SINGAPORE (Feb 18): DBS Group reported 4Q earnings rose 8% to $1.32 billion from a year ago, bringing FY2018 earnings to a record high of $5.63 billion.

In the 4Q ended Dec, net interest income rose 11% to $2.33 billion. Net interest margin increased nine basis points to 1.87% with higher interest rates in Singapore and Hong Kong. Loans grew 6% in constant-currency terms to $345 billion.

Non-interest income fell 4% to $915 million. Fee income was stable at $635 million as increases in card, transaction service and loan-related fees were offset by declines in investment banking, wealth management and brokerage fees. Other non-interest income was 13% lower at $280 million from lower gains on investment securities.

Expenses rose 11% to $1.50 billion. The underlying cost-income ratio was stable. Profit before allowances rose 3% to $1.74 billion.

Compared to 3Q, non-performing assets fell 4% to $5.68 billion. The NPL rate declined from 1.6% to 1.5%.

Total allowances for 4Q were $205 million, bringing the full-year amount to $710 million. Full-year specific allowances were at 19 basis points of loans. Allowance coverage was at 98%.

Deposits in 4Q rose 2% from the previous quarter and 5% from a year ago in constant-currency terms, in line with loan growth, to $394 billion. The liquidity coverage ratio of 138% and the net stable funding ratio of 109% were both above the regulatory requirement of 100%.

The Common Equity Tier-1 ratio increased 0.6 percentage points from the previous quarter to 13.9% due mainly to net profit accretion. The leverage ratio of 7.1% was more than twice the regulatory requirement of 3%.

For the full year, DBS said while business momentum remained healthy, the results were dampened by weakness in Treasury Markets income due to unfavourable market conditions. The combined income of Consumer Banking / Wealth Management and Institutional Banking rose 16% to $2.95 billion, while Treasury Markets income halved to $92 million.

The board has proposed a final dividend of 60 cents per share. This will bring the payout to $1.20 per share for the full year.

DBS CEO Piyush Gupta says, “We achieved financial results befitting our 50th anniversary, a year when we were also recognised as the world’s best bank and best digital bank. Return on equity of 12.1% was near the historical high of 2007, when interest rates were twice the levels today and capital requirements less stringent. The structural improvements we have made to the profitability of our franchise – a shift towards higher-returns businesses, deeper customer relationships and more nimble execution – put us in good stead to navigate the challenges of the coming year.”

Shares in DBS closed at $24.79 on Friday, down from $28.43 on Feb 19 2018.