DBS at risk of 10.8% profit drop in Q2

Analysts think receding fees would be the likely cause.

Banking giant DBS Group is expected to clock in a 10.8% decline in earnings for Q2.

According to Jonathan Koh, an analyst from UOB KayHian, the group's fee income may recede by 2.5% YoY and 8% MoM due to the high base in 2Q16 and 1Q17. These periods showed a marked growth in the bank’s investment banking and wealth management segments.

"Wealth management and trade fees could have risen by 10% and 5% YoY, respectively. We expect net trading income of $250m, which is relatively flat on a qoq basis," Koh said.

Meanwhile, Koh noted that the bank had higher specific provisions during the said quarter, but non-performing loans ratio could be unchanged a 1.44%.

"Specific provisions are expected to have increased 19.5% QoQ to $231m due to a drop in valuations of collaterals. In particular, any change in valuations for large and specialised vessels would have a significant impact on specific provisions," Koh said.