DBS foresees weaker growth with China slowdown

Singapore — Uncertainties over China’s economic slowdown and credit quality have hit DBS’ performance and the Singapore bank is now expecting weaker growth in its financing business, said chief executive Piyush Gupta yesterday when announcing the firm’s third-quarter results.

Trade and financing activities to and from China are under pressure as gross domestic product dipped to a five-year low in the third quarter, while the financial sector there is reeling from a massive trade-financing fraud that is unfolding.

As a result, “we’ve amended our guidance on full-year, group-wide loans growth from 8-9 per cent previously to probably around 7-7.5 per cent growth,” Mr Gupta said.

“But the good news is volume is picking up towards the end of the third quarter ... We’re still currently budgeting the same 8-10 per cent growth for next year.”

Mr Gupta added that DBS would not be affected by issues in China’s banking system and that the bank is not involved in activities such as local government and trust-vehicle financing.

Despite concerns over China, DBS reported another quarter of robust earnings for the July-to-September period, with net profit growing 17 per cent on-year to reach S$1.01 billion.

This came as net interest income and fee income rose to record highs of S$1.6 billion and S$555 million, respectively. Margin rose slightly from 1.67 per cent to 1.68 per cent — the highest in nine quarters.

In the fee-income segment, wealth management fees rose 39 per cent to S$142 million. The unit is set for stronger growth as DBS completed its acquisition of Societe Generale’s private-banking business in Singapore and Hong Kong early last month, pushing up assets under management from S$77 billion to S$89 billion.

“The third-quarter number already shows that wealth management is a key driver for DBS growth. Having Societe Generale is just going to enhance that synergy and deepen DBS’ position for China’s wealth,” said IG Markets’ analyst Ryan Huang.

“The long-term potential is unmistakable, although regional economic slowdown and interest-rate normalisation may create some downside pressure.”

However, Mr Huang is less optimistic about the bank’s housing loans outlook in Singapore, saying: “Prices and sentiment are being weighed down by cooling measures and manpower tightening in the property sector. This will (put) pressure on mortgage loans growth for local banks next year.”

Mr Gupta, however, noted that DBS’ mortgage slowdown was less than expected, as the bank now expects full-year housing loans growth of S$3.7 billion to S$3.8 billion.

This marks moderate but stable 7-8 per cent annual growth and is comparable to last year, he added.