DBS Profit Beats Estimates on Lending, Pays Special Dividend

(Bloomberg) — DBS Group Holdings Ltd.’s fourth-quarter profit topped estimates, helped by lending gains as a strong capital base allowed the bank to deliver a special dividend.

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Net income increased 69% to S$2.34 billion ($1.76 billion) in the three months ended Dec. 31, Southeast Asia’s biggest lender said in a statement Monday. That beat an average estimate of S$2.17 billion from four analysts surveyed by Bloomberg. A special dividend of 50 Singapore cents a share for the period will take the year’s total payout to S$2 a share, according to the statement.

DBS, led by Chief Executive Officer Piyush Gupta, joins lenders getting a lift from rising global interest rates after stock market volatility led to a leaner period for dealmaking and fees from advising rich clients.

The bank is off to “a strong start,” Bloomberg Intelligence analyst Sarah Jane Mahmud said. Loan growth will likely remain relatively steady this year and wealth management fees should pick up, she said.

CEO Gupta sees rate increases moderating and doesn’t envisage rate cuts this year. He maintained the lender’s full-year guidance for mid-single digit loan growth, and signaled that fee income is set to expand at a double-digit rate as China’s border reopening benefits the region.

“Our business pipelines are healthy and asset quality robust,” Gupta said in the statement. “We expect confidence to return to markets in the coming year as interest rate increases ease and China reopens.”

Still, the CEO said there’s a downside risk of five to seven basis points to the bank’s peak net interest margin guidance of 2.25% because of outflows to treasury bills, a stronger local currency and higher funding costs.

A write-back of S$116 million general provision also contributed to the earnings growth.

Dividend Policy

Given the bank’s strong capital base, DBS is reviewing its dividend and capital-return policy, Gupta told reporters at a briefing following the results. One of the options under consideration is a share-buyback program, he said.

Morgan Stanley analyst Nick Lord forecast a S$5 billion share purchase program straddling this year and next.

Competitors Oversea-Chinese Banking Corp. and United Overseas Bank Ltd. are due to report results next week.

Other highlights from DBS’ earnings:

Net interest margin at 2.05%, from 1.90% in the previous quarter
Customer loan growth at 1% to S$414.5 billion from a year ago
Return on equity at 17.2%, new quarterly high
Non-performing loan ratio down to 1.1%, from 1.3% a year earlier

(Adds analyst and CEO comments throughout)