Commodities charge sees DBS net profit fall in Hong Kong
DBS Hong Kong’s net profit fell 17 per cent year on year in the last quarter of 2014 to HK$1.1 billion as the bank booked what it called a one-off charge related to China commodities.
For parent DBS Group, provisions jumped 84 per cent year on year in the final three months of the year to S$149 million (HK$853.3 million). For “greater China”, which includes the mainland but excludes Hong Kong, provisions soared by 344 per cent to $S40 million in the fourth quarter.
That uptick in charges was largely related to some “internal, unauthorised” business of one mainland-based customer, DBS Hong Kong chief executive Sebastian Paredes said in Hong Kong on Tuesday. He downplayed the general risk of deteriorating asset quality in China.
CIMB analyst Kenneth Ng said “no one thinks the level of provisioning will stay this low for Singaporean banks”, noting that provisions were at a historic low due to low interest rates.
Annual net profit for Hong Kong operations grew by about 4 per cent year on year in 2014 to S$838 million. Total income increased by 9 per cent and the bank paid a final dividend of S$0.30. DBS shares closed up 0.2 per cent at S$19.49 on Tuesday.
Hong Kong and Singaporean banks are facing a transitional period in 2015 this year. Many lenders aggressively extended loans to mainland borrowers both on and offshore as the mainland economy began showing signs of a slowdown. The mainland posted its slowest annual gross domestic product growth in two decades last year, at 7.4 per cent, raising concerns over Hong Kong banking exposures to real estate and other sectors with high levels of overcapacity.
At the same time, regional banks will watch interest rates increase in 2015 this year with the end of quantitative easing in the United States and a slow rise in the US Federal Reserve rate over the next two years. Loose monetary policy in the US has kept Hong Kong and Singaporean banks flush with liquidity, helping borrowers roll over loans cheaply and pinning non-performing loan rates at near zero.
DBS Hong Kong’s lending increased by 12 per cent last year, driven by exposure to the mainland. But Paredes said falling commodity prices and sluggish mainland growth were likely push down overall loan growth this year to “single digits”. He also noted that higher interest rates in Hong Kong and monetary easing on the mainland would lead more mainland companies to borrow onshore.
“Some activities will shift back to the mainland” as the borrowing cost falls there, Paredes said. Barclays research agreed that loose monetary policy on the mainland would dampen demand for funding from Hong Kong and Singapore.
At a news conference in Singapore on Tuesday, DBS Group chief executive Piyush Gupta sought to dispel rumours that Standard Chartered had tapped him for a job. "Nobody has approached me,” Gupta said. “But also for the record, I’m very happy where I am.”
Source: http://www.scmp.com/business/banking-finance/article/1709173/dbs-net-profit-growth-falls-hong-kong
Article from:http://www.consultdb.com/new-249.html
