SINGAPORE: Singapore’s biggest bank DBS Group reported on Monday (Nov 6) a better-than-expected 18 per cent jump in third-quarter net profit on the back of higher interest rates, which it forecast will also help keep its profit steady next year.
DBS, which is also Southeast Asia’s largest lender, has already forecast a record full-year profit for the current year.
“Net profit (for 2024) to be maintained around record 2023 level,” CEO Piyush Gupta said in results presentation materials.
“As we enter the coming year, higher-for-longer interest rates will be a net benefit to earnings, while our solid balance sheet with ample liquidity, prudent general allowance reserves and healthy capital ratios will provide us with strong buffers against macro uncertainties,” Mr Gupta said in a statement.
The bank’s July to September net profit rose to S$2.63 billion (US$1.94 billion) from S$2.24 billion a year earlier as total income grew to a record on higher interest margins and fee income.
That beat the mean estimate of S$2.5 billion from four analysts surveyed by LSEG.
DBS’ net interest margin, a key profitability gauge, rose to 2.19 per cent during the quarter from 1.9 per cent in the year-ago period.
It announced a dividend of 48 cents per share for the third quarter, bringing the payout for the nine months of 2023 to S$1.38 a share.
Mr Gupta also expected the bank’s 2024 net interest income to be around this year’s level, and fee income momentum to be sustained by wealth management and cards.
He also forecast next year’s profit before allowances to be higher, and total allowances to normalise to 17 to 20 basis points of loans, according to the statement.
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DISRUPTIONS
The DBS CEO also addressed the series of disruptions that hit the bank this year.
Mr Gupta said: “We will also dedicate ourselves to executing the comprehensive set of measures we recently announced to address the series of digital disruptions, for which we are truly sorry.
“We are committed to strengthening our technology resilience and ensuring customer service reliability.”
In the latest outage on Oct 14, DBS’ digital banking and payment services were down for hours due to a technical issue with the cooling system at a data centre operated by Equinix.
DBS automated teller machines (ATMs) were also affected, prompting the bank to reopen branches on a Saturday afternoon to assist customers.
The Monetary Authority of Singapore (MAS) has barred DBS from any acquisitions of new business ventures for six months, in response to the bank’s multiple service disruptions this year.
The bank is also required to pause non-essential IT changes for six months. It will also not be allowed to reduce the size of its branch and ATM networks in Singapore for now.
The DBS board and management apologised last week for the series of digital disruptions and said that the bank is addressing the issues with “utmost priority”.
DBS chairman Peter Seah acknowledged that the bank has failed to live up to customers’ expectations.
“With the incidents of the past year, we have failed to live up to these expectations, and have also fallen short of our own standards,” he said.
“As an acknowledgement that the bank could have done better, senior management will be held accountable, and this will be reflected in their compensation.”