ADVERTISEMENT

DBS Shares Jump Most Since 2010 After Quarterly Profit Grows

DBS Shares Jump Most Since 2010 After Quarterly Profit Grows

(Bloomberg) -- DBS Group Holdings Ltd. rose the most in almost eight years in Singapore trading after Southeast Asia’s biggest lender posted fourth-quarter profit growth and promised higher dividends.

Net income climbed 33 percent from a year earlier to S$1.22 billion ($920 million) in the three months ended December, helped by rising income from loans and wealth management. Full-year profit increased to a record, the bank said Thursday.

“It is a good set of results, with multiple drivers -- margin expansion, lending momentum and wealth management,” said Diksha Gera, a Bloomberg Intelligence analyst in Singapore. “We expect this momentum to continue in 2018, with a keen eye on the pace at which interest rates rise."

Chief Executive Officer Piyush Gupta told reporters that he’s “fairly confident about 2018,” after DBS kicked off the earnings season for Singapore’s banks on a positive note. His unexpected decision in the previous quarter to clean up the loan book means the lender is no longer burdened by huge provisioning for bad debts, and can focus on making profit from its growing lending and wealth businesses as the economy improves.

Shares of DBS rose as much as 5 percent, the most on an intraday basis since April 2010, and climbed 2.6 percent to S$26.03 at 12 p.m. local time. The dividend outlook drove the gains, according to Marcus Chua, an analyst at Nomura Singapore Ltd.

Dividend Scope

DBS suspended its scrip dividend and said ordinary dividends can be “sustained at higher levels.” For the final payout of 2017, the bank proposed 60 Singapore cents per share, which will bring the full-year number to 93 cents, a 55 percent increase from the previous year. It also proposed a special dividend of 50 cents.

“There is a lot of scope for more special dividends going forward," said Chua.

CEO Gupta said recently completed Basel rules will have a smaller impact on capital than anticipated. He also said he sees the net interest margin widening further and the formation of new non-performing assets is returning to normal levels.

Earnings Highlights

  • Net interest income rose 15 percent from a year earlier
  • Allowances for credit and other losses fell 51 percent
  • Net interest margin expanded to 1.78 percent from 1.71 percent
  • Wealth management increased 44 percent, leading growth in net fees and commissions

DBS acquired wealth and retail banking businesses in five Asian markets from Australia & New Zealand Banking Group Ltd. in 2016, two years after it bought assets from Societe Generale SA. Consumer and wealth banking accounted for 37 percent of the bank’s profit before tax last year, up from 35 percent in 2016.

“The credit environment looks very steady, the full impact of ANZ is kicking in, interest rates should be robust and all our fee income businesses are doing very well,” Gupta said at a news briefing.

In the previous quarter, profit fell as DBS increased bad-loan allowances more than sixfold to put the pain of soured energy-industry loans behind it. 

The bank’s shares rallied 43 percent last year, gaining momentum in the fourth quarter as investors applauded the bad-loan cleanup. The stock outperformed smaller rivals Oversea-Chinese Banking Corp. and United Overseas Bank Ltd., which both report earnings on Feb. 14.

--With assistance from Joyce Koh and Sebastian Tong

To contact the reporters on this story: Chanyaporn Chanjaroen in Singapore at cchanjaroen@bloomberg.net, Livia Yap in Singapore at lyap14@bloomberg.net.

To contact the editors responsible for this story: Marcus Wright at mwright115@bloomberg.net, Russell Ward, Paul Panckhurst

©2018 Bloomberg L.P.