Southeast Asia’s biggest lender DBS Group Holdings Ltd beat market estimates to post a record quarterly profit, as strong lending income offset weakness in wealth management, brokerage and investment banking fees.

DBS, the first Singapore bank to kick off the sector’s results, posted an 8.5 per cent rise in first-quarter net profit from a year earlier, and said the macro-economic environment had stabilised.

“By and large, I’m relatively sanguine about the business momentum,” CEO Piyush Gupta told a news conference. DBS maintained its forecast of mid-single-digit loan growth for this year and stable net interest margins, a key gauge of profitability.

The lender’s shares advanced 2.8 per cent to their highest since June 2018, outperforming a 0.9 per cent rise in the broader market.

“Overall, core driver was in line with expectations, we expect similar trends for peers as well,” Jefferies analyst Krishna Guha said in a report. “We were positively surprised by strength in trading gains,” he said.

United Overseas Bank reports results on May 3 followed by Oversea-Chinese Banking Corp a week later.

DBS reported a net profit of S$1.65 billion ($1.21 billion) for the three months to end-March, up from S$1.52 billion a year earlier and an average estimate of S$1.48 billion from four analysts, according to Refinitiv.

After three years of strong loans growth, Singapore’s banks are gearing up for tougher times as the city-state’s export-reliant economy slows.

Preliminary data for Singapore’s first-quarter GDP released earlier this month confirmed the city-state was experiencing its weakest year-on-year growth in almost a decade. A trade war between the United States and China — two of Singapore’s biggest export markets — has disrupted global supply chains in a blow to growth in many trade-reliant economies including the city state.

DBS, nearly 30 per cent owned by state investor Temasek Holdings, said its loans grew 1 per cent in the latest quarter from the fourth quarter.

Non-trade corporate loans rose 3 per cent while trade loans declined 4 per cent.

When asked about the big risks for the business for this year, Gupta highlighted a steep collapse in the interest rate environment if the US Federal Reserve started to cut rates, but said he doesn’t foresee that happening.

He, however, singled out the Singapore mortgage market as a weak spot. “For the first time in a long, long time, we actually show a shrinkage in our mortgage loan book in the first quarter,” Gupta said.

“Our bookings continue to be soft and the amount of refinancing transactions in the market are actually very low, about half of what they were a year ago.”

Still, DBS’s return on equity rose to 14 per cent, its highest in more than a decade.

Net interest margin rose five basis points to 1.88 per cent, in line with higher interest rates in Singapore and Hong Kong.

“The record earnings and return on equity (ROE) progression demonstrate the strengthened profitability of our franchise from digitalisation, a shift towards higher-returns businesses and more nimble execution,” Gupta said.

Singapore on Monday (inked five partnerships with China in the areas of business, customs enforcement and infrastructure investment.

Four memorandums of understanding (MOUs) and a framework agreement were signed at the Diaoyutai State Guesthouse by representatives from both countries, including Singapore’s Trade and Industry Minister Chan Chun Sing. A ministerial-level cooperation council will be set up between Singapore and Shanghai, making this the eighth business council Singapore has with China.

This is, however, Shanghai’s first comprehensive institutionalised platform with a foreign country.

Singapore-Shanghai trade amounted to approximately $13.5 billion last year, accounting for about 13.6 per cent of Singapore’s trade with China. As of end-2018, Singapore had over 4800 projects in Shanghai, amounting to about $15.2 billion worth of cumulative actual investments.

Called the Singapore-Shanghai Comprehensive Cooperation Council (SSCCC), it will cover the Belt and Road Initiative, financial services cooperation, technology and innovation, ease of doing business, urban governance and people-to-people exchanges.

Enterprise Singapore and the Foreign Affairs Office of the Shanghai Municipality will serve as the Council Secretariat for Singapore and Shanghai, respectively.

The first council meeting is scheduled for May 24 in Shanghai. Singapore and Shanghai enjoy robust economic relations, said the Ministry of Trade and Industry (MTI).

Reuters