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DBS misses profit expectations on bad debt charges

Singapore's DBS Group Holdings and Oversea-Chinese Banking posted increases in quarterly profit fueled by mortgage and trade loans, and were upbeat about growth prospects.

DBS missed expectations but boosted its full-year dividend to 58 cents from 56 cents a year earlier. It said in presentation notes that its outlook is positive and it also sees a strong performance from capital markets.

(Read more: Shine coming off Southeast Asian banks)

OCBC's quarterly profit came in ahead of the market consensus.

"Looking ahead, our overall outlook remains optimistic, given the positive macroeconomic environment and the underlying growth prospects in our key markets," OCBC CEO Samuel Tsien said in a statement.

The positive outlook comes despite concerns that government and central bank curbs on property transactions and lending are set to slow growth in mortgages as well as lending to property firms, which account for about a third of bank loans in Singapore.

A couple walks past an advertisement outside a DBS Group Holdings Ltd. bank branch in Singapore.
Munshi Ahmed | Bloomberg | Getty Images
A couple walks past an advertisement outside a DBS Group Holdings Ltd. bank branch in Singapore.

Analysts have cautioned the real test will come in 2015 when an expected rise in interest rates and a higher supply of homes could dent the property market.

"We're looking at a 10 percent price correction (for property) this year, which shouldn't put much pressure on credit costs, whereas the draw-downs of previously committed mortgages are likely to continue to push loan growth in mortgage," said Macquarie analyst Matthew Smith.

"That might be a very different story in 2015 though. Demand and supply looks tough, rates rising and inability to refinance could push the (housing) market down further."

DBS, Southeast Asia's biggest bank, earned S$802 million ($633.3 million) excluding exceptionals in the three months ended December, compared to the S$843 million average forecast of six analysts polled by Reuters.

(Read more: Higher wealth taxes on the cards for Singapore?)

It earned S$760 million a year earlier. Including one-off items such as the sale of its stake in a lender in the Philippines, DBS posted a net profit of S$973 million.

OCBC reported a net profit of S$715 million in the three months ended December, compared to an average forecast of S$676 million by six analysts. OCBC earned S$663 million in the fourth quarter of 2012.

Quarterly net interest income -- the gap between what a bank makes from loans and pays on deposits -- rose 12 percent for both banks. Customer loans also grew at the same pace of 18 percent year-on-year for the two banks.

The banks are looking at growth opportunities through acquisitions.

(Read more: Singapore dollar still draws safe haven seekers)

DBS is in advanced talks to buy Societe Generale's Asian private bank, a deal that would help boost its private banking assets by almost a third, sources have told Reuters.

OCBC said on Friday substantial shareholders of Wing Hang Bank will have until March 3 "to seek to finalise the terms of the possible general offer by OCBC Bank."

Hong Kong banks are also seeing a slow down in mortgage growth and loans for property investment, but credit quality remains strong, analysts said. Rating agencies like Moody'shave applauded the move by Hong Kong's regulator to temper growth in personal loans as credit positive for banks because they are likely to exercise more prudence in loan underwriting.

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