DBS Group Holdings Ltd., Southeast Asia’s largest bank, signaled improving margins in the second half of this year after higher interest income and fees buoyed quarterly profit.
Chief Executive Officer Piyush Gupta sees an “upside bias” to net interest margin as US interest rates edge higher, according to a statement Thursday. Net income, excluding one-time items, rose 48% to S$2.7 billion ($2 billion) in the three months ended June 30, surpassing the average estimate of S$2.43 billion from seven analysts surveyed by Bloomberg.
DBS joins its global peers including HSBC Holdings Plc in reaping profit from higher interest rates that have been supporting lending income. After the Federal Reserve’s latest rate hike last week, global commercial banks including Standard Chartered Plc signaled an improving outlook for the remainder of the year.
The lender’s net interest margin rose to 2.16% from 1.58% a year ago, lifting its lending income. Fee income for the quarter rose 7% compared to a year ago.
Not all is rosy. Loans contracted 2% from a year ago, and are expected to expand at a low single-digit percentage for the year because of higher rates. Gupta also lowered his forecast for fee-income growth for a second time this year, expecting a mid single-digit for 2023 from a high single digit percentage made in the preceding quarter.
Including a one-time integration cost of S$60 million for the quarter that came with DBS’s acquisition of Citigroup Inc.’s Taiwan consumer banking unit, profit was S$2.63 billion.
United Overseas Bank Ltd. reported a profit beat last week that resulted in a share price jump. Oversea-Chinese Banking Corp., Southeast Asia’s second-largest lender by assets, is due to provide results Friday.
Other Key Details:
- Net interest income for commercial book up 54% at S$3.58 billion
- Expenses up 16% at S$1.93 billion
- Return-on-equity at 19.2%, from 13.4% a year ago
- Non-performing loan ratio at 1.1%, from 1.3%
- Wealth management AUM rose 9% to record S$320 billion
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