DBS wealth management fees to shrink 1.3% in Q4

The bank's high-net worth clients are turning cautious amidst the market rout.

The wealth management fees of DBS are expected to contract 1.3% YoY to $461.51m (S$627m) in 4Q2018 as market sentiment remains weak in light of the heightened US-China trade dispute.

Also read: Singapore banks turn to loans to boost earnings as wealth income weakens

The bank suffered a decline in wealth management fees as high-net worth clients have become more risk averse and turned to less risky income streams to preserve their wealth. 

“Contribution from investment banking fees was also lacklustre. Healthy growth from loans related fees (+6.0% yoy) and credit cards (+25.8% yoy) could not offset the steep decline in wealth management fees,” said Jonathan Koh, chartered financial analyst at UOB Kay Hian.

Also read: Banks in Singapore fall from grace as lending and non-interest income take blow

The escalating trade tensions is set to weigh in on DBS the hardest given its large private banking franchise and exposure to Greater China unlike UOB whose WM business targets the mass affluent segment, according to an earlier report from CIMB.  

On the other hand, double digit growth in DBS’ net interest income of 10.1% YoY could counter the bank’s decline in wealth management fees. Its NIM will continue to expand of 1 bp QoQ to 1.87% due its strong deposit franchise for the Singapore dollar.

Koh expects DBS’ profit to rise 8% to $1.29b for 4Q18, representing a 8.8% QoQ slip and a 8.0% YoY rise. Loan growth would be up 6.6% YoY whilst net trading income fell 47.4% YoY to S$120m, attributed to its unexpected shift in yield curve.