SINGAPORE: Singapore’s DBS Group warned yesterday of heightened uncertainty due to geopolitical risks, high energy costs and borrowing rates, but remained upbeat about its outlook despite a plunge in trading income that dragged down earnings.
DBS, Southeast Asia’s biggest lender by assets, said July-September net profit fell 5% to S$2.81 billion (RM8.9 billion) from a year earlier.
The result undershot the mean estimate of S$2.9 billion from four analysts, according to LSEG data, even though its wealth management division posted a strong performance.
The group’s markets trading income sank 65% year-on-year to S$152 million, which DBS attributed to “unfavourable equity market conditions”.
That contrasted with Wall Street and European peers, whose equity desks benefited from a surge in market activity, while fixed-income trading lagged.
“The US peers did very well because they had large prime brokerage and prime businesses. We don’t have that at the moment, but we’ll see,“ DBS CEO Tan Su Shan said on an earnings call. She added that the lender was building up its financial institutions and institutional investors coverage.
Tan said trading income also fell due to weaker Asian asset performance, a surge in global bond yields and a drop in trading volume.
The decline underscores how surging global bond yields, a rout in high-flying technology stocks and the ongoing Middle East conflict are beginning to bite into Singapore lenders’ earnings after wealth management momentum cushioned their bottom lines in the first half.
Shares of DBS fell more than 2% early yesterday following the results, though later pared losses to trade 0.3% lower.
The bank’s net interest margin (NIM), a key profitability gauge, fell 9 basis points year-on-year to 1.87%.
The results from DBS came a day after its smaller peer UOB posted a fall in its trading and investment income and flagged further margin pressures ahead.
DBS, however, struck a more upbeat tone, expecting its September exit NIM of 1.9% to be largely sustained in the fourth quarter.
Tan said the bank was also expecting a “healthy loan pipeline” in 2027 and total income to rise in the mid-single-digit range.
However, she said market volatility was likely to persist for some time, especially after the US midterm elections on Tuesday, in which Democrats retook the House and Senate from President Donald Trump’s Republicans.
“We think the markets will remain choppy,“ Tan said. “We’re also watchful to see whether higher (yields on) Treasury bills will suck up some deposit growth.”
Asia’s ongoing wealth boom continued to bolster Singapore’s largest lender.
For the quarter, wealth management fees rose 9% from a year ago to S$864 million, supported by growth in assets under management.
However, that marked a 6% decline from record levels in the second quarter, which Eric Xiao, head of Asia sales at CMC Markets, attributed to clients trading less.
“The wealth boom isn’t over, but it’s getting harder to cash in,“ he said.
Transaction services fees recorded a new high for the July-September period, while loan-related and card fees increased, taking net fee income up 6% to S$1.43 billion.
Tan said total income for the bank’s franchise in Indonesia had fallen an annual 9% in the first nine months of this year, largely due to mark-to-market losses from the depreciation in the Indonesian rupiah against the Singapore dollar.
Indonesian markets have faced headwinds this year as investors grow increasingly uneasy about the country’s fiscal health, threats of an MSCI downgrade and the autonomy of its central bank under President Prabowo Subianto.
“We’ve been de-risking in terms of the consumer unsecured loans and the SME loan side,“ Tan said.
“In terms of the outlook, whilst short term it’s hard to tell – it’s a lot of moving parts, longer term, we remain constructive.”
Separately, DBS announced that it has appointed board member Anthony Lim as chairman from Jan 1, 2027, succeeding Peter Seah, who will step down after 16 years. – Reuters
