DBS Group, Southeast Asia's biggest lender, posted an unexpected 8 percent rise in quarterly earnings as strong loans growth more than made up for subdued interest rates.
DBS has been capturing market share from rivals, in particular European banks that have stepped back from Asia due to the eurozone debt crisis. In the three months ended December, the Singapore lender chalked up loans growth of 28 percent.
Analysts, however, say earnings growth this year could prove to be difficult as a slowdown in Asian economies reins in loan growth, while interest rate margins remain hostage to low U.S. rates.
Hopes for higher rates in DBS' key markets — Singapore and Hong Kong — were dented after the Federal Reserve signaled that U.S. rates would probably remain at their current level near zero through late 2014.
"We are committed to pursuing growth in a judicious and disciplined manner while keeping a watchful eye on the health of the global economy " CEO Piyush Gupta, a former Citigroup executive who took over the top post more than two years ago, said in a statement.
The Singapore bank made a net profit of S$731 million ($586 million) for October-December period, up from S$678 million a year earlier.
That compared with an average forecast of S$672 million, according to six analysts surveyed by Reuters.
The bank also posted record high annual net profit of S$3.04 billion, up 86 percent from 2010.
DBS kicked off the earnings season for Singapore banks, with Oversea-Chinese Banking Corp reporting results on Feb 20 and United Overseas Bank on Feb 23.
Gupta has been praised by investors for turning around the bank as he focused on boosting revenue from the existing businesses such as wealth management and avoiding pricey acquisitions.
But growth will remain restricted unless DBS acquires a lender in Indonesia or Malaysia, countries where it has smaller presence compared to its key competitors.
Net interest income rose 17 percent to S$1.29 billion from a year earlier, despite a 6 basis point drop in margins to 1.73 percent from a year earlier as loans expanded by 28 percent. DBS' net interest margin was flat versus the third quarter.
Net fee and commission income dropped 4 percent from a year ago to S$342 million, hurt by weak capital markets in the last quarter of 2011.
Bad-debt charges rose 46 percent to S$229 million from a year ago.
DBS shares have rebounded this year, soaring 18 percent compared to UOB's 15 percent rise and OCBC's 13 percent gain. Its shares fell about 20 percent in 2011, underperforming the benchmark index.