DBS Group's net fee and commission in its wealth management business dropped by 19 per cent from S$52 million ($40.9 million) to S$42 million during the three months to September 2011 as a darkening economy spooks private clients.

DBS Group, Southeast Asia’s largest bank, saw net fee and commission in its wealth management business drop by 19 per cent from S$52 million ($40.9 million) to S$42 million during the three months to September 2011, according to the bank’s third quarter results published today.

Although fees were down during the last quarter, net fees and commission were up a third compared to the same period last year, said the bank.

The private banking and consumer division, which earns much of its fees from accounts, deposits, loans, cards and investment and insurance products, saw profit before tax shrink 11 per cent to S$141 million during the third quarter compared to the previous three months, as margins in the region narrowed and a darkening economic climate made clients became more risk-averse.

Net interest income declined 7 per cent to S$350 million as higher loan volumes were offset by lower net interest margin, said the bank. Non-interest income rose 5 per cent to S$196 million. Overall income dropped marginally from S$562 million to S$546 million. Expenses were 4 per cent higher at S$391 million as staff and non-staff costs rose, said the bank.

Loans to customers in the consumer/private banking business rose fractionally to S$534 million from $529 million in the previous quarter. This reflected a growth in loans across DBS Group. Loans increased 7 per cent during the quarter to S$186 billion, excluding currency translation effects. There was broad-based corporate borrowing across the region, with trade finance accounting for slightly less than half of loan growth. 

For the bank overall the results were largely positive.DBS Group recorded net profits of S$762 million for third-quarter 2011, an increase of 6 per cent from a year ago and 4 per cent from the previous quarter. Business volume and customer income trends were sustained as total income reached a new high.

Liquidity remains healthy. With steady deposit inflows, loan-deposit ratio is at 84 per cent. Customer deposits rose 4 per cent or during the quarter to S$220 billion, bringing growth to 19 per cent or S$35 billion over the past 12 months.

Net interest income rose 1 per cent from the previous quarter to a record S$1.21 billion. Income from cross-selling treasury products to corporate and retail customers increased 15 per cent. The bank also recorded gains of S$47 million from the merger of DBS Asset Management with Nikko Asset Management.

Total income rose 7 per cent from the previous quarter to S$ 1.97 billion. Investments in people and infrastructure for business growth resulted in a 13 per cent increase in expenses to S$2.4 billion. The cost-income ratio rose from 40 per cent a year ago to 42 per cent. 

“DBS continues to fire on all cylinders, achieving record earnings for the first nine months of this year. We are particularly pleased with our strong third-quarter earnings, given the challenging operating environment, characterised by prolonged interest rate headwinds, increasing market volatility and macroeconomic uncertainties,” said DBS chief executive Piyush Gupta.