Profit was down 9% from the previous quarter.
The bank’s results highlight a challenging period for trading desks globally, though DBS emphasized the resilience of its core operations.
Trading Income Slumps Amid Volatile Markets
A key driver of the profit shortfall was a sharp decline in the bank’s markets trading income. DBS reported that trading income plunged 65% to S$152 million from a year earlier and fell 68% sequentially, largely due to unfavourable market conditions. This segment, however, accounted for only 6% of the bank’s total income, dampening its overall impact.
Chief Executive Tan Su Shan addressed the volatility during the results briefing, noting that while DBS will continue to operate as a market player, the underlying growth in its core franchises remains strong.
Core Business Shows Resilience
While trading income faltered, DBS’s core lending and wealth management businesses continued to post solid growth. Net interest income rose 4% year-on-year to S$3.71 billion, supported by proactive hedging strategies and balance sheet growth, which helped offset the negative impact of lower benchmark interest rates. The bank’s net interest margin narrowed nine basis points to 1.87%.
Net fee income also increased, rising 6% to S$1.43 billion. This growth was led by the wealth management segment, where fees jumped 9% to S$864 million.
Focus on Future Growth Opportunities
Looking ahead, Tan Su Shan outlined several strategic priorities for DBS. The bank is considering establishing a prime brokerage business to tap growth opportunities in Asia’s financial markets. While DBS has not yet entered this business, it already possesses key building blocks, including stock custody, market access, and trading capabilities. “In Asia we have all the building blocks and we may put it together. But right now we’re still considering what the options are,” she explained.
Prime brokerage services typically cater to hedge funds, asset management companies, and investment institutions, offering comprehensive solutions such as margin financing, securities lending, custody services, and trade clearing.
DBS also expects continued expansion in wealth management and prudent growth in its coverage of companies in the financial institutions group, as well as the technology, media, and telecommunications sectors. Regarding data centre investments, the lender has adopted a conservative and structured approach, focusing on high-quality investment-grade hyperscalers. The bank has approximately S$14.6 billion in exposures to data centres and outstanding loans in this sector.
Tan Su Shan Comments on Economic Outlook
Tan Su Shan commented on the uncertain global economic outlook, citing elevated energy prices, tighter financial conditions, and geopolitical risks as key concerns. However, she expressed optimism that a more supportive interest rate environment and continued structural growth opportunities would benefit the bank’s earnings.
The bank anticipates two more US interest rate increases by the end of 2027, with the Singapore Overnight Rate Average (SORA) expected to hold at around 1.6% and the Singapore dollar strengthening further. Deposit growth is likely to normalize to the mid-single digits next year, though Tan remains watchful of whether higher Treasury bill rates will absorb some of this growth.
DBS’s net interest income is believed to have passed its trough, with Tan expecting the net interest margin to continue rising into 2027. Total income growth is forecast to be in the mid-single-digit range for the coming year.
DBS’s net profit for the first nine months of the year rose 2% year-on-year to a record S$8.822 billion, demonstrating the bank’s ability to maintain growth despite headwinds in the trading segment.
