DBS first-quarter profit slumps to 2-1/2-yr low on virus loan loss provisionsDBS first-quarter profit slumps to 2-1/2-yr low on virus loan loss provisions
A worker walks past a DBS logo before an event in Mumbai

By Anshuman Daga

SINGAPORE (Reuters) – DBS Group Holdings set aside hefty provisions to cover the impact of the coronavirus pandemic as it reported a 29% drop in first-quarter profit but retained its quarterly dividend.

Southeast Asia’s biggest lender joined HSBC and Standard Chartered in provisioning higher credit losses to guard against the fallout from the crisis.

“We will maintain a solid balance sheet with ample capital, liquidity and loss allowance reserves that give us strong buffers to absorb external shocks,” DBS CEO Piyush Gupta said in a statement on Thursday.

The Singapore-based bank said allowances for credit and other losses surged to S$1.09 billion ($772.5 million) in the three months to March 31, from S$76 million a year earlier. That was well above an average estimate of S$605 million, according to Refinitiv data.

DBS was the first bank in Singapore to report earnings for the quarter. The sector has collectively forecast muted earnings growth for 2020 as interest rates soften and lending moderates following a robust performance in the past few years.

DBS’ quarterly profit fell to S$1.16 billion compared with S$1.65 billion a year earlier, in line with an average estimate of S$1.13 billion from four analysts, according to Refinitiv data. That was the lowest level since the quarter ending September 2017.

“This was largely due to the spike in provisions, which is likely higher than what the market expects but in fact included a large portion of general provisions which shows the bank wants to buffer ahead,” said Kevin Kwek, a senior analyst at Stanford C. Bernstein.

Singapore has reported more than 15,000 confirmed coronavirus infections, one of the highest in Asia, due to outbreaks in cramped dormitories.

DBS said two-thirds of the provisions were set aside in anticipation of a “deeper and more prolonged economic impact from the pandemic.”

The bank retained its proposed dividend of 33 Singapore cents per share for the latest quarter.

($1 = 1.4110 Singapore dollars)

(Reporting by Anshuman Daga; Editing by Kim Coghill and Jane Wardell)