DBS Group CEO Piyush Gupta said the bank’s wealth management and capital markets businesses continued to see “headwinds”, even as the bank reported second-quarter earnings.
“The business is a bit of a mix. Our corporate lending activities are doing really well. And so the balance sheets will continue to grow,” Gupta told CNBC’s “Capital Connection” after the bank’s results were released.
“Private banking clients are reluctant to put money to work, that’s an obvious challenge. Headwinds in wealth management and capital markets mean overall fee income … is falling year-on-year,” he said.
DBS, Southeast Asia’s biggest bank, said revenue from wealth management and investment banking fell 12 percent in the second quarter from a year ago.
First-half net fee income fell 9 percent from a year earlier to 1.66 billion Singapore dollars ($1.2 billion). Wealth management fees fell 21 per cent to S$745 million as weak market conditions dampened sales of investment products, DBS said. Investment banking fees fell 36 percent to S$73 million as capital market activity slowed.
An uncertain attitude
Gupta said the outlook for the wealth management business is one of uncertainty given the current market sentiment.
“If the markets start to turn and we start to see more animal spirits, we may do some more capital market deals – and wealth management, private banking clients may be more active,” said the CEO.
“But like I said, at this point, I’m not holding my breath for that happening,” he added.
On Thursday, DBS reported that net profit for the April to June period rose to S$1.82 billion from S$1.7 billion a year earlier. That’s higher than the average forecast of $1.69 billion, according to Refinitiv data.
The bank’s net interest margin rose to 1.58 percent in the quarter, up from 1.45 percent a year ago.
“Net interest margin, which has been declining since 2019, increased in the first quarter as interest rates began to rise, and improvement accelerated in the second quarter. Net interest margin in the first half was 1.52%, five basis points higher than a year ago,” DBS said in the report. .
Gupta said the increase in net interest margin was the “big story”, which saw a significant increase. Forecasts for net interest margin in the third and fourth quarters are very strong, he said.
“And if that’s the case, then yes, it’s a story of net interest margin growth driving the business along,” Gupta said.
DBS said its board has declared an interim one-tier tax-free dividend of 36 cents for each DBS ordinary share for the second quarter of 2022.
