Singapore's DBS second-quarter profit beats estimates as business picks up

SINGAPORE (Reuters) – Singapore’s DBS Group Holdings (DBSM.SI) reported a 22% fall in second-quarter net profit on Thursday after shoring up loan loss allowances in a pandemic-hit market, but its profit came just above market estimates and rose from the preceding quarter.

Piyush Gupta, CEO of Southeast Asia’s biggest lender, said in a statement that the operating trends were in line with the bank’s guidance and several fee income streams were improving from troughs in April as economies emerge from lockdowns.

Smaller rival United Overseas Bank (UOBH.SI) however missed analysts’ estimates with a 40% fall in quarterly profit due to lower margins and higher credit costs.

Investors are keen to see if the June quarter marked the trough for banks’ net interest margins, a key measure of profitability, and whether lenders can effectively tackle loan losses in recession-hit economies.

DBS said profit for the June quarter fell to S$1.25 billion ($913 million) from S$1.6 billion a year earlier, and versus an average estimate of S$1.19 billion from five analysts, according to Refinitiv data.

The profit was above the first-quarter’s S$1.16 billion number. Loan loss allowances also declined quarter on quarter.

“DBS did better with help on treasury income and surprisingly was again able to contain costs like Q1,” said Kevin Kwek, a senior analyst at Sanford C. Bernstein.

He said given the circumstances, DBS’ ability to maintain a 10% return on equity would be seen positively especially in light of the recent stock price drop due to a cap on dividends.

Investor disenchantment with lenders grew after the city-state’s central bank capped their dividends last week, sparking a sell-off in shares.

DBS’ net interest margin fell to 1.62% in the second quarter from 1.91% a year earlier.

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