Singapore's largest lender expects net interest margins will decline, but sees other growth drivers

cnbc.com:

In this article

Singapore's largest lender DBS Group Holdings expects net interest income to taper off in the future, but the bank is confident that it can ride on other drivers going forward, such as a growth in loans and fee income.

On Tuesday, DBS reported record revenue and net profit for the first quarter. Revenue came in at 4.94 billion Singapore dollars ($3.7 billion), up 34% from a year ago, while net profit stood at SG$2.57 billion, a 43% jump compared with the same period the last year.

DBS said this was due to «higher net interest margin, sustained business momentum and resilient asset quality.» Net interest margin, or NIM, rose 66 basis points year-on-year to 2.12%, compared with 1.46% in the first quarter of 2022.

Net interest income is a measurement comparing the interest income a firm generates from credit products like loans and mortgages, with the outgoing interest it pays out, such as to savings accounts or fixed deposits.

Speaking to CNBC's "Capital Connection," DBS CEO Piyush Gupta said NIM's «have probably peaked at around these levels» — about 2.1% for February to April.

Despite saying there will limited upside from these levels, Gupta said he expects the pace of decline will be very gradual and not «falling off a cliff.» DBS guided for a full-year average of between 2.05% and 2.1% for NIM in 2023.

Geoff Howie, market strategist for equities at the Singapore Exchange, agreed with Gupta's view, saying growth in NIM will become more difficult as interest rate hikes, especially from the U.S. Federal Reserve, start to taper off.

Speaking to CNBC's "Street Signs Asia," Howie said, «From a net interest margin perspective, how do you back up from say, 475 basis points of Fed funds hikes over 13 months or