SINGAPORE: DBS reported a surprise 23 per cent year-on-year drop in its net profit for the third quarter, largely due to hefty provisions on its exposure to the oil and gas industries.
The bank, Southeast Asia’s largest lender, said on Monday (Nov 6) that net profit for the three months ended Sep 30 was S$822 million, down from S$1.07 billion in the same period last year.
Net allowances surged 87 per cent from S$436 million to S$815 million, with the bank classifying its remaining weak oil and gas support service exposures as non-performing assets.
DBS CEO Piyush Gupta said the move will “enable investors to return their focus to our operating performance and digital agenda”.
Mr Stephen Innes, head of trading (APAC) at OANDA, said the bank’s move to shift these provisions forward bodes well for the lender.
“It reassures the investors that the bank is moving back towards its primary business, which is loans and commercial loans and making money of spreads. This is a positive move for DBS to get the bad loans off its book right now. The timing of this move is also good, that’s because one of the key things is that the lender’s stock is on a high right now so investors are not so negative on the stock.”
Profit before allowances was up 4 per cent to a record S$1.8 billion, propelled by loan and fee income growth and offsetting the impact of less favourable interest rates and trading income.
“Business momentum has been strong as we continued to capture opportunities in a reflationary environment across the markets we operate in,” Mr Gupta said.