It is anticipated that BS, a prominent financial institution based in Singapore, will experience an upswing in its projected profits for the year 2025. This projection is predicated on the assumption that the inauguration of Donald Trump as the President of the United States in the upcoming year may result in a reduction in the frequency of interest rate cuts implemented by the Federal Reserve.
Such a scenario could potentially lead to an enhancement in the net interest margin, which serves as a critical indicator of profitability within the banking sector.
Piyush Gupta, CEO of DBS, noted in a briefing after the bank's quarterly earnings announcement that the incoming Trump administration is likely to implement stricter immigration policies and raise tariffs, potentially driving inflation and increasing deficit spending. He remarked, "If that is the case, then it is possible that the Fed monetary policy might stay tighter than is currently being projected. I think a higher interest rate environment is generally better for DBS."
However, Gupta cautioned that DBS, which operates throughout the region from Singapore to China, must remain vigilant regarding legal and regulatory challenges that may arise under Trump's leadership.
On Thursday, DBS, the largest bank in Southeast Asia, reported a record net profit for the third quarter but projected that its 2025 net profit would fall short of 2024 levels due to the introduction of a global minimum corporate tax rate in Singapore.
DBS shares surged by as much as 6.9%, reaching a record high of S$41.87 on Thursday morning. Local competitors, Oversea-Chinese Banking Corporation and United Overseas Bank, which are set to announce their quarterly results on Friday, also saw their shares rise by 3.5% and 2.3%, respectively.
The local benchmark stock index increased by 1.8%.
As the first Singaporean bank to release third-quarter results, DBS reported a 15% rise in net profit for the July-September period, totaling S$3.03 billion ($2.27 billion), significantly surpassing the average estimate of nearly S$2.80 billion from five analysts, according to LSEG data.
This result also exceeded the previous quarterly record of S$2.96 billion set in the first quarter of 2024, despite a year-on-year decline in net interest margin to 2.11% from 2.19% in the third quarter.
The impressive results were fueled by record fee income from wealth management, increased treasury customer sales, and a rise in trading income from markets.
For the nine-month period, net profit surged by 11% to a historic S$8.79 billion, while return on equity improved to 18.8%, up from 18.6% the previous year.
In recent years, Singapore banks have gained from rising global interest rates and significant wealth inflows, attracted by the political stability of the city-state.
However, analysts have indicated that anticipated rate cuts by major central banks and market volatility stemming from global geopolitical and economic uncertainties may hinder their growth trajectory.
According to Gupta, DBS projects that pre-tax profit and group net interest income for 2025 will align with 2024 figures. Nevertheless, net profit after tax is expected to decline next year due to the introduction of a 15% global minimum corporate tax in Singapore, which will affect multinational corporations, including DBS.
DBS has declared a quarterly dividend of 54 Singapore cents per share, an increase from the 48 cents announced in the same quarter last year.
Additionally, the bank revealed the establishment of a new share buyback program amounting to S$3 billion.
Gupta stated, "The new buyback program we announced today is supported by our robust capital position and consistent earnings generation, further demonstrating our commitment to effective capital management."