Wealthy investors drive record trading profits for Singapore banks

Singapore’s leading banks are capitalising on the wealthy’s inclination to move assets and trade in the Asian financial hub, significantly boosting their earnings.

DBS Group Holdings Ltd., Southeast Asia’s largest bank, reported a 37% surge in fees from wealth management, amounting to S$518 million (£302 million). This growth outpaced their lending income mirroring trends seen at smaller competitors Oversea-Chinese Banking Corp. and United Overseas Bank Ltd.

DBS’s results conclude Singapore’s bank earnings season, with all three banks experiencing increased client fund inflows and heightened trading activity in financial markets, thereby generating more fees. These banks have been enhancing their wealth management services to compete with global giants like UBS Group AG, focusing on Asia as a promising region for this business.

Wealth-management fee increases were “driven by a shift from deposits into investments and bancassurance as well as an expansion in assets under management,” DBS stated. Their assets under management (AUM) reached a record S$396 billion.

At OCBC, strong gains in wealth management, trading, and insurance fees pushed non-interest income up by 13%. The bank’s private unit has been recruiting more relationship managers, with clients ramping up trading activities in anticipation of interest rate cuts, according to Jason Moo, Chief Executive Officer of Bank of Singapore Ltd.

Similarly, UOB’s robust fee growth, including from wealth management and loans, helped offset a decline in its primary lending income.

DBS outlook

Looking forward, DBS CEO Piyush Gupta forecasts continued profit growth for 2024. He anticipates net income will grow by a mid- to high-single digit percentage this year, driven by both lending and fee incomes. Despite recognising increased uncertainty in financial markets and geopolitical tensions, he noted, “we have built resilience against risks of economic slowdown and lower interest rates.”

For the quarter ending June 30, DBS reported a 4.2% increase in profit, reaching S$2.8 billion (£1.63 billion), surpassing the S$2.68 billion average estimate by three analysts surveyed by Bloomberg News. Shares rose as much as 3.9% following the results, recovering some losses experienced in the previous week amidst widespread declines in financial stocks.

Investors are closely monitoring the performance of interest income amid expectations of US rate cuts. Citigroup Inc. recently downgraded bank stocks, warning that significant rate cuts over the next few years could impact profitability.

Gupta expects total income growth to be in the high single-digit percentage for the year. Specific provisions for potential bad assets are projected to be 10 to 15 basis points, lower than the previous guidance of 17-20 basis points.

Key highlights from DBS’ earnings:

• Net interest income from the commercial book increased by 5.2% to S$3.77 billion.
• Dividend declared at 54 Singapore cents per share.
• Group net interest margin decreased by two basis points to 2.14% compared to the previous year.
• Assets under management rose to S$396 billion, up from S$320 billion a year earlier.
• Markets trading income increased by 6% to S$187 million.
• Allowances for credit and other losses grew to S$148 million from S$72 million.

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