DBS posts 20% net profit drop in Q3

Lower net interest income triggered the fall.

DBS has recorded a 20% fall in its Q3 net profit, totalling $1.3b during the quarter from $1.63b in Q3 2019, according to a bourse filing.

The net profit decline was brought about by lower net interest income, DBS said.

Third quarter net interest income also shrunk 12% YoY to $2.17b from $2.46b a year ago.

Compared to the second quarter, the lender posted a 4% net profit jump in Q3 from $1.25b previously on the back of better business momentum, as fee income recovered 17%. On the other hand, net interest income skidded 6% from Q2’s $2.3b.

During the quarter, DBS took in $554m in allowances. Together with the $1.94b set aside during H1 this year, total allowances for the first nine months quadrupled from a year ago to $2.49b with three-fifths of that amount allocated for bolstering the balance sheet against macroeconomic risks.

Net interest margin fell nine basis points to 1.53% as the effects of global interest rate cuts in March and April fully set in. Loans were stable in constant currency terms at $371b with underlying loan momentum remaining healthy. Further drawdowns of non-trade corporate loans were offset by the repayment of short-term facilities made in H1.

Fee income increased 17% from Q2 to $798m, the third-highest quarter on record, as economic activity recovered. Wealth management fees rose 25% to $380m as sales of investment and insurance products increased with improved market sentiment in a low interest rate environment.

Card fees grew 22% to $160m as consumer spending picked up with an easing of lockdowns, but remained 21% below a year ago. Other non-interest income fell 18% from the previous quarter to $608m as trading income declined.

Common Equity Tier-1 ratio rose 0.2pp to 13.9% due to profit accretion and a stable risk-weighted asset base. The bank declared a quarterly dividend of $0.18 per share for the third quarter.