(Bloomberg) — DBS Group Holdings Ltd. expects this year’s record level of profit to continue through 2024 after earnings beat estimates from strong margin growth in commercial lending.
Net interest income will likely also be around 2023’s level as higher-for-longer rates support the spread, Chief Executive Officer Piyush Gupta said Monday in a statement accompanying results. He sees fee income momentum sustained by higher gains in wealth and credit cards.
Gupta’s optimism comes after delivering net income that climbed 18% to S$2.63 billion ($1.94 billion) in the three months ending Sept. 30. That beat the S$2.54 billion average estimate of four analysts surveyed by Bloomberg News. The bank’s shares rose slightly.
Higher global interest rates have boosted revenue at banks including DBS, though they may now face a cloudier economic outlook. In Singapore, the central bank kept monetary policy settings unchanged for a second straight meeting, as growth concerns linger.
The lender is bracing for potential costs as specific allowances for expected credit losses soared almost eight times from a year ago to S$197 million, or 18 basis points of loans. They were “prudently taken” for exposures linked to a recent money laundering case in Singapore, DBS said.
More than S$2.8 billion of assets linked to 10 foreigners with Chinese origins have been seized or frozen, amid a probe that the accused allegedly laundered illicit gains from overseas online gambling rings to fund their luxe lifestyles in the city-state.
DBS is among lenders that held accounts for the individuals or associates and companies related to them. With about a dozen local and international banks embroiled in the scandal, this has raised questions about the extent to which firms had flagged suspicious activities to authorities.
Digital Banking Disruptions
The Monetary Authority of Singapore last week banned DBS from acquiring new business ventures and reducing local branch and ATM networks for six months after a spate of digital banking service outages. DBS will hold senior management accountable, and that will be reflected in their compensation, Chairman Peter Seah said.
The actions followed repeated and prolonged disruptions of DBS’ digital banking services this year, including just last month. CEO Gupta has apologized to customers and said the bank is addressing the issues “with utmost priority.”
DBS expects to deliver improved service availability and quicker recovery, Gupta said in the statement. The bank aims to provide service availability over and above regulatory requirements, he said.
Other results highlights
- Total income rises 16% to record S$5.2 billion
- Net interest margin expanded for seventh consecutive quarter; group NIM expanded 29 basis points to 2.19%
- Wealth management fees rose 22% to S$393 million
- Treasury markets income fell 38% from a year ago, from higher funding cost
- Quarterly dividend is 48 Singapore cents/share