DBS second-quarter profit beats estimates as banks profit from higher interest rates

A DBS Group Holdings Ltd logo. atop an automated teller machine (ATM) at a bank branch in Singapore, Wednesday, Feb. 17, 2021. Singapore’s DBS Group reported a 7% increase in quarterly net profit slightly above market estimates and gave strong outlook, with Southeast Asia’s largest lender benefiting from significantly higher interest rates.

Lauryn Ishak | Bloomberg | Getty Images

Singapore’s DBS Group reported a 7% rise in quarterly net profit slightly above market estimates and gave a strong outlook as Southeast Asia’s biggest lender benefited from sharply higher interest rates .

Singapore banks are also benefiting from a rebound in economic activity in the Asian financial hub after the government eased most of its Covid-19 restrictions in April.

Shares of DBS fell 1.7% in early trade Thursday, while the broader market STI was slightly higher.

DBS said its April-June net profit rose to S$1.82 billion ($1.30 billion) from S$1.7 billion a year earlier, from an average estimate of 1.69 billion Singapore dollars from five analysts compiled by Refinitiv.

“Net interest margin increased for the first time in three years and accelerated in the second quarter, while business momentum and asset quality were maintained,” DBS CEO Piyush Gupta said Thursday. , in the results release.

“Our ongoing stress tests indicate that asset quality continues to be robust,” he said.

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DBS results capped a strong reporting season for Singaporean banks after local peers OCBC beat estimates and United Overseas Bank reported further improvement in net interest margins.

Singapore lenders were expected to report a net interest margin increase of 10 basis points in April-June on a quarterly basis, the highest in the past eight quarters, outperforming Asian peers, analysts said. JPMorgan analysts last month.

DBS’ net interest margin increased to 1.58% in the quarter from 1.45% a year earlier, and the key profitability indicator rose above 1.8% in July.

The bank maintained its full-year loan growth forecast at mid-single-digit percentage.

Net commission income fell 12% in the second quarter as lower contributions from wealth management and investment banking more than offset increases in other commission business.

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