DBS profit up 20 percent, net interest margin at 5-year high

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By Saeed Azhar

SINGAPORE (Reuters) - DBS Group Holdings, Singapore's biggest lender, posted a 20 percent rise in quarterly profit that beat expectations, as a higher net interest margin overcame a jump in bad debt charges and higher expenses.

Southeast Asia's biggest bank by assets saw its net interest margin jump to a five-year high of 1.84 percent, which helped defy market concerns that an economic slowdown in China and its exposure to the oil and gas sector could hurt the bank.

DBS and rival Oversea-Chinese Banking Corp both have significant exposure to Chinese banks and corporates through their Hong Kong units.

"While unsettled financial markets in recent weeks have created short-term uncertainty, the region's economic fundamentals are sound and the risks associated with slower growth are manageable," DBS CEO Piyush Gupta said in a statement.

DBS's net profit came in at S$1 billion ($711 million) in the three months ended December, versus S$838 million a year earlier and above an average forecast of S$978 million from six analysts polled by Reuters.

Its charges for non-performing loans and other assets climbed 17 percent to S$247 million from a year earlier, part of a trend for the city-state's lenders that reflects slowdowns in Asian economies and tough times for the oil and gas sector.

Net interest income spiked 11 percent to S$1.85 billion, helped by a 13 basis point rise in its net interest margin after the Singapore Interbank Offered Rate, which is widely used to price mortgages, jumped on a weakening in the Singapore dollar.

Moody's Investors Service said last week that while higher loan loss provisions would negatively impact the profitability of Singaporean banks in 2016, the new provisions were unlikely to eat into their capital buffers.

The ratings agency expects new credit growth for Singapore banks will be in the low single-digits in 2016.

DBS shares have fallen 18 percent this year, underperforming rivals due to concerns over a slowing China economy and the fallout from weak commodity prices.

($1 = 1.4059 Singapore dollars)

(Reporting by Saeed Azhar; Editing by Edwina Gibbs and Stephen Coates)