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DBS Q2 profit falls 22%; CEO sees bank riding on digitalisation wave from Covid-19
SINGAPORE - DBS Bank is set to benefit from the digitalisation trends brought forth by Covid-19, said its group chief executive Piyush Gupta on Thursday (Aug 6), during the release of the bank’s results for the second quarter.
South-east Asia’s largest bank reported a 22 per cent fall in net profit to $1.2 billion, down from $1.6 billion a year ago, beating the $1.19 billion average estimate of eight analysts surveyed by Bloomberg.
DBS shares closed up 57 cents or 2.9 per cent to $20.40 on Thursday.
Net profit for the first half of this year came to $2.4 billion, down 26 per cent from $3.3 billion a year ago.
The board declared a dividend of 18 cents per share for the second quarter, with the scrip dividend scheme applicable. Scrip dividends will be issued at the average of the closing share prices on Aug 14 and Aug 17 this year. The move is in line with guidance from the Monetary Authority of Singapore (MAS) for local banks to moderate their dividends for 2020. In the year-ago quarter, DBS paid a dividend of 30 cents per share.
The bank's net interest margin, a key gauge of profitability for banks, between April and June is 1.62 per cent, down from 1.91 per cent a year ago.
DBS said it expects full-year net interest margin to come in at 1.6 per cent. Its net interest margin last year was 1.89 per cent. Net interest margin measures the difference between income earned from loans and the interest paid to depositors.
Pointing to how the bank’s volumes for digital transactions and market share have been increasing over the past few months, Mr Gupta said that the bank “has been ahead of the game” in terms of its digital offerings.
“(Digitalisation) creates an opportunity for many new income-generating businesses. We are actively working on several other things we could do in the digital space as economies and sectors are morphing to a new way of thinking,” he added.
Covid-19 has turbocharged digitalisation processes as progress that should be made in five to 10 years has been completed in three months, Mr Gupta said. “The way people will consume tech... the way people produced and where they need to work from (will) change,” he added.
Earlier, Mr Gupta also identified trends such as how supply chains will be changing, because of tensions between the United States and China, at a pace “far more glacial than a lot of what a lot of people think”.
He also expects the current low interest rate environment to last for “much, much longer”.
Mr Gupta said that the bank had delivered “a strong operating performance amidst severe macroeconomic headwinds”.
Still, “this was a tough quarter”, he added, pointing out that interest rate cuts and lockdowns in April and May in most of the countries that the bank is operating in have dragged on income.
Economic and consumer activities have slowed down as a result, Mr Gupta pointed out.
The US Federal Reserve had earlier cut interest rates at an emergency meeting in March, aiming for a target range of zero per cent to 0.25 per cent in a move to shore up the world’s largest economy amid the pandemic.
Companies tend to want to borrow more money when interest rates are low, but the yield on those loans are low for the banks. “That’s not an easy environment to operate in,” Mr Gupta said.
On its business outlook, the bank expects deposit inflows into current and savings accounts to continue, building on the strong growth in the first six months of this year.
The easing of lockdowns is also expected to improve several fee income streams such as cards and bancassurance, wealth management investment and investment banking, Mr Gupta said.
“Market conditions remain conducive for treasury markets income and for customer flows,” he said.
Mr Gupta added: “Notwithstanding the uncertainties, we are in a good position to continue supporting customers and the community through the difficult months ahead of us.”
SINGAPORE - DBS Bank is set to benefit from the digitalisation trends brought forth by Covid-19, said its group chief executive Piyush Gupta on Thursday (Aug 6), during the release of the bank’s results for the second quarter.
South-east Asia’s largest bank reported a 22 per cent fall in net profit to $1.2 billion, down from $1.6 billion a year ago, beating the $1.19 billion average estimate of eight analysts surveyed by Bloomberg.
DBS shares closed up 57 cents or 2.9 per cent to $20.40 on Thursday.
Net profit for the first half of this year came to $2.4 billion, down 26 per cent from $3.3 billion a year ago.
The board declared a dividend of 18 cents per share for the second quarter, with the scrip dividend scheme applicable. Scrip dividends will be issued at the average of the closing share prices on Aug 14 and Aug 17 this year. The move is in line with guidance from the Monetary Authority of Singapore (MAS) for local banks to moderate their dividends for 2020. In the year-ago quarter, DBS paid a dividend of 30 cents per share.
The bank's net interest margin, a key gauge of profitability for banks, between April and June is 1.62 per cent, down from 1.91 per cent a year ago.
DBS said it expects full-year net interest margin to come in at 1.6 per cent. Its net interest margin last year was 1.89 per cent. Net interest margin measures the difference between income earned from loans and the interest paid to depositors.
Pointing to how the bank’s volumes for digital transactions and market share have been increasing over the past few months, Mr Gupta said that the bank “has been ahead of the game” in terms of its digital offerings.
“(Digitalisation) creates an opportunity for many new income-generating businesses. We are actively working on several other things we could do in the digital space as economies and sectors are morphing to a new way of thinking,” he added.
Covid-19 has turbocharged digitalisation processes as progress that should be made in five to 10 years has been completed in three months, Mr Gupta said. “The way people will consume tech... the way people produced and where they need to work from (will) change,” he added.
Earlier, Mr Gupta also identified trends such as how supply chains will be changing, because of tensions between the United States and China, at a pace “far more glacial than a lot of what a lot of people think”.
He also expects the current low interest rate environment to last for “much, much longer”.
Mr Gupta said that the bank had delivered “a strong operating performance amidst severe macroeconomic headwinds”.
Still, “this was a tough quarter”, he added, pointing out that interest rate cuts and lockdowns in April and May in most of the countries that the bank is operating in have dragged on income.
Economic and consumer activities have slowed down as a result, Mr Gupta pointed out.
The US Federal Reserve had earlier cut interest rates at an emergency meeting in March, aiming for a target range of zero per cent to 0.25 per cent in a move to shore up the world’s largest economy amid the pandemic.
Companies tend to want to borrow more money when interest rates are low, but the yield on those loans are low for the banks. “That’s not an easy environment to operate in,” Mr Gupta said.
On its business outlook, the bank expects deposit inflows into current and savings accounts to continue, building on the strong growth in the first six months of this year.
The easing of lockdowns is also expected to improve several fee income streams such as cards and bancassurance, wealth management investment and investment banking, Mr Gupta said.
“Market conditions remain conducive for treasury markets income and for customer flows,” he said.
Mr Gupta added: “Notwithstanding the uncertainties, we are in a good position to continue supporting customers and the community through the difficult months ahead of us.”
