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Southeast Asia's biggest lender, DBS Group Holdings, yesterday posted record quarterly net profits of S$807 million (HK$5.1 billion), up 19 per cent from the previous quarter and beating market expectations.
Rising investment banking fees and a surge in trade finance, on top of loan growth across all markets, contributed to the earnings increase, said Michael Sia, the bank's head of investor relations  in Singapore. 
The bank's net interest margin - a measure of lending profitability - had been stable for three quarters, which  was a good sign said Magdalene Choong, an analyst at Phillip Securities Research in Singapore.
Net interest margin increased by one basis point, quarter on quarter, to 1.8 per cent. 
For the bank's Hong Kong operations, net profit rose 32 per cent on the quarter, reaching S$190 million. 
'Hong Kong recovered quite a bit, largely driven by non-interest income,' said Wee Siang Ng, an analyst at BNP Paribas Securities in Singapore. 
In Hong Kong,  net interest margin remained flat, dropping one basis point to 1.48 per cent compared to the previous quarter.
Hong Kong banks have faced fierce  competition in interest-based businesses such as mortgages and loans in the past two years, because of  abundant liquidity after the United States increased the  supply of money to stimulate the economy. 
DBS Group's capital adequacy ratio,  which measures a bank's capital against its risk-bearing assets, reached 17.2 per cent. Its core ratio - highly liquid assets and cash - stood at 11.5 per cent. 
Return on equity, a measure of profitability, reached 12.1 per cent, up 1.9 percentage points from the previous quarter. 
The bank's non-performing loan ratio fell 10  basis points to 1.8 per cent. Loan loss provisions, a leading indicator of expected loan losses, dropped 20 per cent to S$125 million.
Ng said the consistent decrease in loan loss provisions  was an  indicator of better asset quality. 
The loan to deposit ratio was 79 per cent, up five percentage points from the same period last year. The bank said its mainland operations met the ratio requirement of 75 per cent or below. 
Cost to income ratio dropped five percentage points to 40 per cent compared with December last year. 
The bank's shares closed  60 Singaporean cents higher  to S$14.98 yesterday.
Earnings recovery
The increase in net profits for the quarter at DBS' operations in Hong Kong: 32%



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DBS posts S$807m in profit on increased fees and loan growth