By Yantoultra Ngui
SINGAPORE (Reuters) -Singapore's top bank DBS sees an upside to its 2025 profit when Donald Trump takes office as U.S. president next year, as his policies could spell fewer interest rate cuts by the Federal Reserve that translate into higher net interest margin, a key profitability gauge.
The incoming Trump administration is generally expected to adopt stricter immigration policies and impose more tariffs that could spur inflation, as well as increased deficit spending, DBS CEO Piyush Gupta said in a briefing after the bank's quarterly earnings results on Thursday.
"If that is the case, then it is possible that the Fed monetary policy might stay tighter than is currently being projected," he added. "I think higher interest rate environment is generally better for DBS."
Nevertheless, Gupta said DBS, with operations across the region from Singapore to China, must be wary of legal and regulatory risks under Trump's administration.
DBS, Southeast Asia's biggest bank, posted on Thursday a record net profit in the third quarter, but forecast 2025 net profit to be below 2024 levels because the city-state is introducing a global minimum corporate tax rate.
DBS shares rose as much as 6.9% to a record high of S$41.87 on Thursday morning. Local rivals Oversea-Chinese Banking Corporation and United Overseas Bank (OTC:UOVEY), which are scheduled to report their quarterly results on Friday, also rose 3.5% and 2.3%, respectively.
The local benchmark stock index climbed 1.8%.
DBS, the first Singapore lender to report third-quarter results, said its July-September net profit surged 15% to S$3.03 billion ($2.27 billion), easily beating the mean estimate of nearly S$2.80 billion from five analysts, according to LSEG data.
It also topped the previous quarterly record of S$2.96 billion that it set in the first quarter of 2024, even though its year-on-year net interest margin declined to 2.11% during the third quarter from 2.19%.
The strong result came on the back of record fee income driven by wealth management, higher treasury customer sales and increased markets trading income.
Nine-month net profit rose 11% to a record S$8.79 billion, while return on equity climbed year-on-year to 18.8% from 18.6%.
Singapore banks have benefited in recent years from higher global interest rates and strong inflows of wealth drawn by the city-state's political stability.
But rate cuts by big central banks and volatile markets due to global geopolitical and economic uncertainties are set to weigh on their growth momentum, analysts have said.
DBS forecast 2025 pre-tax profit and group net interest income to be around 2024 levels, according to Gupta. But net profit after tax will be lower next year due to a 15% global minimum corporate tax being introduced by Singapore from January, which will be imposed on multinational companies including DBS.
DBS announced quarterly dividend of 54 Singapore cents per share, up from 48 cents declared in the same quarter a year ago.
The bank also announced that its board had established a new share buyback programme of S$3 billion.
"The new buyback programme we announced today is underpinned by our strong capital position and ongoing earnings generation, and it is another affirmation of our commitment to capital management," Gupta said.
($1 = 1.3324 Singapore dollars)