Reality bites for Singapore banks but diversification dims the pain

DBS CEO Piyush Gupta says: 'If people feel they can’t travel, they don’t spend'

The headline numbers were ugly in Singapore this morning.

At 8.30am, UOB chief executive Wee Ee Cheong explained why his bank’s first-half profit was down 30% year-on-year. Two hours later, Piyush Gupta narrated a 26% decline in the same metric at DBS. “This,” began the CEO, “was a tough quarter.”

The reasons are easily understood: the fact that the Covid-19 pandemic and associated lockdowns brought many of the Asian economies within which the two banks operate to a standstill in April and May, coupled with the central bank response to the pandemic.

“The full impact of the interest-rate cuts flowed through our entire book,” Gupta says. “It is costing us about 80 million bucks a month [Singapore dollars] and that will probably go up to 100 million bucks a month next year.

“It is obviously a big drag on income, compounded by the fact that in April and May there was a basic lockdown in most of the countries in which we operate.”