DBS’ Q2 profit rises 15% to S$1.12 billion

SINGAPORE — DBS Group Holdings posted a better-than-expected 15 per cent gain in second-quarter profit, as improving interest margins and robust loan growth helped Singapore’s biggest lender withstand a weak housing market, slowing regional economy and a sluggish trade financing business.

For the three months ended June 30, net profit rose to S$1.12 billion from S$969 million in the corresponding period a year earlier, DBS said today (July 27), beating an average forecast of S$1.06 billion from analysts in a Reuters poll. Net interest income rose 12 per cent to S$1.74 billion, boosted by an eight basis point jump in the net interest margin to 1.75 per cent. Non-interest income increased 25 per cent to S$947 million, helping to drive total income 16 per cent higher to S$2.69 billion.

The strong second quarter propelled first-half net profit to a new high of S$2.39 billion.

DBS chief executive Piyush Gupta said: “Despite slowing growth across the region, DBS achieved record earnings in the first half of the year driven by strong broad-based income growth. Notably, net interest margin is at its highest in 13 quarters.”

Customer loans grew 9 per cent to S$280.1 billion in the second quarter, boosted by mortgages, where DBS improved its market share to 25.3 per cent — its highest since 2010 — from 24.6 per cent in the first quarter. New mortgage bookings amounted to S$3 billion in the second quarter, which Mr Gupta said was a quarterly record. Of that, S$1 billion came from refinancing, he added.

Amid the prolonged slowdown in the property market, DBS was able to build market share in mortgages because its broad deposit base allowed it to offer three-year fixed rate loans at competitive rates.

Mr Gupta said: “You look at our market share of the mortgage business. From the early part of the century… (the share) eroded every year. From 2010, we have been growing market share in the last five years. If you look at last year, one part of that comes also because we have been focusing on the Housing and Development Board (HDB) market. We have been able to win share from HDB, so it’s not just from the banking system,” he said.

Data published by the Urban Redevelopment Authority last Friday showed private residential prices fell 0.9 per cent in the second quarter from the previous three months, marking the seventh consecutive quarter of decline, the worst since the eight straight quarters of price falls from the third quarter of 2000. Meanwhile, HDB data showed resale prices fell 0.4 per cent in the second quarter, their eighth consecutive quarter of decline.

On bancassurance, Mr Gupta said DBS is now leading the market with a share of 35 per cent.

In April, it signed a 15-year partnership with Canadian insurer Manulife Financial that will allow the insurer to sell products through the lender’s Asian branch network.

On the impact on DBS’ fixed deposit business from the Singapore Savings Bond which will be offered to retail investors come October, Mr Gupta said there will definitely be some shift in cash to the bond as it would be very hard for banks to compete with the product.

Singapore Savings Bonds are a special type of Government bonds that give individuals a long-term savings and investment option with safe returns. The principal is guaranteed and can be redeemed at any time with no penalty.

DBS declared a first-half dividend of 30 cents per share, up from 28 cents a year ago in what Mr Gupta said is “a reflection of our confidence in the sustainability of our earnings.”