Expect growth opportunities from more regional trade amid US tariffs: DBS

EVEN though the Trump administration may cause global volatility, DBS expects to gain from more intra-regional trade as a result of US tariffs, said deputy chief executive and CEO designate Tan Su Shan.

The lender will also focus on trade opportunities between Asean and North Asia and Europe, given that there are more multinational corporations from Europe and Asia that are looking to do more within Asia as a result of the tariffs, she said.

“While there will be reactions around some of the tariffs, at least for our markets in Asia, especially in China and South-east Asia, the countries here are looking to be more resilient internally and to look at more intra-regional trade,” Tan said at a briefing on Monday (Feb 10) for the lender’s fourth-quarter 2024 results.

Her comments came on the back of yet another tariff announcement by US President Donald Trump on Sunday, when he said he would impose 25 per cent tariffs on imports of steel and aluminium.

He had earlier ordered tariffs against China, Mexico and Canada, although the levies against the latter two were paused after they agreed to step up on border and crime enforcement.

Meanwhile, DBS CEO Piyush Gupta noted that global trade excluding the US is still growing.

“There is enough tailwind around connectivity and interactivity around other countries in the world that gives us an opportunity,” he said.

He also noted that during Trump’s first presidential term in the US, tariffs did not affect global trade materially, and the shift to the China plus one strategy had benefited DBS.

“It depends on how exactly they levy tariffs, but it could actually have some interesting possibilities as well,” he added.

The Q4 briefing is the last results announcement headed by the outgoing CEO, who is due to retire after the lender’s annual general meeting on Mar 28.

Gupta said he was “quite pleased that I’m able to go out on a high note”.

“Our 2024 was a solid year, and frankly, we outperformed the guidance that we’ve been giving through the course of the year,” he said.

Income saw a double-digit growth from a guidance of high single digits, while net profit after tax rose 11 per cent despite the interest-rate cuts in Q4, Gupta noted.

Non-interest income rose more than 20 per cent despite a guidance in the high teens, and DBS’ return on equity of 18 per cent outperformed that of most global banks, he added.

Q4 results

DBS posted net profit of S$2.52 billion for Q4 ended Dec 31, 2024, up 11 per cent from S$2.27 billion in the year-ago period, amid broad-based growth.

Excluding one-off items – including a S$100 million corporate social responsibility commitment – Q4 net profit would have been up 10 per cent at S$2.62 billion, slightly missing the S$2.64 billion consensus forecast in a Bloomberg survey of two analysts.

Total income for Q4 rose 10 per cent to S$5.51 billion on the year, from growth in both the commercial book and markets trading.

Net interest income under its commercial book was up 5 per cent at S$3.83 billion, due to a higher net interest margin (NIM) and balance sheet growth.

Commercial book net fee income grew 12 per cent to S$968 million, led by a 41 per cent increase in wealth management fees, and higher card, transaction service and investment banking fees.

The increases were moderated by an 11 per cent decline in loan-related fees, although Gupta noted healthy broad-based loan demand in the quarter.

Loans grew S$3 billion in the quarter, mostly in non-trade loans amid a cyclical decline in trade loans, he noted.

“Non-trade growth means our pipeline is strong, and that’s despite some pay downs in North Asia,” he said.

Commercial book other non-interest income grew 41 per cent to S$548 million due to higher treasury customer sales and property disposal gains. Excluding the property disposal gains, this would be 19 per cent higher.

Meanwhile, markets trading income rose 40 per cent from the previous year’s low base, to S$158 million.

Group NIM was 2.15 per cent for the quarter, up two basis points (bps) year on year, or up 4 bps quarter on quarter.

Lower funding cost and accounting asymmetry for markets trading more than offset commercial book NIM decline of 6 bps due to lower interest rates, Gupta noted.

The bank’s non-performing loans ratio was at 1.1 per cent, unchanged from the same period a year earlier.

Q4 specific allowances were S$229 million or 20 bps of loans, as write-backs in the quarter of S$18 million were materially lower due to timing.

For the full year, net profit hit a new high of S$11.29 billion, up 12 per cent from the year-ago period.

DBS noted that treasury customer sales reached a new high, fee income crossed S$4 billion for the first time, and markets trading income rebounded.

The lender proposed a final dividend of S$0.60 per share for Q4, which brings it to S$2.22 per share for the full year – an increase of 27 per cent over the previous year, the bank said.

The final dividend will be payable on or around Apr 16.

It also announced a capital return dividend of S$0.15 per share per quarter to be paid out over financial year 2025; it expects to pay out a similar amount of capital in the next two years.

“The board committed to managing down the stock of excess capital over the coming three years,” said the lender.

DBS also set aside S$32 million to pay out a one-time bonus of S$1,000 each to all employees except senior managers “as an additional reward for their contribution to the record performance”, it said.

Looking ahead, Tan expects DBS’ group net interest income for 2025 to be slightly above 2024 levels, given that it has dialled back rate-cut expectations to two reductions from four.

Net profit will likely remain below 2024 levels, however, due to a global minimum tax of 15 per cent, she said.

DBS shares ended Monday 1.6 per cent, or S$0.70, higher at S$45.38.