DBS's quarterly profit misses estimates on trading income drop

DBS Group Holdings, Southeast Asia’s largest bank, posted second-quarter earnings that missed analysts’ estimates as trading income fell 47% and loan profitability shrank.

 

Net income was $735 million, compared with a loss of $300 million a year earlier when it booked a goodwill impairment charge at its Hong Kong unit, the Singapore-based lender said in a statement to the stock exchange. That’s less than the $750 million average of six analysts’ estimates compiled by Bloomberg.

 

DBS shares slumped as low borrowing costs weighed on income from lending and the economy shrank in the quarter. Chief Executive Officer Piyush Gupta aims to expand operations in markets including China and India to tap demand for credit and financial services in the world’s fastest-growing economies.

 

“There are some pockets of concern relating to fee-earning activities such as stock broking,” said Sachin Nikhare, a banking analyst at IIFL Securities Pte. in Singapore. “The growth in fee income is less than what we were expecting.”

 

Shares of DBS fell 1% to $15.17 as of 9:24 a.m. in Singapore. They have advanced 6% this year.

 

Non-interest income, which includes its trading business, slipped 15% to $748 million from a year earlier. Trading income fell 47% to $146 million, according to the statement. Income from stock broking declined 19%.

 

LOANS CLIMB

Net interest margin, a measure of lending profitability, narrowed to 1.8% from 1.84%, the bank said.

 

DBS’s loan book grew 16% in the second quarter, driven primarily by corporate debt. Fee income, which includes earnings from private and investment banking operations, grew 8.1% to $387 million from a year earlier. Net interest income jumped 12% to $1.2 billion.

 

Loan growth in Singapore has accelerated this year, climbing 24% in May, the most since September 2008.

 

Singapore’s gross domestic product fell an annualized 7.8% in the second quarter from the previous three months, when it climbed 27.2%, the trade ministry said on July 14. Last week, the central bank reiterated a prediction that the economy will expand 5% to 7% this year.