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Staff expenses rise at DBS as profit falls

DBS’s Q1 staff expenses have risen significantly from the previous quarter and year-on-year. Singapore’s largest bank saw staff costs climb 8.2% year-on-year and 10.3% quarter-on-quarter to S$1.047bn in the first quarter.

Together with other expenses of S$597m (down 3.6% from a year ago), total expenses for the quarter came in 3.6% higher year-on-year at S$1.644bn. Still, the bank said in its earnings presentation on Friday that expenses were “well managed”.

Overall, DBS’ reported net profit of S$1.8bn in this latest earnings report was on par with Bloomberg analyst estimates of around S$1.88bn, despite falling 10% from the same period a year prior.

The bank attributed this poorer profit performance to “a high base for wealth management and treasury markets activities a year ago, when buoyant market sentiment and clear market momentum had driven income from both activities to exceptional levels”.

With last year’s abnormal market uptick having now settled, total income for Q1 2022 thus fell 3% from a year ago to S$3.75bn. Despite that, DBS said this was the second highest net profit on record, with return on equity climbing to 13.1% from 9.9% last quarter.

Business momentum also “remained healthy” as loans grew 2% over the quarter, with fee income streams (minus wealth management and investment banking) coming in higher than a year ago.

Net interest margin, a key indicator of a bank’s profitability and growth, rose three basis points from the previous quarter, the first increase in three years.

Looking ahead towards the rest of 2022, DBS CEO Piyush Gupta said recent geopolitical developments have created macroeconomic headwinds and financial market volatility which may affect some business activities such as wealth management.

However, he noted that the overall business pipeline “continues to be healthy” and that the bank “will benefit significantly from interest rate increases in the coming quarters”.

“We have stress tested our portfolio and it remains resilient,” said Gupta, adding that loans are expected to grow 1-2% in 2Q 2022, with full-year expense growth guidance maintained at “slightly above 2021”.

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AUTHORKelvin Ong Insider Comment

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