SINGAPORE: DBS Group reported a 22 per cent fall in second-quarter net profit on Thursday (Aug 6) after shoring up loan loss allowances in a pandemic-hit market, but its profit came just above market estimates and rose from the preceding quarter.
Piyush Gupta, CEO of Southeast Asia's biggest lender, said in a statement that the operating trends were in line with the bank's guidance and several fee income streams were improving from troughs in April as economies emerge from lockdowns.
Advertisement Advertisement Smaller rival United Overseas Bank however missed analysts' estimates with a 40 per cent fall in quarterly profit due to lower margins and higher credit costs.
[h=3]Commentary: More government measures needed to cushion a worsening Singapore jobs market[/h]Investors are keen to see if the June quarter marked the trough for banks' net interest margins, a key measure of profitability, and whether lenders can effectively tackle loan losses in recession-hit economies.
DBS said profit for the June quarter fell to S$1.25 billion from S$1.6 billion a year earlier, and versus an average estimate of S$1.19 billion from five analysts, according to Refinitiv data.
Advertisement Advertisement The profit was above the first-quarter's S$1.16 billion number. Loan loss allowances also declined quarter on quarter.
"DBS did better with help on treasury income and surprisingly was again able to contain costs like Q1," said Kevin Kwek, a senior analyst at Sanford C. Bernstein.
He said given the circumstances, DBS' ability to maintain a 10 per cent return on equity would be seen positively especially in light of the recent stock price drop due to a cap on dividends.
[h=3]READ: Local banks should cap FY2020 dividends, offer shareholders alternatives to conserve capital: MAS[/h]Investor disenchantment with lenders grew after the country's central bank capped their dividends last week, sparking a sell-off in shares.
DBS' net interest margin fell to 1.62 per cent in the second quarter from 1.91 per cent a year earlier.
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