DBS's mortgage and insurance sales hit new highs in Q2

Singapore

DBS Group Holdings' consumer banking is on a roll. Despite slower economic growth and a sluggish property market, the bank's home-loan and bancassurance sales are hitting records as the lender's strong franchise and dominant position in Singapore give it the edge over rivals.

DBS is selling more home loans despite a sluggish property market with new mortgage bookings at S$3 billion in the second quarter of this year, said chief executive Piyush Gupta.

The S$3 billion of new bookings was a "quarterly record", of which S$1 billion came from refinancing sales, said Mr Gupta on Monday at the bank's Q2 results. This brings the bank's first-half 2015 new mortgage sales to S$5.2 billion.

Rivals OCBC Bank and United Overseas Bank will release their results on July 31.

DBS posted better-than-expected Q2 net profit of S$1.12 billion, up 15 per cent on higher interest margin and loans growth from corporates and mortgages, partially offset by lower trade loans.

Its consumer banking/wealth management unit reported the best results for the quarter on higher loan volumes and rise in investment and insurance products. Compared to a year ago, profit before tax jumped 56 per cent to S$336 million as total income grew 27 per cent.

DBS's wealth management sales got a huge boost when it bought Societe Generale Private Banking Asia last October. That acquisition pushed it to eighth largest private bank in Asia and helps the bank sell all manner of loans and investment products.

Elaborating on the bank's success in home loans amid a slowdown in the property market, Mr Gupta said DBS's strength came from its huge deposits.

DBS, the largest bank in South-east Asia, has customer deposits of S$306 billion, down 6 per cent from the previous quarter as surplus or the more expensive deposits, mainly in US dollars and Hong Kong dollars were "managed out".

DBS's "biggest advantage" is in refinancing because "we can do three-year fixed rate loans" and at competitive rates, he said. Another avenue is from HDB home loan sales through its POSB franchise, he said.

DBS offers 1.98 per cent per annum for a three-year fixed loan. A year ago, the rate was 1.58 per cent or 40 basis points lower. The key three-month Singapore interbank offered rate (Sibor) on which home loans are pegged to has more than doubled from a year ago to 0.83 per cent.

To date, almost two out of 10 customers opt for the fixed rate package, said a DBS spokeswoman.

DBS's mortgage market share as at May 15 has risen to 25.3 per cent, its highest since 2010. It was 24.56 per cent in Q1.

Total housing loans rose to S$54.6 billion at June 30, 2015, up from S$53.9 billion as at March 31, 2015, and S$50.8 billion a year ago.

Total gross customer loans rose 9 per cent to S$284 billion from a year ago. Growth in regional corporate and Singapore housing loans was partially offset by a fall in trade loans. Trade loans rose S$2 billion during the quarter but they had fallen S$9 billion in Q1.

Mr Gupta said he expects the trade book to be flat for the year on slower China growth.

Compared to the previous quarter, loans rose one per cent in constant currency terms as trade and Singapore housing loans grew.

Mr Gupta said he expects full-year loans growth to come in at 5 per cent.

On DBS's bancassurance business, he said it grew the annual premium in the first half by 32 per cent year on year. DBS's bancassurance market share in Q1 is 35 per cent, making it No 1 in bancassurance sales based on new business.

DBS signed a Manulife bancassurance partnership in April and expects insurance sales to reach half a billion dollars in a few years, said Mr Gupta then. DBS's previous partner was Aviva.

This year the bank expects to sell S$250 million of bancassurance and it will also get S$106 million from Manulife. DBS gets a total of S$1.6 billion from the 15-year tie-up with Manulife.

Insurance penetration in Singapore is low at 4 per cent while it is 12 per cent in a country with similar per capita, he said in April.

DBS has the largest network in Singapore, with more than 2,500 touchpoints, from branches, ATMs, and partnerships with retail chains where customers can withdraw cash.

READ MORE: DBS beats expectations with 15% rise in Q2 profit