SINGAPORE (Feb 16): DBS Group reported a 9% fall in earnings of $913 million for the 4Q ended Dec from a year ago, bringing FY16 earnings to $4.24 billion.
Full-year earnings were 2% below a year ago as a stronger operating performance was offset by higher allowances.
DBS says total allowances for FY16 and for the 4Q doubled from a year ago to $1.43 billion and $462 million respectively.
The non-performing loan rate of 1.4% in 4Q was 0.9% higher than a year ago and 1.3% higher than 3Q.
A significant part of the increase in non-performing loans and specific allowances was due to stresses in the oil and gas support services sector.
In the 4Q, total income rose 5% to $2.78 billion as non-interest income growth more than offset the impact of a lower net interest margin.
Profit before allowances rose 10% to $1.55 billion, thanks to productivity gains from digitalisation and cost management initiatives.
But the improved operating performance was more than offset by a doubling of total allowances.
Net interest income fell 2% to $1.82 billion as a decline in net interest margin more than offset the impact of loan growth.
Net interest margin fell 13 basis points to 1.71% as Singapore-dollar interest rates were lower compared to a year ago. Loans were 6% higher.
Non-interest income increased 19% to $952 million. Net fee income rose 6% to $515 million, led by growth in wealth management and cards income. Other non-interest income grew 40% to $437 million from higher trading income and wealth management treasury customer sales.
The 2% decline in expenses resulting from productivity gains resulted in a three percentage improvement in the cost-income ratio to 44%.
DBS CEO Piyush Gupta said, “We achieved a 10% increase in full-year profit before allowances despite a challenging operating environment. The strong operating performance is the payoff from investments we made to build multiple business engines and to digitalise the bank. They enabled us to meet headwinds related to China and stresses in the oil and gas support services sector. The financial discipline we exercised over the years in building up buffers for capital, liquidity and allowance reserves has ensured that our balance sheet remains resilient.”
The board has proposed a final dividend of 30 cents per share for approval. This will bring the full-year dividend to 60 cents per share, unchanged from a year ago.
Shares of DBS closed 3 cents lower at $18.23 on Wednesday.