SINGAPORE, HONG KONG, CHINA, INDIA, INDONESIA, TAIWAN, 18 February 2019 – DBS Group achieved another record performance in 2018 as net profit rose 28% to SGD 5.63 billion. Business momentum was maintained over the course of the year despite heightened economic uncertainty and financial market volatility in the second half. Total income increased 11% to SGD 13.2 billion from loan and fee income growth as well as a higher net interest margin, which were partially offset by weaker Treasury Markets income.
Return on equity rose more than two percentage points to 12.1%, the highest in more than a decade, attesting to the improved structural profitability of the DBS franchise as interest rates and allowances reached more normalised levels.
Fourth-quarter earnings increased 8% to SGD 1.32 billion. Total income grew 6% to SGD 3.25 billion as sustained loan growth and net interest margin progression over the quarter were moderated by a decline in Treasury Markets income.
Full-year earnings increase 28%
Full-year net interest income rose 15% to SGD 8.96 billion. Net interest margin increased 10 basis points to 1.85% with higher interest rates in Singapore and Hong Kong.
Loans grew 6% in constant-currency terms to SGD 345 billion. Non-trade corporate loans increased 12% from steady broad-based growth across the region through the year. Consumer loans rose 3%, with a softening in the second half due to Singapore residential property market cooling measures and volatile financial markets. Trade loans declined 6% as maturing exposures were not replaced due to unattractive pricing.
Net fee income rose 6% to SGD 2.78 billion. Card fees increased 31% to SGD 714 million from higher customer transactions in Singapore and the consolidation of the retail and wealth management business of ANZ. Wealth management fees grew 18% to SGD 1.14 billion mainly from higher bancassurance income. Transaction service fees increased 5% to SGD 647 million as a 13% rise in cash management fees was moderated by lower trade finance fees. These increases were partially offset by a 41% decline in investment banking fees to SGD 128 million as debt and equity capital activities were affected by market uncertainty.
Other non-interest income fell 4% to SGD 1.45 billion due to lower gains on investment securities, partially offset by property disposal gains.
By business unit, Consumer Banking / Wealth Management (CBG/WM) income rose 21% to SGD 5.65 billion from increases in all product categories led by deposits, cards and bancassurance. Institutional Banking (IBG) income grew 9% to SGD 5.76 billion from higher cash management income. Treasury Markets income declined 21% to SGD 672 million due to unfavourable market conditions.
Expenses rose 13% to SGD 5.80 billion. ANZ accounted for five percentage points of the increase. The underlying cost-income ratio excluding Treasury Markets and ANZ was maintained. Profit before allowances increased 9% to SGD 7.39 billion.
Fourth-quarter earnings up 8% from year ago
For the fourth quarter, net profit rose 8% from a year ago to SGD 1.32 billion. While business momentum remained healthy, the results were dampened by weakness in Treasury Markets income. The combined income of CBG/WM and IBG rose 16% to SGD 2.95 billion, while Treasury Markets income halved to SGD 92 million.
Net interest income rose 11% to SGD 2.33 billion. Net interest margin increased nine basis points to 1.87% with higher interest rates in Singapore and Hong Kong. Loans grew 6% in constant-currency terms to SGD 345 billion.
Non-interest income fell 4% to SGD 915 million. Fee income was stable at SGD 635 million as increases in card, transaction service and loan-related fees were offset by declines in investment banking, wealth management and brokerage fees. Other non-interest income was 13% lower at SGD 280 million from lower gains on investment securities.
Expenses rose 11% to SGD 1.50 billion, with ANZ accounting for six percentage points of the increase. The underlying cost-income ratio was stable. Profit before allowances rose 3% to SGD 1.74 billion.
Fourth-quarter earnings 7% below previous quarter
Compared to the previous quarter, fourth-quarter net profit was 7% lower. The combined income of CBG/WM and IBG income was slightly higher while Treasury Markets income fell three-fifths.
Net interest income grew 3% as loan growth and net interest margin progression were sustained over the quarter. Net interest margin rose one basis point to 1.87%. A two-basis-point increase due to higher interest rates in Singapore was moderated by a drag from Treasury Markets activities. Loans rose 2% in constant-currency terms from growth in non-trade corporate loans. Consumer and trade loans were stable.
Fee income fell 9%. Declines in wealth management and loan-related fees were partially offset by increases in card and transaction service fees. Other non-interest income fell 31% due to weaker trading income.
Expenses rose 1% while profit before allowances was 8% lower.
Balance sheet remains strong
Compared to the previous quarter, non-performing assets fell 4% to SGD 5.68 billion. The NPL rate declined from 1.6% to 1.5%.
Total allowances for the fourth quarter were SGD 205 million, bringing the full-year amount to SGD 710 million. Full-year specific allowances were at 19 basis points of loans. Allowance coverage was at 98%, up five percentage points from the previous quarter and 13 percentage points from a year ago. Allowance coverage was at 178% after taking collateral into account.
Deposits rose 2% from the previous quarter and 5% from a year ago in constant-currency terms, in line with loan growth, to SGD 394 billion. The liquidity coverage ratio of 138% and the net stable funding ratio of 109% were both above the regulatory requirement of 100%.
The Common Equity Tier-1 ratio increased 0.6 percentage points from the previous quarter to 13.9% due mainly to net profit accretion. The leverage ratio of 7.1% was more than twice the regulatory requirement of 3%.
The Board proposed a final dividend of 60 cents per share for approval at the forthcoming annual general meeting. This will bring the payout to $1.20 per share for the full year.
DBS CEO Piyush Gupta said, “We achieved financial results befitting our fiftieth anniversary, a year when we were also recognised as the world’s best bank and best digital bank. Return on equity of 12.1% was near the historical high of 2007, when interest rates were twice the levels today and capital requirements less stringent. The structural improvements we have made to the profitability of our franchise – a shift towards higher-returns businesses, deeper customer relationships and more nimble execution – put us in good stead to navigate the challenges of the coming year.”
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