Tuesday, 16 July 2024
DBS' net profit rises 43% to $1.9 billion while return on equity increases to 18.6% in Q1
DBS Group’s net profit rose by 43% to a record SGD 2.57 billion ($1.9 billion) in the first quarter of 2023 from a year ago. Return on equity increased to 18.6%, also a new high.
Total income grew by 34% to SGD 4.94 billion ($3.7 billion) as net interest margin rose 66 basis points and business momentum was sustained. The cost-to-income ratio improved seven percentage points to 38%. Asset quality continued to be resilient with the NPL ratio at 1.1% and specific allowances at six basis points of loans. General allowances of SGD 99 million ($74.7 million) were taken as a prudent measure to strengthen GP reserves.
Compared to the previous quarter, net profit was 10% higher. Total income rose by 8% as net interest margin increased seven basis points, loans grew by 1% and non-interest income was seasonally higher. Expenses declined by 4% due to non-recurring items in the previous quarter. Profit before allowances grew by 16% to SGD 3.05 billion ($2.3 billion). Total allowances were higher as there had been a general allowance write-back in the previous quarter.
Commercial book net interest income rose by 2% on a day-adjusted basis from the previous quarter to SGD 3.38 billion ($2.5 billion). Net interest margin increased eight basis points to 2.69% as continued asset repricing from higher interest rates was partially offset by higher deposit costs. Loans grew by 1% or SGD 4 billion ($3 billion) in constant-currency terms to SGD 417 billion ($314.7 billion). Non-trade corporate loans rose by 2% or SGD 4 billion ($3 billion) led by Singapore real estate acquisition financing. Trade loans increased by 3% or SGD 1 billion ($754.8 million). Consumer loans fell by 1% or SGD 1 billion ($754.8 million) as wealth management loans declined. Compared to a year ago, commercial book net interest income increased by 69% as net interest margin rose 104 basis points and loans grew by 3% or SGD 11 billion ($8.3 billion).
Deposits rose by 1% or SGD 5 billion ($3.7 billion) in constant-currency terms from the previous quarter to SGD 529 billion ($399.3 billion). Deposits and wealth management net new money benefited from flight-to-safety inflows in March. Compared to a year ago, deposits were 4% or SGD 20 billion ($15 billion) higher. The liquidity coverage ratio of 147% and the net stable funding ratio of 118% were both well above regulatory requirements.
Commercial book net fee income rose by 29% from the previous quarter to SGD 851 million ($642.4 million) from broad-based growth. Wealth management fees increased by 39% to SGD 365 million ($275.5 million) due partly to seasonal effects. Investment banking fees doubled to SGD 44 million ($33.2 million) from higher equity and debt capital market activity. Loan-related fees grew by 80% to SGD 142 million ($107.2 million), while transaction service fees rose by 2% to SGD 230 million ($173.6 million). These increases were moderated by a 7% decline in card fees to SGD 227 million ($171.3 million) due to seasonally-higher spending in the fourth quarter.
Compared to a year ago, commercial book net fee income was 4% lower. Wealth management fees fell 11% with all of the decline occurring in January due to base effects. Wealth management fees were stable in February and March compared to a year ago. Card fees grew by 21% from higher spending including for travel, while investment banking fees rose by 2%. Loan-related fees were stable while transaction service fees were 4% lower.
Commercial book other non-interest income grew by 35% from the previous quarter and 22% from a year ago to SGD 432 million ($326.1 million) due to higher treasury customer income.
Expenses of SGD 1.88 billion ($1.4 billion) were 4% below the previous quarter, which included non-recurring items. Expenses were stable on an underlying basis. Compared to a year ago, expenses were 14% higher led by higher staff costs. Profit before allowances rose by 16% from the previous quarter and 50% from a year ago to SGD 3.05 billion ($2.3 billion).
Asset quality was resilient. Non-performing assets fell 3% from the previous quarter to SGD 4.95 billion ($3.7 billion) and the NPL ratio was unchanged at 1.1%. New non-performing asset formation remained low and was more than offset by repayments and write-offs. Specific allowances amounted to SGD 62 million ($46.8 million) or six basis points of loans. General allowances of SGD 99 million ($74.7 million) were taken to strengthen GP reserves to SGD 3.83 billion ($2.89 billion). Allowance coverage stood at 127% and at 229% after considering collateral.
The Common Equity Tier-1 ratio declined 0.2 percentage points from the previous quarter to 14.4%. Net profit accretion during the quarter was offset by the impact of the fourth-quarter 2022 ordinary and special dividends of SGD 92 cents ($0.69) per share as well as by risk-weighted asset growth. The leverage ratio of 6.4% was more than twice the regulatory minimum of 3%. The board declared a dividend of SGD 42 cents ($0.42) per share for the first quarter.
DBS CEO Piyush Gupta said, “We delivered a record performance and benefited from safe-haven deposit inflows during a quarter marked by increased market volatility. Our ability to sustain business momentum, as well as customers’ trust in a time of market stress, are the result of our solid capital position, prudent risk management, diversified business lines and nimble execution, underpinned by an ongoing digital transformation. Our multi-faceted franchise strengths will enable us to continue supporting customers and delivering shareholder returns".
Re-disseminated by The Asian Banker
