Singapore's DBS expects higher margins as fourth-quarter profit jumps

SINGAPORE (Reuters) - Singaporean lender DBS Group Holdings said on Thursday it expects to lift its net interest margins this year, as it reported a 33 percent rise in quarterly profit and announced higher dividends, sending its shares up 3 percent.

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

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

"We are quite optimistic about 2018," CEO Piyush Gupta told a news conference. "We enter the coming year with sustained momentum across our businesses and, more fundamentally, in our digital transformation."

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.

Full-year net profit rose 4 percent to a record S$4.4 billion.

Gupta said he expected DBS to further improve its net interest margins and reaffirmed the bank's 7 percent to 8 percent loan growth outlook for this year.

Three-month Singapore dollar interest rates are currently at 1.12 percent, after rising to nearly 1.51 percent in early January, the highest since October 2008. A year earlier, the rates were about 0.96 percent.

The annual 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, Gupta said.

Shares in DBS, in which Singaporean state investor Temasek Holdings owns just over 29 percent, were up 3 percent on Thursday. They gained 43 percent last year.

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 announced an increase in its final dividend, and 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; Additional reporting by Masayuki Kitano; Editing by Stephen Coates)