DBS profit jumps 32% to record on rates, flags upbeat outlook

DBS Group reported a forecast-beating 32% jump in quarterly profit to a record high and gave a bullish outlook on Thursday as higher interest rates boosted net interest margins at Southeast Asia's largest lender.

Banks globally have benefited from a jump in net interest income as central banks hike rates to tackle soaring inflation, although analysts warn they could suffer if higher rates lead to a sharp slowdown in economic activity.

DBS shares, though, dropped 1.6% in early trade on Thursday as the broader Singapore market fell about 1%.

Local peer UOB Group beat market estimates last week with a record quarterly net profit as net interest income swelled and credit allowances declined. OCBC reports results on Friday.

Net profit at Singapore-based DBS came in at S$2.24 billion ($1.58 billion) in July-September, beating an average estimate of S$1.97 billion from four analysts, according to Refinitiv data.

The bank saw sustained business momentum in the quarter and asset quality was resilient, DBS CEO Piyush Gupta said in a statement. Looking ahead to next year, he said the loan pipeline remained healthy and could reach mid-single digit growth.

While the bank's net fee and commission income fell 13% in the quarter, hurt by weakness in the wealth management business in depressed markets, Gupta forecast double-digit fee income growth for next year, led by wealth management and credit cards.

Return on equity at DBS rose to a record 16.3% in the quarter and net interest income surged 44%. Its net interest margin, a key profitability gauge, improved to 1.90% in the quarter from 1.43% a year earlier.

Shares of Singapore banks have risen between 4%-6% so far this year, outperforming the broader market on expectations of big expansions in their net interest margins.