DBS first-quarter net profit rises 43%

First-quarter net profit rises 43% to SGD 2.57 billion while return on equity increases to 18.6%

DBS Group’s net profit for first-quarter 2023 rose 43% from a year ago to a record SGD 2.57 billion. Return on equity increased to 18.6%, also a new high. Total income grew 34% to SGD 4.94 billion as net interest margin rose 66 basis points and business momentum was sustained. The cost-income ratio improved seven percentage points to 38%. Asset quality continued to be resilient with the NPL ratio at 1.1% and specific allowances at six basis points of loans. General allowances of SGD 99 million were taken as a prudent measure to strengthen GP reserves.

DBS CEO Piyush Gupta said, “We delivered a record performance and benefited from safe-haven deposit inflows during a quarter marked by increased market volatility. Our ability to sustain business momentum as well as customers’ trust in a time of market stress are the result of our solid capital position, prudent risk management, diversified business lines and nimble execution, underpinned by an ongoing digital transformation. Our multi-faceted franchise strengths will enable us to continue supporting customers and delivering shareholder returns".

Compared to the previous quarter, net profit was 10% higher. Total income rose 8% as net interest margin increased seven basis points, loans grew 1% and non-interest income was seasonally higher. Expenses declined 4% due to non-recurring items in the previous quarter. Profit before allowances grew 16% to SGD 3.05 billion. Total allowances were higher as there had been a general allowance write-back in the previous quarter.

Commercial book net interest income rose 2% on a day-adjusted basis from the previous quarter to SGD 3.38 billion. Net interest margin increased eight basis points to 2.69% as continued asset repricing from higher interest rates was partially offset by higher deposit costs. Loans grew 1% or SGD 4 billion in constant-currency terms to SGD 417 billion. Non-trade corporate loans rose 2% or SGD 4 billion led by Singapore real estate acquisition financing. Trade loans increased 3% or SGD 1 billion. Consumer loans fell 1% or SGD 1 billion as wealth management loans declined. Compared to a year ago, commercial book net interest income increased 69% as net interest margin rose 104 basis points and loans grew 3% or SGD 11 billion.

Deposits rose 1% or SGD 5 billion in constant-currency terms from the previous quarter to SGD 529 billion. Deposits and wealth management net new money benefited from flight-to-safety inflows in March. Compared to a year ago, deposits were 4% or SGD 20 billion higher. The liquidity coverage ratio of 147% and the net stable funding ratio of 118% were both well above regulatory requirements.

Commercial book net fee income rose 29% from the previous quarter to SGD 851 million from broad-based growth. Wealth management fees increased 39% to SGD 365 million due partly to seasonal effects. Investment banking fees doubled to SGD 44 million from higher equity and debt capital market activity. Loan-related fees grew 80% to SGD 142 million, while transaction service fees rose 2% to SGD 230 million. These increases were moderated by a 7% decline in card fees to SGD 227 million due to seasonally-higher spending in the fourth quarter.

Compared to a year ago, commercial book net fee income was 4% lower. Wealth management fees fell 11% with all of the decline occurring in January due to base effects. Wealth management fees were stable in February and March compared to a year ago. Card fees grew 21% from higher spending including for travel, while investment banking fees rose 2%. Loan-related fees were stable while transaction service fees were 4% lower.

Commercial book other non-interest income grew 35% from the previous quarter and 22% from a year ago to SGD 432 million due to higher treasury customer income.

Expenses of SGD 1.88 billion were 4% below the previous quarter, which had included non-recurring items. Expenses were stable on an underlying basis. Compared to a year ago, expenses were 14% higher led by higher staff costs. Profit before allowances rose 16% from the previous quarter and 50% from a year ago to SGD 3.05 billion.

Asset quality was resilient. Non-performing assets fell 3% from the previous quarter to SGD 4.95 billion and the NPL ratio was unchanged at 1.1%. New non-performing asset formation remained low and was more than offset by repayments and write-offs. Specific allowances amounted to SGD 62 million or six basis points of loans. General allowances of SGD 99 million were taken to strengthen GP reserves to SGD 3.83 billion. Allowance coverage stood at 127% and at 229% after considering collateral.

The Common Equity Tier-1 ratio declined 0.2 percentage points from the previous quarter to 14.4%. Net profit accretion during the quarter was offset by the impact of the fourth-quarter 2022 ordinary and special dividends of 92 cents per share as well as by risk-weighted asset growth. The leverage ratio of 6.4% was more than twice the regulatory minimum of 3%.

The Board declared a dividend of SGD 42 cents per share for the first quarter.