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DBS Q3 profit drops 20% to $1.3 billion

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SINGAPORE – DBS Bank posted a 20 per cent drop in third-quarter net profit to $1.3 billion from $1.63 billion a year earlier on higher allowances for potential bad loans amid the coronavirus pandemic and lower net interest income.

Earnings were better than expected, beating the $1.12 billion average estimate of eight analysts surveyed by Bloomberg.

South-east Asia’s largest bank set aside allowances of $554 million in the third quarter. Together with allowances of $1.94 billion in the first half of the year, total allowances in the first nine months of this year quadrupled to $2.49 billion from a year ago.

Three-fifths, or $1.5 billion, of this amount were general allowances conservatively set aside to fortify the balance sheet against macroeconomic risks.

The bank also saw lower net interest income, which fell 12 per cent year on year to $2.17 billion  as loan growth was offset by a lower net interest margin. The drop was 6 per cent from the previous quarter.

Net interest margin fell nine basis points to 1.53 per cent as the impact of global interest rate cuts in March and April was more fully felt.  Net interest margin is a key gauge of profitability for banks, measuring the difference between income earned from loans and the interest paid to depositors. 

DBS’ annualised earnings per share stood at $1.98 for the quarter, a decrease from $2.50 a year ago.

The board has declared an interim dividend of 18 cents per share, to which the bank’s scrip dividend scheme will be applied.

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