February 15, 2022: -DBS Group flagged strong business momentum after its profit rose to a record in the coming year, cementing a recovery for Southeast Asia’s largest lender as pandemic-hit economies rebound and boost loan growth and asset quality.

Singapore lenders are expected to be huge beneficiaries of rising interest rates. At the same time, the city-state’s economy is forecast to grow 3% to 5% this year after expanding at its annual speed in over a decade in 2021.

Krishna Guha, an analyst at Jefferies, said that while the bank’s fourth-quarter profit was slightly below estimates because of lower than expected non-interest income, growth in revenue metrics was “outstanding.”

“Guidance for 2022 is in line with our recent inputs but for the credit costs and is likely to be the coming driver of positive earnings revisions,” Guha said in a note.

DBS, the Singapore bank to report this season, said net profit for October-December increased to S$1.39 billion and followed a frail pandemic-hit year when profit tumbled to a three-year low in the fourth quarter.

The result missed an average estimate of S$1.47 billion from four analysts polled by Refinitiv and was 18% less than the third quarter, hit by a 41% drop in non-interest income. DBS shares eased 0.6% on Monday trade.

“We look forward to the coming year with a prudently managed balance sheet that is poised to benefit from increasing interest rates,” DBS CEO Piyush Gupta said in a statement, which adds that the bank expects mid-to-single digit loan growth or better this year, after reporting a 9% increase last year.

DBS, which earns most of its profit from Singapore and Hong Kong, struck a deal in the previous month to pay S$956 million to buy Citigroup’s consumer business in Taiwan. It shores up regional acquisitions to power growth.

The Singapore lender’s complete-year profit increased 44% to a record S$6.8 billion as a 9% growth in loans, the highest in seven years, and a surge in wealth management and transaction banking services fees offset the impact of lower interest rates.

Allowances for loan losses were less than S$33 million in the latest quarter from S$577 million a year earlier.

Buoyed by the improved outlook for banks, investors have pushed up Singapore bank stocks this year, with DBS and more miniature rival UOB trading near record highs.