DBS profit soars 32% to a quarterly record on rising interest rates

DBS Group reported a forecast-beating 32 per cent jump in quarterly profit to a record high and gave a bullish outlook on Thursday (Nov 3) as higher interest rates boosted net interest margins at Southeast Asia's largest lender.

Banks globally have benefited from a jump in net interest income as central banks hike rates to tackle soaring inflation, although analysts warn they could suffer if higher rates lead to a sharp slowdown in economic activity.

DBS shares, though, dropped 1.6 per cent in early trade on Thursday as the broader Singapore market fell about one per cent.

Local peer UOB Group beat market estimates last week with a record quarterly net profit as net interest income swelled and credit allowances declined. OCBC reports results on Friday.

Net profit at Singapore-based DBS came in at $2.24 billion in July to September, beating an average estimate of $1.97 billion from four analysts, according to Refinitiv data.

The bank saw sustained business momentum in the quarter and asset quality was resilient, DBS CEO Piyush Gupta said in a statement. Looking ahead to next year, he said the loan pipeline remained healthy and could reach mid-single digit growth.

While the bank's net fee and commission income fell 13 per cent in the quarter, hurt by weakness in the wealth management business in depressed markets, Gupta forecast double-digit fee income growth for next year, led by wealth management and credit cards.

Return on equity at DBS rose to a record 16.3 per cent in the quarter and net interest income surged 44 per cent. Its net interest margin, a key profitability gauge, improved to 1.9 per cent in the quarter from 1.43 per cent a year earlier.

Shares of Singapore banks have risen between four per cent to six per cent so far this year, outperforming the broader market on expectations of big expansions in their net interest margins.

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