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Singapore's DBS Q4 profit misses forecasts as China bad loans jump

DBS: 'No material increases in provisioning'

DBS Group Holdings, Singapore's biggest bank, posted a small rise in core fourth-quarter net profit but fell short of analysts' estimates on a jump in provisions for non-performing loans in China and Singapore.

Bad debt provisions rose 40 percent to S$211 million ($155 million) from a year earlier, the highest level since the quarter ending June 2013, according to Thomson Reuters data. Those for Greater China excluding Hong Kong quadrupled to S$40 million.

Trading income was also hit, dropping 44 percent with the bank blaming less favourable trading conditions.

Munshi Ahmed | Bloomberg | Getty Images

In its presentation slides, DBS said China and commodities markets would be key risks to watch.

The weaker-than-expected results eclipsed a 10 percent rise in full-year net profit to a record S$4 billion.

For the October-December quarter, net profit rose to S$838 million, below an average forecast of S$931 million from six analysts polled by Reuters.

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That compares with a net profit before exceptional items of S$802 million in the same period a year earlier. In the previous year, the sale of a stake in a Philippine bank boosted overall net profit to S$973 million.

But DBS also said it would benefit from rising interest rates.

"Structurally higher returns of our franchise will become more evident as interest rates normalize," it said.

The city-state's banks have benefited from a surge in SIBOR, the benchmark for interbank lending, as interest rates on many home loans are pegged to it. SIBOR has climbed as the Singapore dollar weakened on the view that the U.S.Federal Reserve will move to raise rates later this year.