DBS Group Holdings posted a 9 per cent rise in Q1 earnings to a record S$1.65 billion on higher margin, strong trading income and a S$100 million write-back due to improved credit quality.
The first of the three local banks to report Q1 results, the stock jumped 3.6 per cent or 99 cents to S$28.40 as it decided to pay dividends four times a year instead of twice a year to provide shareholders with more regular income. For the first quarter, the bank is paying 30 cents per share, consistent with the previous financial year's payout of S$1.20 per share, it said.
"The policy of of paying sustainable dividends that rise progressively with earnings remain unchanged," DBS said.
DBS chief executive Piyush Gupta was upbeat about the rest of the year and expects the strong business momentum to continue.
"Business momentum is actually relatively strong, I think it's consistent with what we've seen in the macroeconomic data," said Mr Gupta on Monday during the bank's results briefing.
China's Q1 growth came in at 6.4 per cent, stronger than expected and the US recorded a surprise 3.2 per cent Q1 growth; and while the PMIs were slow in the fourth quarter and early in the year, the March PMI (purchasing managers' index) generally across the region has been on the uptick, he noted.
The bank's non-trade corporate loan growth expanded 11 per cent from broad-based activities across the region. Consumers loans rose a slower 3 per cent as housing loans fell.
The business momentum is generally robust across the region, he said.
Southeast Asia's largest bank is seeing corporates looking to invest in Thailand, Malaysia, Vietnam and Indonesia, which "plays to our strengths - better than if the investments were in China," said Mr Gupta.
"By and large I think business momentum I'm relatively sanguine about, with one caveat and the caveat is the Singapore property market," he said.
"For the first time, in a long, long time, we saw a reduction, shrinkage in our mortgage loan book in the first quarter," he said.
DBS is seeing soft new home loan sales, bookings are half of what it was a year ago, due to the impact from last year's cooling measures, he said.
Still as more property projects get completed, he expects the mortgage loan book to grow S$1 billion to S$1.5 billion, down from an earlier estimate of S$1.5 billion to S$2 billion.
Overall the bank's loan book should grow mid-single digit, he said.
DBS's loan book rose 1 per cent from the previous quarter and 5 per cent from a year ago.
Total income rose 6 per cent to S$3.55 billion from S$3.36 billion a year ago.
DBS said a healthy business momentum and a higher net interest margin (NIM) more than offset the impact of a high base for wealth management, brokerage and investment banking fee income, as well as a property gain a year ago.
NIM was up one basis point to 1.88 per cent from the previous quarter; it was up five basis points from a year ago due to higher interest rates and the repricing of housing loans.
NIM should continue to improve, up five basis points to 1.9 per cent on lag effect as more loans get repriced, he said.
Net interest income rose 9 per cent in Q1 to S$2.31 billion
Net fee income shrank 2 per cent to S$730 million on a base effect, as wealth management, brokerage and investment banking fee income declined 12 per cent due to an "exceptionally buoyant market sentiment" a year ago, the bank said.
Other non-interest income rose 5 per cent from a year ago to S$511 million as increases in trading income and net gain on investment securities more than offset a property gain of S$86 million a year ago.
Trading income grew 20 per cent from gains in interest rate and credit activities. Treasury markets income was up 18 per cent on year at S$293 million and more than three times the S$92 million from the previous weak quarter.
Mr Gupta said treasury markets income was "exceptional," due to the surge in equity prices in Q1, and the average income per quarter should be about S$200 million.
Overall, return on equity increased to 14 per cent, the highest in more than a decade, but again Mr Gupta cautioned that the ROE of 14 per cent was "exceptional". ROE for 2018 was 12.1 per cent, and he expects sustained ROE progression.
Balance sheet remains healthy; the non-performing loan ratio was unchanged at 1.5 per cent. There was a general allowance write-back of S$100 million due to improved portfolio credit quality and improved external credit conditions.