Singapore's DBS beats expectations in Q1 earnings as wealth management shines

Singapore's top lender, DBS Group Holdings, on Tuesday reported better than expected first quarter earnings even as banks in the city state continue grappling with a troubled oil and gas services sector.

The bank said first quarter net profit rose to 1.21 billion Singapore dollars ($867 million), up 1 percent from a year ago and higher than the average forecast of 1.09 billion Singapore dollars ($781 million) by Reuters.

The better performance was helped by its wealth management business that brought in record high income of 222 million Singapore dollars ($159 million), 26 percent higher than the same period a year ago.

DBS' non-performing loan rate was unchanged at 1.4 percent, but non-performing loan formation moderated.

Speaking to CNBC's "Capital Connection," chief executive Piyush Gupta said bad loans from the oil and gas services sector will likely continue, but banks have seen the worst.

"There's going to be tough sledding in terms of the industry without a doubt, it's just that we've taken the bulk of the pain in our book already and so there is not that much more to come," he said, reiterating his view that oil prices have to stay above $60 per barrel for a sustained period of time to lift support services firms out of their troubles.

DBS' shares were up 2.6 percent higher in early trade, outperforming the broader Straits Times Index.

"We have had a good start to the year," Gupta said in a press release.

"Earnings were maintained at the quarterly high achieved a year ago as business momentum and productivity gains were sustained, offsetting the impact of a lower net interest margin. Our business pipeline is healthy, consistent with the recent improvement in economic data for key markets. While asset quality pressures appear to be moderating, we remain vigilant to continued headwinds in the oil and gas support services sector."

Jeremy Teong, investment analyst at Phillip Securities, said growing the loan book will be key in the coming quarters.

"What might weigh in the future is loans growth. The guidance if mid-single digit (growth) so let's hope that will be the case for the year. What we're a little bit concerned is it's a very challenging lending market. Our forecast has always been a flat net interest income growth… so the profit line will be driven by cost savings, lesser provisions," Teong said on CNBC's "Squawk Box."

Last week on April 27, United Overseas Bank, or UOB, said its first quarter net profit rose 5.4 percent from a year ago to 807 million Singapore dollars ($578 million). That was higher than the 765 million Singapore dollars ($548 million) that CIMB Securities projected and 775 million Singapore dollars ($555 million) that Daiwa Capital markets expected.

Oversea-Chinese Banking Corp., Singapore second largest lender, will report results for the first quarter on May 9.

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