While the bank's first-quarter income grew 13 percent to cross $4 billion for the first time, pre-emptive allowances it has made for uncertainty due to Covid-19 has resulted in its lowest profit in six quarters.

DBS Bank's first-quarter net profit is down 29 percent year-on-year, at S$1.17 billion ($830 million), as it set aside general allowances of S$703 million for risks arising from the ongoing Covid-19 pandemic, the bank said in a statement on Thursday.

The bank's total income of S$4.03 billion, however, was up 13 percent on year and 16 percent on quarter, on the back of broad-based growth in non-trade corporate loans and fee income, as well as gains from investment securities. Fee income grew 14 percent from a year ago to a new high of S$832 million, led by a 28 percent increase in wealth management fees, a 17 percent rise in loan-related fees, and a 64 percent increase in investment banking fees, though card fees fell 8 percent due to lower transactions across the region. Non-interest income grew 39 percent from a year ago to S$712 million.

Expenses grew by 4 percent from the year before, but was still 3 percent lower on quarter to S$1.56 billion, from lower general expenses and staff costs. Profit before allowances grew 20 percent to S$2.47 billion.

Its balance sheet was bolstered with reserves growing by 29 percent to S$3.23 billion, as the bank is anticipating a «deeper and more prolonged economic impact» from the pandemic. 

Increased Credit Risks

«The magnitude of the crisis will be greater than 08-09 and Sars,» DBS CEO Piyush Gupta said in a media briefing on Thursday, with the bank expecting increased credit risks going forward. However, it maintains a positive business outlook, with «resilient» loan growth, record deposit inflows, and upside from non-interest income.

As a result of the uncertain economic outlook, DBS expects a full-year profit before allowances to be around 2019 levels after factoring in declines for the next three quarters, Gupta said, noting that its operating performance in the first quarter has given DBS a strong head-start.

«We will maintain a solid balance sheet with ample capital, liquidity and loss allowance reserves that give us strong buffers to absorb external shocks,» Gupta said in the statement.

Dividend Unchanged

The board announced a quarterly dividend of $0.33 per ordinary share, unchanged from the quarter before. It will be paid together with the dividend for Q4 2019 on 26 May.

DBS said it would continue to assess the prospective impact of the pandemic on financial performance, credit costs and capital ratios, and adjust its dividend policy as appropriate.