DBS' Q3 profit down by 25%
CEO says it has 'cleaned' oil and gas loan book, no more provisions expected
DBS Bank took a big hit on earnings in the third quarter as it bit the bullet on its sour energy-sector debts to clear the decks for the future.
Its chief executive Piyush Gupta said yesterday that all the provisions required for the oil and gas portfolio were taken in the three months to Sept 30. That meant specific allowances for bad debts almost doubled, which helped send net profit down 25 per cent.
"We have been conservative on the collateral values that we have taken," Mr Gupta said at the bank's results briefing.
"I can say with high confidence that we have cleaned the book. We are highly unlikely to take more in the book," he added, referring to provisions for the energy segment.
He said loan growth is likely to be 7 per cent to 8 per cent this year and next. Income is likely to expand by around 3 per cent this year and in the double digits next year.
DBS' share of the housing loan market rose to more than 30 per cent in the quarter from 27 per cent in the same period last year. It booked $3.9 billion of new home loans in the three months and expects its mortgage book to end the year up by $4 billion to $4.5 billion.
ANZ INTEGRATION COST
Net profit fell 25 per cent to $802 million in the third quarter from a year earlier.
Excluding one-time items such as a $21 million ANZ integration cost, net profit stood at $822 million, 23 per cent lower than the same quarter a year ago.
The weakness in the oil and gas segment can be seen by the rise in specific allowances for credit and other losses, which hit $815 million, 87 per cent up on the $436 million recorded a year earlier.
Total income in the quarter rose to $3.06 billion, up 4 per cent, while net interest income increased 9 per cent year on year to $1.98 billion.
The home loan market share next year is expected to be stable, Mr Gupta said, but the collective sale fever adds uncertainty as home owners who have sold en bloc will be paying off their mortgage.
Some analysts welcomed DBS' operating performance.
Morgan Stanley said the third-quarter results showed strong core profit with the oil and gas overhang removed.
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