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DBS Group Holdings, Southeast Asia’s biggest bank, reported third-quarter profit that beat analysts’ estimates as loan growth outweighed narrowing interest margins.
Net income climbed 28% to a record $722 million in the three months ended Sept. 30, from $563 million a year earlier, the Singapore-based company said in a statement today. That beat the $655.3 million average of nine estimates compiled by Bloomberg.
Net income climbed 28% to a record $722 million in the three months ended Sept. 30, from $563 million a year earlier, the Singapore-based company said in a statement today. That beat the $655.3 million average of nine estimates compiled by Bloomberg.
DBS, led by Chief Executive Officer Piyush Gupta, is benefiting from a revival in credit growth as Asia’s economic expansion outpaces the rest of the world. That has spurred profit even as income from lending is crimped by low borrowing costs in Singapore and Hong Kong.
“The increase in loan volumes has helped banks to maintain their net interest income even though margins have been declining,” said Magdalene Choong, an analyst at Singapore- based Phillip Securities “Going forward, growth may come from non-interest income as net interest margins are likely to fall further.”
DBS rose 0.7% to $14.20 at 11:01 a.m. on the Singapore stock exchange. The stock has fallen 7.8% this year, while rival United Overseas Bank has lost 6.3% and Oversea-Chinese Banking Corp. has climbed 3.2%.
INTEREST INCOME
Net interest income, or the difference between what DBS makes from lending and pays on deposits, rose 1% from the previous quarter to $1.1 billion. Loans climbed 1%, spurred by corporate borrowing across Asia as well as home loans in Singapore. The net interest margin, a measure of loan profitability, declined four basis points to 1.8%.
Singapore’s three-month interbank lending rate, or Sibor, has averaged 0.58% this year. The equivalent rate in Hong Kong, Hibor, has averaged 0.25%.
Total loans in Singapore rose 12.1% from a year earlier to $309.4 billion in September, data from the Monetary Authority of Singapore show.
Non-interest income fell 2% from the previous quarter to $730 million as loan-related fees dropped and trading income weakened, DBS said. Investment banking revenue rose, the statement said. Expenses increased 1%, while non-performing assets declined 6%.
“Our core revenue drivers are gaining greater traction,” CEO Gupta said in the statement. Loan expansion is “mitigating the effect of headwinds in a low-rate market,” he said.
