In a surprise development, there was a decrease of 23 per cent year-on-year in the net profit of DBS Bank for the third quarter, largely due to hefty provisions on its exposure to the oil and gas industries.
The net profit of the bank for the three months ended September 30 was SGD822 million, down from SGD1.07 billion in the same period last year.
Net allowances surged 87 per cent from SGD436 million to SGD815 million, with the bank classifying its remaining weak oil and gas support service exposures as non-performing assets.
However, business momentum remained strong as quarterly total income crossed SGD 3 billion for the first time, rising 4 per cent from a year ago to SGD 3.06 billion. Profit before allowances rose 4 per cent to a record SGD 1.80 billion.
Piyush Gupta, DBS CEO, said, “The recognition of the residual weak oil and gas support service exposures as NPAs will enable investors to return their focus to our operating performance and digital agenda. Business momentum has been strong as we continued to capture opportunities in a reflationary environment across the markets we operate in. Broad-based loan and fee income growth propelled third-quarter and nine-month total income and profit before allowances to new highs, more than offsetting the impact of less favourable interest rates and trading income. Our digitalisation efforts are progressively transforming the bank, generating customer benefits and creating shareholder returns.”
Net interest income, which refers to interest it earns from loans, increased 9 per cent to SGD1.98 billion, driven by higher net interest margin and loan growth. Non-interest income, which refers to its earnings from non-loan products, fell 3 per cent to S$1.08 billion.
Net interest margin, which is the difference banks make from the interest it earns through giving out loans and the interest it pays out to customer deposits, came in at 1.73 per cent compared to 1.77 per cent a year ago.
Though DBS posted a decline in its third-quarter results, two other banks of Singapore-OCBC posted a net profit of SGD1.06 billion for the third quarter on October 26 while UOB posted a 12 per cent year-on-year increase in the net profit to SGD883 million.