Singapore bank DBS raises 2024 view as robust wealth flows drive profit beat

DBS Group D05 raised its full-year profit guidance on Wednesday after posting quarterly earnings that beat estimates, as Singapore's biggest bank reaped the benefits of a booming wealth business that drove assets and fee income to records.

DBS's results rounded off a strong second-quarter earnings season for banks in the city-state, with more inflows and trading by wealthy clients.

Singapore has benefited from strong inflows of wealth into Asia due to its political stability, low taxes and policies favourable towards family offices and trusts.

DBS, also Southeast Asia's biggest bank, said April-June net profit climbed 4% to S$2.80 billion ($2.11 billion) from S$2.69 billion a year earlier. That beat the mean estimate of S$2.71 billion from five analysts, according to LSEG data.

"DBS delivered another very strong set of results with guidance upgrade across the board," Jefferies' equity analysts Sam Wong and Shujin Chen said in a research note following the results.

DBS shares rose 3.4% to S$33.86 by Wednesday afternoon following the earnings release, outperforming the broader market's STI 1.8% increase.

"While recent market volatility and ongoing geopolitical tensions have resulted in heightened uncertainty, we have built resilience against the risks of an economic slowdown and lower interest rates," DBS CEO Piyush Gupta said in a statement.

Gupta said DBS full-year group net interest income growth was expected to be in the mid-single digits, while maintaining commercial book non-interest income growth projection in the mid-to-high teens. DBS had previously forecast annual net interest income to be modestly better than 2023 levels.

Its total income growth is anticipated to be a high-single digit, cost-income ratio at around 40% and specific provisions at 10 to 15 basis points, lower than the 17 to 20 basis point projected in May, according to his presentation slides.

DBS's wealth assets under management (AUM) surged 24% in the quarter to a record S$396 billion. The wealth management segment income rose 19.6% to S$1.29 billion for the quarter.

Smaller peers Oversea-Chinese Banking Corp (OCBC) O39 and United Overseas Bank (UOB) U11 also posted double-digit growth in wealth management income.

OCBC's wealth AUM hit a record S$279 billion, while UOB's jumped 10% to S$182 billion.

DBS declared a dividend of 54 cents per share for the second quarter, versus 48 cents the same quarter a year ago.

Return on equity declined to 18.2% in the second quarter from 19.2% in the same period of 2023.

DBS's net interest margin, a key profitability gauge, dropped to 2.14% during the quarter from 2.16% a year earlier.

($1 = 1.3286 Singapore dollars)