3-8-2023 (SINGAPORE) DBS Group, Singapore’s largest bank, reported a remarkable 48% surge in second-quarter profit, surpassing forecasts and setting a new record. The boost in earnings was attributed to higher interest rates, which contributed to income growth. DBS is now projecting further growth in its net interest margin (NIM), a crucial indicator of profitability.
The bank expressed optimism about the NIM outlook, citing unexpected US interest rate increases in the latter half of the year and a rise in the Hong Kong Interbank Offered Rate. According to the presentation slides accompanying the results, DBS anticipates continued support from approximately one-fifth of its commercial book yet to be repriced and foresees lower deposit repricing pressure than previously anticipated.
DBS CEO, Piyush Gupta, highlighted that the commercial book benefited from higher interest rates and witnessed broad-based growth in non-interest income activities. However, this was offset by higher funding costs for treasury markets. Despite some macroeconomic uncertainty, Mr. Gupta asserted that the bank’s prospects for the remainder of the year were grounded in a resilient franchise capable of capturing business opportunities.
During the second quarter, DBS initiated efforts to enhance the resilience of its technology while awaiting the conclusion of an independent review of its recent digital disruptions. The Monetary Authority of Singapore (MAS) had conducted a preliminary probe, attributing the cause of the digital banking disruption in May to human error. Consequently, MAS imposed an additional capital requirement on the bank due to two successive service disruptions within a short span.
DBS, also recognized as Southeast Asia’s largest lender by assets, reported a net profit of S$2.69 billion (US$2.69 billion) for April to June, marking a quarterly record high compared to S$1.82 billion in the same period a year earlier. This figure exceeded the average estimate of S$2.41 billion from four analysts surveyed by Refinitiv.
The bank’s NIM, a critical measure of profitability, experienced its sixth consecutive quarterly rise, reaching 2.16 per cent during the quarter compared to 1.58 per cent a year ago. Furthermore, the return on equity achieved a new quarterly high of 19.2 per cent, compared to 13.4 per cent in the corresponding quarter last year.
DBS declared a dividend of S$0.48 per share, leading to a total dividend of S$0.90 per share for the first half of 2023 when combined with the first-quarter dividend. The bank attributed the increase in dividends to their stronger earnings prospects for the year.
As DBS continues to display robust financial performance amid evolving market conditions, it stands well-positioned to navigate uncertainties while capitalizing on business opportunities.
