Singapore's DBS expects higher margins as fourth profit jumps

SINGAPORE (Reuters) - DBS Group Holdings, Singapore's biggest lender, said on Thursday it expects an improving interest rate environment to lift net interest margins this year, as it reported a 33 percent increase in quarterly profit, matching market expectations.

The results came after the bank had surprised markets in November by doubling its quarterly provisions to the troubled oil and gas sector and said the worst was probably over.

Kicking off the reporting season for Singapore's banks on Thursday, DBS's net interest margin, a key gauge of profitability, rose seven basis points to 1.78 percent.

Southeast Asia's largest bank by assets reported net profit of S$1.2 billion ($905 million) for October-December versus S$913 million a year earlier. This matched the S$1.2 billion average estimate of six analysts compiled by Thomson Reuters.

CEO Piyush Gupta said the full-year performance was driven by broad-based growth in loans and fee income, which more than offset the impact of less favourable interest rates and trading income.

The bank's net fee income grew 23 percent in the fourth quarter, with the increase spread across most fee income streams and led by wealth management and investment banking.

DBS proposed a special dividend of 50 Singapore cents per share to return the capital buffers it had built up ahead of the finalisation of new capital rules.

Since Gupta took over as the CEO in 2009, DBS has more than doubled its group profits and broken into the top five private banks in Asia, helped by medium-sized acquisitions.

($1 = 1.3256 Singapore dollars)

(Reporting by Anshuman Daga; Editing by Stephen Coates)