Singapore bank DBS profit rebounds, seen gaining as rates outlook improves

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A logo of DBS is pictured outside an office in Singapore January 5, 2016. REUTERS/Edgar Su

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  • Q4 net profit S$1.39 bln, up 37% on-year; misses estimates
  • Loan loss provisions show big decrease
  • CEO sees mid-to-single digit or better loan growth in 2022
  • Shares trade near record highs, up 14% so far this year

SINGAPORE, Feb 14 (Reuters) – DBS Group (DBSM.SI) flagged strong business momentum after its profit rose to a record last year, cementing a recovery for Southeast Asia’s largest lender as pandemic-hit economies rebound and boost loan growth and asset quality.

Singapore lenders are also expected to be big beneficiaries of rising interest rates, while the city-state’s economy is forecast to grow 3% to 5% this year after expanding at its fastest annual pace in over a decade in 2021.

Krishna Guha, an analyst at Jefferies said that while the bank’s fourth-quarter profit was slightly below estimates due to lower than expected non-interest income, growth in other revenue metrics was “outstanding.”

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“Guidance for 2022 is in line with our current inputs but for the credit costs, and is likely to be the next driver of positive earnings revisions,” Guha said in a note.

DBS, the first Singapore bank to report this season, said net profit for October-December rose to S$1.39 billion ($1.03 billion) and follows a particularly weak pandemic-hit year when profit tumbled to a three-year low in the fourth quarter.

The result however missed an average estimate of S$1.47 billion from four analysts polled by Refinitiv, and was also 18% lower than the third quarter, hit by a 41% drop in non-interest income. DBS shares eased 0.6% in early Monday trade.

“We look forward to the coming year with a prudently managed balance sheet that is poised to benefit from rising interest rates,” DBS CEO Piyush Gupta said in a statement, adding that the bank expects mid-to-single digit loan growth or better this year, after reporting a 9% increase last year.

DBS, which earns most of its profit from Singapore and Hong Kong, struck a deal last month to pay S$956 million to buy Citigroup’s (C.N) consumer business in Taiwan, as it shores up regional acquisitions to power growth. read more

The Singapore lender’s full-year profit rose 44% to a record S$6.8 billion as a 9% growth in loans, the highest in seven years, and a surge in wealth management and transaction banking services fees offset the impact of lower interest rates.

Allowances for loan losses decreased to S$33 million in the latest quarter from S$577 million a year earlier.

Buoyed by the improved outlook for banks, investors have pushed up Singapore bank stocks this year, with DBS and smaller rival UOB (UOBH.SI) trading near record highs.

($1 = 1.3464 Singapore dollars)

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Reporting by Anshuman Daga; Editing by Diane Craft and Stephen Coates

Our Standards: The Thomson Reuters Trust Principles.

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