SINGAPORE: DBS Group Holdings Ltd , Southeast Asia's biggest lender, reported a quarterly profit slightly below estimates on Monday (Nov 5), flagging trade war worries and property cooling measures likely to hold back its loan book growth next year.
Concerns about the impact of an intensifying tariff dispute between China and the United States on Singapore's export-reliant economy, and curbs on the city-state's property market, have muddied the outlook for banks after they reported record profits last year.
"There is a lot of angst and anxiety around trade war ... Our own sense is that the direct impact of the trade war on the macroeconomies will not be as material as people worry," DBS CEO Piyush Gupta said at a briefing following the results.
"What is more worrying is the impact of market sentiment - the indirect impact of the trade war."
DBS said net profit came in at S$1.41 billion (US$1 billion) in the three months ended September versus S$822 million a year earlier, and an average estimate of S$1.47 billion from three analysts, according to data from Refinitiv. The bank took higher allowances for weak oil and gas support service exposures last year.
DBS shares fell 2.6 per cent in afternoon trade, on track for their biggest single-day percentage fall in nearly three months.
DBS, which is about 29 per cent-owned by Singaporean state investor Temasek Holdings, posted results after Oversea-Chinese Banking Corp announced a record quarterly profit and United Overseas Bank reported profit rose 17 per cent.
DBS's net interest margin, a key gauge of profitability, rose 13 basis points from a year ago to 1.86 per cent. Total income jumped 10 per cent to a record S$3.38 billion, DBS said, while net interest income rose 15 per cent.
Gupta said he expected 10-11 per cent growth in non-trade loans for the full year. However, next year, he forecast non-trade loans to moderate to 6-7 per cent "based on an assumption that given the uncertainty - trade war etc - the amount of investment might slow down".
The bank had been scaling back its trade loan book due to "unattractive pricing", he added.
DBS, which has a 31 per cent share of the Singaporean housing loan market, said there also had been a bigger-than-expected slowdown in new mortgages because of recent cooling measures.
Before the latest round of measures were introduced this year, DBS expected to grow its mortgage book by around S$4 billion in 2018. After the measures the lender revised that to S$3.5 billion and now expects about S$2.5 billion, Gupta said.
DBS's investment banking fees also were hit by trade war worries, down 66 per cent year-on-year.
"The biggest impact on our business is from market sentiment ... and that shows up in our investment banking fee income," Gupta said.