DBS reports Q3 net profit of S$1.07 billion, up 6% after a S$50 million charge

DBS Group reported on Monday that it generated a net profit of S$1.07 billion for the third quarter ended September 30, 2015, up 6 per cent from a year ago.

Total income rose 8 per cent to S$2.71 billion as net interest income rose 13 per cent to reach a record at S$1.81 billion, with net interest margin at a four-year high. The latter rose ten basis points to 1.78 per cent, the highest since second quarter 2011.

Compared to the previous quarter, net profit was 5 per cent lower from an increase in general allowances. Total income and profit before allowances were both little changed.

A charge of S$50 million was taken for the first-time adoption of funding valuation adjustment to the fair value of derivatives.

"In doing so, DBS becomes an early adopter in Asia of a newly-instituted industry best practice,'' DBS said.

Adjusting for the charge, net profit would have risen 10 per cent from a year ago and been stable from the previous quarter.

During the quarter, loans grew 9 per cent, largely due to currency effects, with increases in non-trade corporate and housing loans partially offset by a decline in trade loans.

Net fee income fell 7 per cent to S$517 million as investment banking fees fell from a high base a year ago. Other noninterest income rose 7 per cent to S$382 million from higher trading income and from the disposal of properties.

Non-performing loan rate was unchanged from recent quarters at 0.9 per cent. The Common Equity Tier 1 ratio was at 12.9 per cent, while the leverage ratio was at 7.1 per cent, exceeding the minimum of 3 per cent envisaged by the Basel Committee.

In terms of geography, Singapore generated S$697 million in net profit, up almost 2 per cent from S$686 million a year ago.

Hong Kong saw the greatest surge in net profit, up 46 per cent to S$329 million from S$226 million a year ago. Net interest income increased 29 per cent from higher net interest margin as deposit mix improved. Non-interest income rose 19 per cent, mainly due to property disposal gains. Expenses rose 23 per cent due to higher headcount and from the impact of the acquisition of Societe Generale's private banking business and higher computerisation costs due to increasing business volume.

Rest of Greater China, net profit fell 39 per cent to S$23 million, from S$38 million. South and Southeast Asia, net profit tumbled to S$1 million from S$16 million. Net profit also slipped for the rest of the world to S$16 million, from S$42 million a year ago.

DBS CEO Piyush Gupta said, "In a quarter marked by slower regional growth and intense market volatility, the bank's earnings continued to hold strong. Significantly, net interest margin is at a four-year high. The ability to deliver a solid set of numbers in the face of headwinds testifies to the resilience of the DBS franchise and the soundness of our risk management practices."

For the first nine months, net profit rose to a record S$3.45 billion, underpinned by a 12 per cent increase in total income to S$8.14 billion. There was a one-time gain of S$136 million from the disposal of a property investment.

Excluding the gain, net profit rose 10 per cent to S$3.32 billion. Return on equity was 11.6 per cent.