High interest rates carry DBS to record net profit of $6.14b in 2022

Total income surpassed S$16b for the first time in the bank’s history.

DBS’ net profit rose to a record $6.14b (S$8.19b) in 2022, growing 20% compared to a year earlier, according to its latest financial report. Total income climbed 16% to $12.4b (S$16.5b)–the first time in history that the bank’s total income surpassed S$16b, the bank said.

High interest rates boosted the bank’s net interest income, which more than offset a decline in non-interest income, DBS said.

For the financial year ended 31 December 2022, the directors have recommended a total of 92 cents for each DBSH ordinary share, subject to shareholders’ approval at the bank’s annual general meeting taking place in March. It consists of a final one-tier tax exempt dividend of 42 centers per ordinary share, and a one-off tax-exempt special dividend of 50 cents per ordinary share.

Together with the interim tax-exempt dividends of $1.08, the total dividends for the financial year ended 31 December 2022 will be $2.00 for each DBSH ordinary share, the banks said.

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Q4 profits up 69%
For the fourth quarter, DBS saw its net profit skyrocket 69% to S$2.35b. Total income jumped 41% to S$4.59b, whilst net interest income rose 53%.

Compared to Q3, net profit was 5% higher. DBS attributed the improvement to a higher net interest income and lower general allowances, which the bank said more than offset seasonally lower non-interest income. 

Return on equity was 17.2%, a new quarterly high.

DBS CEO Piyush Gupta attributed the record return on equity for Q4 and the full year not just to the high interest rates, but also as a reflection of the bank’s “significant structural gains from our decade-long transformation initiatives.” 

“Our business pipelines are healthy and asset quality robust. We expect confidence to return to markets in the coming year as interest rate increases ease and China reopens,” Gupta stated in the press announcement. 

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Interest income, margins rise
DBS’ net interest income grew 40% to a record S$10.7b in 2022, whilst net interest margin increased 48 basis points to 2.11%, an effect of the higher interest rates.

Loans rose 4% or by S$14b constant-currency terms to S$415b. Despite the full-year rise, however, loans slightly declined in Q4, moderated only by growth in the first nine months of 2022.

“Whilst underlying loan demand remained healthy, some corporates shifted their borrowing to cheaper financing options or repaid opportunistic borrowing, and wealth management customers reduced margin loans,” DBS said in its financial statement.

Net fee income fell 12% to S$3.09b. Wealth management fees notably fell 26% to S$1.33b, which DBS blamed on “weaker market conditions.” This reportedly led to lower investment product sales, the bank stated.

Investment banking fees fell 44% to S$121m as capital market activities slowed.

On the other hand, other fee activities grew in 2023. Card fees rose 20% to a new high of S$858m. Overall card spending reportedly reached a record, whilst travel spending progressively recovered, DBS said.

Other non-interest income rose 1% to S$1.52b.

Back to lending, non-trade corporate loans rose 5%to S$248b, whilst trade loans increased by 4% to S$44b. Unattractive pricing in the second half of 2022 partially offset gains in the first half, according to DBS. 

Mortgages grew 4% to S$81b, with the majority of the growth occurring in the second half. 

Other consumer loans fell 7% to S$43b, with wealth management loans also declining.

(US$1 = S$1.33; as of February 13, 2023)