DBS sees slower loan growth ahead

DBS Group said yesterday that the bank's loan growth could slow for the rest of the year and the spread was narrowing between its loan income and funding costs on the mainland.

The Singapore-based bank posted a SG$1.74 billion (HK$10.81 billion) profit in the first half, up 13 per cent compared with the same period last year, boosted by higher interest income and lower provisions.

'DBS turned in another quarter of solid performance despite a difficult operating environment,' DBS chief executive Piyush Gupta said, adding that Asia is likely keep slowing and that the chances of China coming out with a massive stimulus plan like last time is slim.

The bank's non-interest income dropped 2 per cent to SG$785 million as a result of equity market volatility. But this was offset by 22 per cent growth in loans in the first half, mainly in Singapore and on the mainland.

The bank's net interest margin, a measure of lending profitability, rose slightly to 1.43 per cent in Hong Kong compared to the end of last year. It narrowed by about 50-60 basis points on the mainland to 2.2 per cent due to tightening liquidity.

DBS Bank (Hong Kong) chief executive Sebastian Paredes said he expected the net interest margin in Hong Kong to stabilise in the second half, but it could continue to be squeezed on the mainland.

The bank's loan growth rate in Hong Kong in the second half could remain in single digits and be much lower than the same period last year.