(Bloomberg) -- Singapore’s biggest banks are reaping benefits from the rich’s appetite to shift assets and trade in the Asian wealth hub, which have boosted the lenders’ earnings.
DBS Group Holdings Ltd. saw fees from wealth management jump 37% to S$518 million ($390 million), faster than the growth from lending income, Southeast Asia’s largest lender said Wednesday. That echoes the trend at smaller rivals Oversea-Chinese Banking Corp. and United Overseas Bank Ltd.
DBS’ results wrap up Singapore’s bank earnings season with the trio enjoying higher fund inflows from clients and active trading in financial markets, generating more fees. The lenders have been expanding their wealth franchises, seeking to compete with global peers including UBS Group AG, with Asia held up as among regions that hold the most promise for this business.
Gains in wealth-management fees were “driven by a shift from deposits into investments and bancassurance as well as an expansion in assets under management,” DBS said in a statement. AUM rose to a record S$396 billion.
At OCBC, robust gains from fees in wealth, trading and insurance drove non-interest income 13% higher. Its private bank unit has been adding relationship managers, and clients are increasing trading activities in anticipation of rate cuts, according to Chief Executive Officer Jason Moo of Bank of Singapore Ltd.
Meanwhile, UOB’s strong fee gains including from wealth management and loans helped cushioned a dip in its main lending income.
DBS Guidance
Looking ahead, DBS CEO Piyush Gupta guided for continued 2024 profit growth. He said net income will expand in a mid- to high-single digit percentage this year driven by both lending and fee incomes. While acknowledging heightened uncertainty in financial markets and geopolitical tensions, he said “we have built resilience against risks of economic slowdown and lower interest rates.”
DBS reported a 4.2% increase in quarterly profit to S$2.8 billion ($2.1 billion) in the three months ended June 30. That surpassed the S$2.68 billion average estimate by three analysts surveyed by Bloomberg News. Shares rose as much as 3.9% after the results, recouping some of the losses in the past week marked by widespread losses in financial stocks.
Investors are on watch for how interest income will perform amid expectations of US rate cuts. Citigroup Inc. this week downgraded the bank stocks, citing potentially big rate cuts over the next couple years that could hit their profitability.
Total income growth is expected to be in a high single-digit percentage for the year, said Gupta. Specific provisions for potential bad assets will be 10 to 15 basis points, lower than a previous guidance for 17-20 bps.
Here are highlights from DBS’ earnings:
- Commercial book net interest income rose 5.2% to S$3.77 billion.
- Dividend at 54 Singapore cents per share
- Group net interest margin shrank two basis points to 2.14% from a year ago
- Assets under management rose to S$396 billion, from S$320 billion a year ago
- Markets trading income rose 6% to S$187 million
- Allowances for credit and other losses rose to S$148 million from S$72 million
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