Singapore bank DBS’ Q2 profit beats estimates; expects record year

SINGAPORE: Singapore’s biggest bank DBS Group said on Thursday its second-quarter profit jumped a forecast-beating 48% to a new record as higher interest rates helped drive income growth, and forecast growth in its net interest margin (NIM).

DBS said the outlook for NIM, a key indicator of profitibility, had improved due to unexpected U.S. interest rate increases in the second half and a rise in the Hong Kong Interbank Offered Rate.

It looked forward to continued support from one-fifth of its commercial book yet to reprice and lower deposit repricing pressure than it had expected, according to presentation slides accompanying its results.

DBS shares rose 1.1% in early trade on Thursday amid a relatively flat broader market.

DBS’ views followed that of smaller peer United Overseas Bank, which last Thursday said it had a more positive outlook for NIM following the latest U.S. rate rise after it chalked up a 27% increase in second-quarter earnings.

Besides higher interest rates, Singapore banks have also benefited from strong inflow of wealth amid global uncertaintiy due to the city-state’s status as a financial safe-haven.

Oversea-Chinese Banking Corp is due to announces its second-quarter results on Friday.

DBS, which is also Southeast Asia’s largest lender by assets, expects another record year as first-half drivers sustained into the second half, projecting full-year return on equity at above 17%, according to the slides.

“While there is some macroeconomic uncertainty, our prospects for the rest of the year are anchored on a franchise with a proven ability to capture business opportunities,” DBS Chief Executive Officer Piyush Gupta said in a statement.

DBS said April-June net profit hit a quarterly record high S$2.69 billion ($2.69 billion) compared to S$1.82 billion a year earlier.

This exceeded the average estimate of S$2.41 billion from four analysts surveyed by Refinitiv.

DBS’ NIM rose for sixth consecutive quarter to 2.16% during the quarter from 1.58% a year earlier.

Return on equity hit new quarterly high of 19.2%, up from 13.4% the same quarter a year ago.

It declared a dividend of 48 Singapore cents per share. – Reuters