DBS net profit down 3% in H1, but Q2 profits second-highest in history

The bank is expected to benefit from rising interest rates, says CEO Piyush Gupta.

DBS Group reported a net profit of S$3.62b for the first six months of 2022, 3% lower from 2021’s record-breaking profits a year earlier, the bank announced in a latest bourse filing. Whilst net interest margin (NIM) rose for the first time in three years, gains were offset by lower wealth management and investment banking fees.

“Net interest margin rose for the first time in three years and accelerated in the second quarter, whilst business momentum and asset quality were sustained,” Piyush Gupta, CEO of DBS Group, commented on the latest financial statement. 

Gupta expects DBS to benefit from the rapidly rising interest rates, although “the macroeconomic outlook remains uncertain.”

“The income growth will improve the cost-income ratio in the coming quarters even as we judiciously invest for the future. Our ongoing stress tests indicate that asset quality continues to be robust,” he said.

Despite the slight decline in H1, net profit actually rose 7% in Q2 compared to the same period last year, to S$1.82b–its second highest in history. Second quarter profits are also 1% higher than in Q1. 

Total income during the quarter grew 6% to S$3.79b during the period. Net interest income rose 17% thanks to a boost in NIM, offsetting the 11% decline in non-interest income during the quarter.

NIM up for first time in 3 years
Net interest income for the first half of 2022 rose 11% to S$4.64b, driven from sustained loan growth and higher NIM during the two quarters.

NIM was 1.52%, rising from 1.47% in H1 2021. The start of the interest rate hikes drove net interest margin to shoot up in Q1 for the first time in three years, and the improvement accelerated in Q2.

Loans in H1 totalled S$425b, a 7% or S$26b increase in constant-currency terms from a year ago. Housing loans and wealth management loans were little changed, whilst non-trade corporate loans rose by S$8b and trade loans jumped S$6b, DBS reported.

On the downside, net fee income fell 9% to S$1.66b. Wealth management fees also dropped 21% to S$745m as weaker market conditions led to lower investment product sales. 

Investment banking fees declined by 36% to S$73m, which DBS blamed on capital market activities slowing.

In contrast, other fee income activities grew. Card fees rose 17% to S$90m, with overall spending reaching a new high with travel spending recovered towards pre-pandemic levels. 

Loan-related fees increased 12% to S$258m, and transaction service fees rose 4% to S$473m, buoyed by cash management and trade finance fees rising.

Other non-interest income declined 13% to S$1.24b.

Expenses were 5% higher at S$3.3b due to higher staff costs.