Singapore's DBS bank reports lower first quarter profits, partners Indian startups to boost SME banking
Singapore: Last week, Southeast Asia's largest bank by assets DBS Bank (DBS) reported a fall in first-quarter earnings for 2022 to SGD 1.8 billion (USD1.3 billion), 10 per cent lower than the record profits it reported in the same quarter last year, while revenue was down three per cent.
Still, it was the second-best quarter in the bank's history and net profit was 30 per cent higher compared with the previous quarter, and higher than the average estimate of SGD 1.63 billion from six analysts polled by Refinitiv.
The Singapore-based bank reported healthy business momentum with a four per cent rise in net interest income and fee income streams were generally higher except for those from wealth management and investment banking compared with a year ago.
In the same week, on April 28, DBS reiterated its commitment to nurture its India business by announcing the launch of a series of events which will bring together founders, investors and tech ecosystem partners, providing them with a platform to collaborate and find solutions to grow their businesses. The first event in the series which is named 'DBS BusinessClass foundED', was hosted in Hyderabad recently with actor, entrepreneur and investor Rana Daggubati as the keynote speaker.
Speaking at the event, Rana Daggubati said, "To change the ecosystem, we need founders who can drive their teams and instil the message that we are here to build products or services for the world. The initiative has to come from fearless investors who are ready to invest in diverse opportunities." He also emphasised the importance of networking through initiatives like 'DBS's foundED'.
DBS Bank India's partners in this initiative are startup venture capital fund Anthill Ventures and evangelist network Headstart Network Foundation. The series of events will be held across different cities in India like Bangalore, Chennai and Mumbai in the coming months.
DBS's growing investment in India contrasts with other foreign banks, many of which are scaling back their operations in the country lately. The latest being Citibank which sold its consumer business to Axis Bank for USD 1.6 billion in March this year. In recent years, banks such as Barclays, Commonwealth Bank of Australia, Royal Bank of Scotland, Deutsche Bank, Standard Chartered, HSBC, BNP Baribas have all downsized their presence in India or withdrawn from certain segments of the market. They have cited a variety of reasons including strategy change and an unfavourable regulatory landscape.
DBS latest expansion in India was in November 2020 when it took over Lakshmi Vilas Bank and combined it with DBS Bank India Limited, which is a locally incorporated wholly owned subsidiary of DBS. The Singapore lender has had a presence in India for 27 years, opening its first office in Mumbai in 1994. Today, it has a network of nearly 600 branches across 19 states in India, and a digital banking services which has about one million savings accounts. It also provides an entire range of banking services for large, medium and small enterprises (SMEs) and corporates, besides its consumer business.
In its Q1 2022 reporting, DBS said total income fell three per cent from a year ago to SGD3.75 billion (USD2.71 billion) due to a high base for wealth management and treasury market activities a year ago when "buoyant market sentiment and clear market momentum had driven income from both activities to exceptional levels". Expenses rose to SGD 1.64 billion which is four per cent higher than a year ago due to base salary increments carried out in the middle of last year. Quarterly net interest income was higher by four per cent year-on-year.
Compared to the previous quarter, net profit was 30 per cent higher. Total income rose 14 per cent from broad-based growth while expenses were two per cent lower. Net interest income increased four per cent on a day-adjusted basis from the previous quarter to SGD 2.19 billion (USD 1.58 billion).
In addition, net interest margin rose three basis points from the previous quarter to 1.46 per cent, the first increase in three years. The non-performing loan (NPL) ratio was unchanged at 1.3 per cent.
In his comments on its first quarter results, DBS CEO Piyush Gupta said, "First-quarter business momentum was strong and broad-based, and earnings were second only to the exceptional quarter a year ago. Geopolitical developments in recent weeks have created macroeconomic headwinds and financial market volatility."
He added that the "overall business pipeline continues to be healthy, and loans are expected to grow 1-2 per cent in Q2, bringing loan growth for 1H to around 3-4 per cent." He also said that cards (business) is set to benefit from domestic and border re-openings and expects to "benefit significantly from interest rate increases in the coming quarters." However, full-year growth is anticipated be in the mid-single digit percentage if second half growth slows.
