Singapore's DBS Group Holdings flagged strong loan growth and lower credit costs ahead after a rebound in its mainstay home market fuelled a better-than-expected 37% jump in quarterly net profit for Southeast Asia's biggest lender.
The bank joined local peers OCBC and United Overseas Bank in reporting strong results, but the sector's sequential performance slowed sharply, underscoring challenges to maintaining growth.
"Overall numbers were OK considering net interest margins have fallen over 40 basis points from pre-COVID levels as rates fell, with the fee side largely expected," said Kevin Kwek, a senior analyst at Stanford C. Bernstein, commenting on DBS.
DBS shares rose as much as 1.2% on Thursday to a record S$30.95 in a weak market. The stock is up 23% so far this year.
HSBC and Standard Chartered have also reduced credit losses in a global economic recovery after booking huge provisions last year in the face of the coronavirus pandemic.
"It was a strong first half of the year and we go into the back end of the year with a fairly high degree of confidence," DBS CEO Piyush Gupta, 61, told an online news conference.
The bank raised its dividend payout after Singapore's central bank last week removed caps on bank dividends, citing the improving global economic outlook.
As Singapore's economy rebounds from its worst-ever recession, demand for home mortgages and loans has improved, while booming markets have bolstered banks' wealth management businesses. This helped them cushion the impact of weak net interest margins in a low interest rate environment.
DBS reported profit for April-June rose to S$1.7 billion from S$1.25 billion a year earlier and beat an average estimate of S$1.42 billion from five analysts, according to Refinitiv data. Profit fell 15% from a record first quarter.
This was the 10th consecutive quarter that the bank has reported higher-than-expected profit.
Under Gupta, who took charge in 2009, DBS has broken into the ranks of the top wealth managers in Asia, acquired two banks, in India and China, over the past year, and is making forays into businesses such as a digital exchange and a global carbon exchange as it seeks new revenue streams amid low interest rates.
Provisions for potential loan losses declined to S$79 million from S$849 million a year earlier, and DBS reduced its forecast for full-year credit costs.