SINGAPORE (Apr 30): DBS Group Holdings has reported earnings of $1.17 billion for 1Q2020, down 29% y-o-y, as it “pre-emptively” set aside $703 million in general reserves to buffer potential risks arising from the Covid-19 outbreak.

However, the bank is keeping its dividend for the quarter at 33 cents per share.

The bank now has total allowances of $1.09 billion, which includes $383 million in specific allowances, mainly for new exposures recognised as non-performing during the quarter. Among the three local banks, DBS has the largest exposure of US$290 million to beleaguered oil trader Hin Leong, which went into judicial management last week.

DBS’s total income for the quarter grew 13% y-o-y to a new high of $4.03 billion, with broad-based growth in non-trade corporate loans as well as fee income. Gains from investment securities also contributed to the increase in total income, said the bank.

Net interest income increased 7% y-o-y to $2.48 billion. A slight growth in non-trade corporate loans was offset by lower trade and wealth management loans. Net interest margin remained stable q-o-q at 1.86%.

Net fee income, on the other hand, rose 14% y-o-y to $832 million, led by a 28% growth in wealth management fees, a 17% rise in loan-related fees, and a 64% increase in investment banking fees. However, due to lower transaction volumes, card fees dropped by 8%.

Other non-interest income rose 39% y-o-y to $712 million, mainly contributed by gains in investment securities.

The nonperforming loan (NPL) rate rose 1.6% from 1.5%.

Overall, the bank’s cost to income ratio has improved to 39%; total expenses fell 3% q-o-q to $1.56 billion from lower general expenses and staff costs.

The bank’s Common Equity Tier-1 ratio declined 0.2 percentage points from the previous quarter to 13.9%. Even so, this level is still above the group’s target operating range as well as regulatory requirements. The leverage ratio of 6.9% was more than twice the regulatory minimum of 3%.

In its outlook statement, DBS says it is “well-positioned” to support its clients in uncertain markets due to the bank’s strong capital, funding, and liquidity.

DBS CEO Piyush Gupta said that while the bank’s expenses will be tightened, there will be no retrenchments or pay cuts, although discretionary non-staff costs will be reduced. Investments will be prioritised, and bonuses will be aligned to earnings, said Gupta in his commentary in the bank’s earnings announcement.

“Our record operating performance in the first quarter has given us a head start to face the challenges of the coming year.

“While the economic outlook remains uncertain and credit risks have increased, the digital investments we have made have strengthened the resilience and efficiency of our franchise and we remain committed to serving our customers,” he said.

Shares in DBS closed 13 cents higher or up 0.7% at $19.20 on Wednesday prior to the results announcement.