
results next week, are also expected to post a sharp rise in
annual profits, but quarter-on-quarter earnings are seen as
being flat to slightly lower.
The banks' shares have gained 8% to 16% since late October
when Singapore's key market index fell to 20-month lows.
The gauge has since recovered by 12%.
Gupta said DBS has S$1.3 billion exposure to India's Adani
Group of companies, out of which S$1 billion was financing
provided to Adani's $10.5 billion acquisition of Holcim's cement business in India last year.
New York-based short-seller Hindenburg Research accused the Adani Group in a Jan. 24 report of stock manipulation and improper use of offshore tax havens that it said obscured the extent of Adani family stock ownership in group firms. The conglomerate, which has denied any wrongdoing, has since seen $110 billion wiped off the value of its seven listed firms. "They're solid cash generating companies so we're not concerned about the exposure," Gupta said referring to the cement business. "The underlying is ring-fenced." ($1 = 1.3325 Singapore dollars) (Reporting by Anshuman Daga; Editing by Kim Coghill, Stephen Coates and Sam Holmes)
