DBS Group suffered a 33% drop in fourth-quarter earnings, and full year profits slumped 26% to S$4.72bn ($3.56bn), the Singapore bank reported this week.
The group posted net profit of S$1bn for the quarter ended December, down from S$1.5bn a year earlier, but in line with analysts’ expectations, according to Refinitiv data.
Its net interest margin fell to 1.49% from 1.86% a year earlier, and Southeast Asia’s biggest lender also set aside S$577m for potential loan losses due to the coronavirus and Singapore’s severe recession, up from S$122m in the fourth quarter of 2020.
General allowances of S$1.71bn were set aside for the full year to strengthen the bank’s balance sheet, increasing 72% to a total of S$4.31bn, according to the DBS report.
However, “business momentum was sustained in the fourth quarter and our pipeline for loans and fee income is healthy,” said DBS CEO, Piyush Gupta in a statement.
WEALTH MANAGEMENT TRENDS
Wealth management was a bright spot last year, with fees in the division growing 11% to a record S$1.43bn, with the first and third quarters the two highest on record, according to the report.
Demand for investment products increased with risk appetite in the first quarter, and improved market sentiment in a low interest rate environment in the second half, while brokerage commissions rose 31% to S$149m, driven by higher stock market volumes and increased new digital account openings.
But these increases were outweighed by lower card and investment banking fees.
Card fees fell 19% to S$641m, bottoming in the second quarter, before recovering in the third and fourth quarters; investment banking fees were 31% lower at S$148m, with record fixed income fees more than offset by a fall in equity capital market activity, according to the report.
The net result was that the full-year consumer banking / wealth management unit’s income declined 8% to S$5.77bn compared with 2019.
DBS is boosting its wealth management business to tap into rising affluence in the region and as Singapore increases its role as a global booking centre for client transactions.
The firm has emphasised the importance of digital platforms for the future growth of wealth management and has strongly promoted its DBS iWealth app since its launch in November 2019.
DBS also offers its private banking clients a flagship “barbell” portfolio strategy that is spilt evenly between equities and fixed income to provide a mixture of capital growth and steady income.
Earlier this year, it said that it intended to hire 650 wealth planning managers and insurance consultants by the end of 2021.
