DBS Group, South-east Asia's biggest lender, on Friday exceeded expectations by posting an 11 per cent rise in quarterly profit on strong loan growth, despite taking a small hit from credit market turmoil. The bank set aside $70 million for its exposure to United States subprime mortgage debt, marked down $42 million against its exposure to an investment vehicle that invests in risky debt derivatives and took a $38 million charge on its stake in Thailand's TMB Bank.
The writedowns and mark-to-market losses were below market expectations since four analysts had forecast an average $125 million in writedowns alone.
Core earnings beat market expectations due to strong loan growth and higher fee income, led by its key Singapore market where the economy is booming and which accounts for about two-thirds of its profit.
The Singapore-based bank, in which state investor Temasek Holdings has a 28 per cent stake, posted a net profit of $610 million for its third quarter from July to September, compared with $552 million a year ago and against an average forecast of $481 million from five analysts polled.
Excluding the impairment charge on TMB, the net profit was up 17 per cent to $648 million, the bank said.
'Results for the quarter were reassuring despite turbulence in the global credit markets,' said Chief Executive Jackson Tai, who leaves his job towards the end of the year.
Forecasts had varied widely depending on estimates of trading losses and lower income from fees. BNP Paribas had expected DBS to report a 7.6 per cent decline in quarterly profit from a year earlier, but UBS had forecast a 35 per cent drop in profit.
This was the second straight quarter of write-downs for the bank after it took an impairment on the value of its 16 percent stake in Thailand's TMB Bank in the second quarter.
Despite the setback, lending grew 23 per cent in the third quarter from a year ago, underpinned by Singapore's property boom and a recovering construction sector.
On the revenue side, interest income for the quarter rose 15 per cent to $1.05 billion from a year ago, while net fee income rose 38 per cent to $403 million. -- REUTERS
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