Singapore's DBS second-quarter profit up 8.5 percent on loan growth, flags pressures on asset quality

SINGAPORE (Reuters) - Singapore's biggest lender, DBS Group Holdings, reported an 8.5 percent increase in quarterly profit that came in line with market expectations, boosted by strong loan growth, but the bank flagged pressures on asset quality.

DBS, the last of Singapore's big banks to post results, cited risks from the struggling offshore support services sector, which has been showing some signs of stability after a severe downturn in the past few years.

"Asset quality pressures will continue and the risk of heightened credit costs in the oil and gas support services sector will persist with low oil prices," Chief Executive Officer Piyush Gupta said in a statement on Friday.

DBS reported net profit of S$1.14 billion ($840 million) in the three months ended June, versus S$1.05 billion a year earlier and an average forecast of S$1.15 billion from five analysts compiled by Reuters. Total income was flat at S$2.92 billion.

Loan growth of 6 percent more than offset the impact of a 13 basis points decline in net interest margin to 1.74 percent. DBS increased its first-half dividends by 10 percent on the back of record profits.

Gupta has rapidly expanded DBS' wealth management business by making medium-sized acquisitions, helping it break into the top five of private banks in Asia.

Last week, DBS peer Oversea-Chinese Banking Corp reported forecast-beating results, powered by its wealth management business, while profit at Singapore's United Overseas Bank rose to a two-year high on strong net interest income.

($1 = 1.3572 Singapore dollars)

(Reporting by Anshuman Daga; Editing by Stephen Coates and Kenneth Maxwell)