![Growth in Asia will continue to be quite solid, says DBS Bank](https://image.cnbcfm.com/api/v1/image/107233768-16830084351683008432-29268862810-1080pnbcnews.jpg?v=1683010318&w=750&h=422&vtcrop=y)
Singapore’s largest lender DBS group holdings expects net interest income to decrease in the long run, however the bank is confident that it should give you the chance to operate in the long run based on other aspects resembling growth in lending and fee income.
DBS reported on Tuesday record revenues and net profit for the primary quarter. Revenue was S$4.94 billion ($3.7 billion), a rise of 34% over the previous yr, while net profit was S$2.57 billion, up 43% over the identical period period last yr.
DBS said this was due to “higher net interest margin, sustained business momentum and versatile asset quality”. Net Interest Margin, or NIM, increased by 66 basis points year-on-year to 2.12%, up from 1.46% in the primary quarter of 2022.
Net Interest Income is a measure that compares the interest income generated by an organization from its lending products, resembling loans and mortgages, to the outgoing interest it pays, resembling savings accounts or fixed deposits.
Speaking to CNBC’s Capital Connection, DBS CEO Piyush Gupta said NIM “probably peaked around those levels” – around 2.1% from February to April.
Despite saying that increases from these levels will likely be limited, Gupta said he expects the speed of decline to be very gradual and never “falling off a cliff”. DBS projects a full-year average of between 2.05% and a couple of.1% for NIM in 2023.
![Singaporean banking trio](https://image.cnbcfm.com/api/v1/image/107233722-16829962171682996214-29266973678-1080pnbcnews.jpg?v=1683002285&w=750&h=422&vtcrop=y)
Geoff Howie, Singapore stock market strategist, agreed with Gupta, saying that NIM’s growth will likely be harder as interest rate hikes, especially from the US Federal Reserve, start to fade.
Speaking to CNBC’s “Street Signs Asia,” Howie said, “From a net interest margin perspective, how do you hedge against, say, 475 basis points of Fed funding increases in roughly 13 months?”
Rising rates generally increase bank profits by allowing banks to raise interest rates on loans, while interest costs for banks – resembling those paid on deposit accounts – can remain unchanged.
He noted that in 2022, net interest income for Singapore’s three important banks grew by around 30%, but as NIMs are “consolidating a bit”, it should be difficult to maintain this pace of growth.
Howie points out that “you’ve got had nine consecutive quarters of quarter-on-quarter net interest income growth, it is perhaps over for some time, [and] we expect some consolidation of net interest income.”
In light of the outcomes, the corporate’s management also declared a dividend of 42 Singapore cents per share for the primary quarter, higher than 36 cents in the identical period a yr ago.
DBS shares rose as much as 1.37% on Tuesday after the outcomes.
Other growth aspects
While Gupta sees net interest income growth declining, he said the bank still sees “healthy business dynamics”. He said the growth outlook for Asia was still “fairly solid” despite a slowdown within the West.
He noted that “two quarters ago, everyone was pretty sure there was going to be a recession [in the West] and now the jury is wondering in the event that they can actually avoid a recession. So we do not think the slowdown will likely be catastrophic.”
Gupta said he still sees Asia’s fundamentals supportive, saying “demographics are good, infrastructure spending continues, intra-Asian trade and commerce continues to be solid, wealth management stays very strong.”
As such, he said these drivers are in place to help DBS proceed to construct the business “pretty decently” going forward.