SINGAPORE - DBS Group Holdings, Singapore's biggest lender, beat forecasts with a 6 per cent rise in its core quarterly profit, but a slump in mainly China-related trade loans signalled how Chinese risks are spreading across the region.
China's efforts to boost growth have led to easier onshore rates and reduced the incentive for companies to borrow offshore. China's economy is also slowing - its gross domestic prroduct grew 6.7 per cent in the first quarter this year from a year earlier, its slowest pace in seven years.
DBS said loans for the quarter declined by 1 per cent on constant currency basis, but trade loans, linked largely to China, plunged by 23 per cent.
Net profit came in at S$1.20 billion in the three months ended March, versus a S$1.13 billion core profit a year earlier and compared with an average forecast of S$1.017 billion from five analysts polled by Reuters.
Last year's overall first quarter net profit of S$1.269 billion was boosted by a one-time gain from a property disposal.
Singapore lenders' profits are under pressure due to slowing Asian economies, particularly China, and weak commodity prices that have boosted provisions on loans to energy services firms.
DBS benefited from a 16 basis point rise in net interest margin in the quarter due to higher Singapore dollar interest rates and higher wealth management income.
DBS said loans from non-trade related corporates and housing grew.
Smaller rival Oversea-Chinese Banking Corp, last week had warned of sluggish loan growth this year and risks from the offshore marine sector due to weak commodity prices, as it posted its smallest profit in more than a year.
DBS said its specific provisions for bad loans increased by 6 per cent to S$170 million which included amounts for customer exposures in Hong Kong and rest of Greater China.