DBS Group Holdings Ltd , Southeast Asia's biggest lender, posted a 12 percent rise in third-quarter net profit, beating expectations on a sharp drop in bad debt charges and on double-digit growth in income from its core lending business.
The bank's net profit surprisingly exceeded its second-quarter figure as well, bolstered by strong fee and commission income amid gains in investment banking and wealth management.
The outlook for Singapore's banking sector is challenging as new government measures to cool the property market will likely slow demand for mortgages, while low interest rates are expected to hit margins.
Singapore authorities expect GDP growth this year of between 1.5 and 2.5 percent, down from 4.9 percent last year and below what they believe is the economy's trend growth of 3-5 percent.
"As loan growth slows, the Singapore banks' abundant liquidity will likely become an increasing drag on margins," Sharnie Wong, a banking analyst at Barclays, said in a note before the earnings announcement. DBS CEO Piyush Gupta is trying to expand the bank beyond its two largest markets - Singapore and Hong Kong - which account for almost 80 percent of its earnings. But the bank's $7.2 billion bid to take over Indonesia's sixth-biggest bank, PT Bank Danamon, has been delayed due to regulatory obstacles. Singaporean state investment fund Temasek owns a controlling stake in Danamon and a 29 percent stake in DBS. Gupta said in a statement the bank would manage its capital efficiently ahead of the introduction of Basel 3 rules. DBS made a net profit of S$856 million ($702 million) for July-September against a net profit of S$762 million a year earlier.
That beat an average forecast of S$795 million in a survey of five analysts by Thomson Reuters, and was above the S$810 million recorded in its second quarter. It posted a record nine-month net profit of S$2.6 billion, up 13 percent from a year earlier. Bad debt charges dropped 76 percent in the third quarter of 2012 from a year earlier, when Singapore banks took more provisions due to the worsening eurozone debt crisis.
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