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Finance

Singapore's DBS reverses COVID woes with record Q1 profit

Southeast Asia's largest lender books 72% surge, eyeing strong rebound

DBS posted a record $1.21 billion net profit for the three months through March. (Photo by Takaki Kashiwabara)

SINGAPORE -- Southeast Asia's largest lender, DBS Group Holdings, on Friday reported a 72% surge in net profit for the three months ending in March, keenly eyeing a strong recovery in 2021 after a tough year last year due to the COVID-19 pandemic.

The bank booked a record net profit of 2 billion Singapore dollars ($1.51 billion) for the period, compared with SG$1.17 billion the year before, marking a shift toward performance levels seen before the new coronavirus outbreak overshadowed most of 2020.

"The global economic rebound is strengthening, and we are bullish about prospects for the coming year," said DBS Chief Executive Piyush Gupta in a statement. "We are in a position of strength to support customers and deliver shareholder returns as the economic recovery takes hold," he added.

On Wednesday, the Monetary Authority of Singapore said the city-state's gross domestic product growth could exceed 6% in 2021, at the upper end of official projections, if the global economic recovery does not suffer a setback.

As the COVID health crisis dragged on last year, DBS stepped up loan loss provisions, anticipating that customers might have difficulty paying their debts given the poor economic conditions. But with prospects looking up this year, the lender set aside allowances of SG$10 million in the first quarter, down from the SG$577 million in the previous three months.

Its nonperforming loan ratio also declined from 1.6 in the final quarter of last year to 1.5 during the January to March period.

"The delinquencies in all of these [loan] portfolios are not coming at anywhere near the levels that we thought they might, so there might be some upside of that," Gupta said during an earnings briefing on Friday.

However, the persistent low interest rates environment has been a drag for the bank, with the net interest income, or the income earned from providing loans minus interest paid to depositors, declining 15% on the year to SG$2.11 billion in the first quarter.

Elsewhere, DBS reported "strong" and "broad-based" business momentum, with wealth management fees hitting new highs of SG$519 million during the quarter, up from SG$418 million a year ago.

Banks see wealth management as crucial to their income growth. This month, Citibank announced plans to exit from retail banking in markets like China, Malaysia, India, Indonesia, Taiwan and Thailand, but has opted to remain in Singapore and to boost its presence in the wealth segment.

As its rivals establish a stronger foothold on Southeast Asia's financial hub, DBS is eyeing new revenue opportunities. This week, it announced a venture with J.P. Morgan and Singapore-owned investor Temasek to set up a new platform to improve processing of cross-border payments, trade transactions and foreign exchange settlements.

Called Partior, the platform uses blockchain, a form of distributed ledger technology that underpins cryptocurrencies like Bitcoin, to provide efficient clearing and settlement for lenders.

"With leveraging blockchain ... you can actually convert your money, effectively -- fiat money to digitized money, and you can send it across so the settlement happens," Gupta said during the Friday earnings call.

The platform is starting small, with a focus on facilitating flows primarily between Singapore-based banks in both U.S. and Singapore dollars, intending to expand service offerings to other markets and currencies.

In addition, DBS this month also said that it obtained approvals from Singapore's central bank and the China Banking and Insurance Regulatory Commission to buy a 13% stake in Shenzhen Rural Commercial Bank for 5.286 billion yuan ($820 million).

With the investment, DBS will become the largest shareholder in SZRCB and will have representation on its board of directors, as it seeks to increase its exposure to China, one of its core markets.

"The GBA is a big part of our agenda and strategy," Gupta said on Friday, referencing the greater bay area, which covers Hong Kong and key Chinese industrial cities like Shenzhen and Guangzhou. "This 13% ownership and partnership can actually be quite a game-changer for us in terms of expanding our franchise."

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