Dbs earns record profit by increasing lending to consumers

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DBS EARNS RECORD PROFIT BY INCREASING LENDING TO CONSUMERS

Post date:
27 Apr 2015 - 4:15pm








[photo credit: The Straits Times]
DBS Group Holdings posted first-quarter profit of 10 percent, it announced today. In fact, profit rose to a record high of S$1.27 billion.
And the factor that contributed to the jump in profit? An increase in loans.
Loans actually grew by 11 percent in the first quarter of this year, mainly because of regional corporate borrowing and secured consumer credit.
According to DBS, the net interest margin, which is a measure of lending profitability, increased three basis points to 1.69 per cent.
Chief Executive Officer Piyush Gupta said: “DBS started the year on a solid footing, with strong all-round performance yet again. Despite a slowdown in trade volumes, the bank’s first-quarter earnings reached a record high. This is testament to the strength and resilience of the DBS franchise. We will continue to grow our business, while keeping a watchful eye on the economy.”
Another reason for the strong growth is also because of the rising domestic interest rates. Interest rates grew to their highest in six years which have allowed the banks to charge more on borrowers.
In fact, Sibor, or the three-month Singapore interbank offered rate, increased by more than one time over to be more than 1 percent. The last time this was seen was in 2008.
All in, lending has contributed to 62 percent of DBS's revenue last year.
The rising interest rates will definitely continue to benefit DBS and other local banks.
The increase in consumer loans in Singapore has also resulted in Singapore having one of the highest debt levels in Singapore.






According to the Singapore Democratic Party (SDP), "our percentage change in household debt-to-income ratio between 2007–2013 saw the biggest jump worldwide".
"It must be pointed out that the difference between Singapore and other countries is that our housing system is predominantly controlled by the PAP Government," SDP said.
"In other words, in the more than 50 years that the PAP Government has been in control, it has engineered the system to the point where the people have become the biggest debtors in the world – to the PAP Government."
SDP also said: "And because we owe so much, we have to keep working harder and harder just to pay off these loans. It is no wonder that 50% of our households live from paycheck to paycheck.
"Because of this, Singaporean workers are the most stressed out and disengaged in Asia, and we hold the dubious honour of being the least happy people in the world."
On how the economic model needs to change, SDP also said: "We need to develop a more sustainable economic model, one that makes the Government serve us – not profit at our expense."


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