Bad loans a worry for DBS as profits fall
(16 February 2017 – Singapore) DBS Group reported its lowest quarterly profit since 2015, as provisions for bad loans nearly doubled.
The bank’s net profit dropped nine percent to S$913 million (A$833 million) for the fourth quarter ended December 31, compared to S$1.0 billion a year earlier, even as revenue gained five percent to S$2.78 billion.
DBS' earnings were eroded by total allowances which surged 87 percent to S$462 million, compared with S$247 million in the same period last year.
The bank’s non-performing loan (NPL) ratio reached 1.4 percent in the fourth quarter, up from 0.9 percent a year ago.
For the full year, total allowances increased from S$743 million in 2015 to S$1.43 billion in 2016, representing a 93 percent jump. As a result, full year net profit was down five percent to S$4.24 billion.
In an update to its loan portfolio, DBS said its total exposure to sectors including oil and gas support services stood at around S$7 billion at the end of 2016.
DBS' fourth quarter net interest income was down two percent year on year to S$1.82 billion, after net interest margin tightened from 1.84 percent a year ago to 1.71 percent and offset the six percent loans growth.
Non-interest income however grew 19 percent to S$952 million in the same period, on the back of a six percent increase in net fee income to S$515 million.
The board proposed a final dividend of 30 cents, unchanged from a year ago.
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