SINGAPORE (Apr 29): DBS Group Holdings reported record 1Q earnings of $1.65 billion, up 9% a year as total income grew 6% to a new high of $3.55 billion.

The stronger bottomline was supported by healthy business momentum and higher net interest margin which more than offset the impact of a high base for wealth management, brokerage and investment banking fee income as well as a property gain a year ago.

New non-performing asset formation remained low and total allowances halved. Return on equity rose to 14.0%, the highest in more than a decade.

Compared to the year ago, net interest income rose 9% to $2.31 billion while loans grew 5% in constant-currency terms to $347 billion.

Net interest margin increased five basis points to 1.88% in line with higher interest rates in Singapore and Hong Kong.

Net fee income was 2% lower at $730 million.

Wealth management, brokerage and investment banking fee income declined 12% in aggregate due to exceptionally buoyant market sentiment a year ago, but the impact was mitigated by fee income increases in other categories.

Other non-interest income rose 5% to $511 million as increases in trading income and net gain on investment securities more than offset a property gain of $86 million a year ago.

Trading income rose 20% to $443 million from gains in interest rate and credit activities. Net gain on investment securities doubled to $53 million from a low year-ago base.

Asset quality continued to be benign, says DBS.

Non-performing assets were stable from the previous quarter at $5.6 billion as new non-performing asset formation remained low. The NPL rate was unchanged at 1.5%.

Total allowances fell to $76 million, half the level a year ago. Specific allowances amounted to $176 million.

Common Equity Tier-1 ratio rose 0.2 percentage points from the previous quarter to 14.1% as earnings accretion outpaced risk-weighted asset growth. The leverage ratio of 7.3% was more than twice the regulatory requirement of 3%.

DBS says it will pay dividends four times a year from FY19 onwards, instead of two times a year, to provide shareholders with more regular income streams.

The policy of paying sustainable dividends that rise progressively with earnings remains unchanged.

For 1Q, the board declared a dividend of 30 cents per share, consistent with the previous financial year’s payout of $1.20 per share.

DBS CEO Piyush Gupta says, “We have had a good start to the year as business momentum was sustained and non-interest income recovered from the recent weakness. The record earnings and ROE progression demonstrate the strengthened profitability of our franchise from digitalisation, a shift towards higher-returns businesses and more nimble execution. We are well placed to continue capturing growth opportunities across the region and delivering healthy shareholder returns.”

Shares in DBS closed 16 cents higher at $27.41 on Friday.