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SINGAPORE: DBS Group Holdings put aside sizable provisions to cover the impact of the coronavirus pandemic, as it reported a 29 percent drop in first quarter earnings, but retained its quarterly dividend.
South East Asia’s largest lender teamed up with HSBC and Standard Chartered in supplying higher credit losses to ward off the consequences of the crisis.
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“We will maintain a solid balance sheet with ample capital reserves, liquidity and losses that provide us with strong buffers to absorb external shocks,” DBS CEO Piyush Gupta said in a statement on Thursday.
The bank said provisions for loans and other losses increased to S $ 1.09 billion in the three months to March 31, from S $ 76 million a year earlier. That was well above an average estimate of S $ 605 million, according to Refinitiv data.
DBS was the first bank in Singapore to report earnings for the quarter. The sector has collectively forecast moderate earnings growth for 2020 as interest rates soften and loans moderate after strong performance in recent years.
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DBS ‘quarterly earnings fell to S $ 1.16 billion compared to S $ 1.65 billion the previous year, in line with an average estimate of S $ 1.13 billion from four analysts, according to Refinitiv data. That was the lowest level since the quarter that ended in September 2017.
“This was largely due to the increase in provisions, which is probably higher than the market expects, but in fact included a large part of the general provisions showing that the bank wants to buffer,” said Kevin Kwek, analyst Stanford C Bernstein senior
Total revenue grew 13% from a year ago to a new high of S $ 4.03 billion.
Singapore has reported more than 15,000 confirmed coronavirus infections, due to outbreaks in foreign workers’ dormitories.
DBS said two-thirds of the provisions were shelved in anticipation of a “deeper and longer-lasting economic impact of the pandemic.”
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DBS, which pays quarterly dividends, withheld its proposed dividend of 33 Singapore cents per share for the last quarter.
“Our record operating performance in the first quarter has given us an edge in meeting next year’s challenges. While the economic outlook remains uncertain and credit risks have increased, the digital investments we have made have strengthened the resilience and efficiency of our franchise and we remain committed to serving our clients, “said Mr. Gupta.
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