SINGAPORE: DBS Group Holdings set aside hefty provisions to cover the impact of the coronavirus pandemic as it reported a 29 per cent drop in first-quarter profit but retained its quarterly dividend.
Southeast Asia's biggest lender joined HSBC and Standard Chartered in provisioning higher credit losses to guard against the fallout from the crisis.
"We will maintain a solid balance sheet with ample capital, liquidity and loss allowance reserves that give us strong buffers to absorb external shocks," DBS CEO Piyush Gupta said in a statement on Thursday (Apr 30).
The bank said allowances for credit and other losses surged to S$1.09 billion in the three months to Mar 31, from S$76 million a year earlier. That was well above an average estimate of S$605 million, according to Refinitiv data.
DBS was the first bank in Singapore to report earnings for the quarter. The sector has collectively forecast muted earnings growth for 2020 as interest rates soften and lending moderates following a robust performance in the past few years.
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DBS' quarterly profit fell to S$1.16 billion compared with S$1.65 billion a year earlier, in line with an average estimate of S$1.13 billion from four analysts, according to Refinitiv data. That was the lowest level since the quarter ending September 2017.
"This was largely due to the spike in provisions, which is likely higher than what the market expects but in fact included a large portion of general provisions which shows the bank wants to buffer ahead," said Kevin Kwek, a senior analyst at Stanford C Bernstein.
Total income grew 13 per cent from a year ago to a new high of S$4.03 billion.
Singapore has reported more than 15,000 confirmed coronavirus infections, due to outbreaks in foreign worker dormitories.
DBS said two-thirds of the provisions were set aside in anticipation of a "deeper and more prolonged economic impact from the pandemic."
DBS, which pays quarterly dividends, retained its proposed dividend of 33 Singapore cents per share for the latest quarter.
“Our record operating performance in the first quarter has given us a head start to face the challenges of the coming year. While the economic outlook remains uncertain and credit risks have increased, the digital investments we have made have strengthened the resilience and efficiency of our franchise and we remain committed to serving our customers," said Mr Gupta.