- Q1 net profit S$2.9 billion vs S$2.82 billion estimate
- DBS remains positive on India, says CEO
- Return on equity falls to 17.3% in Q1
- Took S$205 million general allowances in Q1
- Net interest margin lower at 2.12% in Q1
SINGAPORE, May 8 (Reuters) - Singapore lender DBS Group flagged risk from heightened uncertainty and softer non-interest income growth for 2025 after posting on Thursday a 2% drop in first-quarter net profit that beat expectations.
Tan Su Shan, who took over as CEO in March, said in a press conference the market now expects three U.S. Fed rate cuts in the second half of this year versus the two forecast earlier. The Fed rates are a key determinant of interest rates charged by Singapore banks, and thus a profit driver for the lenders.
"Recent escalations in trade tensions have heightened macroeconomic risks and market volatility," Tan said earlier in a statement.
DBS, Southeast Asia's biggest bank, broadly maintained its 2025 guidance, but Tan projected commercial book non-interest income growth to be in the mid-to-high single digits, versus high-single digits expected in February.
She said DBS is still looking at a loan growth of 5% to 6% this year, subject to conditions in the second half, but added that funding would be deployed into non-loan assets if loan demand weakened.
Shares of DBS climbed 1.0% in afternoon trade, outperforming the benchmark index's 0.3% drop.
Jefferies, in a research note to clients, said the profit beat "underlines the underlying strength of DBS's franchise" and maintained its preference for DBS among Singaporean banks.
INDIA GROWTH STORY SEEN INTACT
Tan said DBS remained positive on India, one of its core markets, despite geopolitical tensions.
"The India structural growth story remains intact," she said. "Our numbers suggest that the trend is good, because you do have a rising middle class, you have a very digitally engaged population."
DBS's results followed that of smaller peer United Overseas Bank, which on Wednesday posted a stable yet weaker-than-expected first-quarter net profit and paused giving 2025 guidance due to uncertainties triggered by U.S. tariffs.
Major global lenders such as HSBC and Standard Chartered have also highlighted the threat to economic growth due to the impact of U.S. President Donald Trump's tariffs.
DBS said its January-March net profit declined to S$2.9 billion ($2.24 billion) from S$2.95 billion a year earlier, due to higher tax expenses from the implementation of the 15% global minimum tax. It was the first on-year drop since the first quarter of 2022.
But the result beat the average estimate of S$2.82 billion from two analysts, according to LSEG data.
Profit before tax hit a record S$3.44 billion in the first quarter, slightly higher than a year ago, as total income grew 6% to a new high of S$5.91 billion, according to the bank's financial statement.
DBS said it took a general allowance of S$205 million as a prudent measure to strengthen reserves to S$4.16 billion in light of recent developments that have added to macroeconomic and geopolitical uncertainty.
It announced an ordinary dividend of 60 Singapore cents per share and a capital return dividend of 15 cents for the first quarter.
DBS's first-quarter return on equity was 17.3%, down from 19.4% a year ago.
Net interest margin, a key gauge of profitability, dropped to 2.12% in the first quarter from 2.14% in the same period a year earlier.
Singapore's Oversea-Chinese Banking Corporation is scheduled to report its results on Friday.
($1 = 1.2940 Singapore dollars)
Reporting by Yantoultra Ngui; Editing by Chris Reese, Stephen Coates and Muralikumar Anantharaman
Source: Reuters