DBS CEO cautions on Fed hikes after profit surge

Bloomberg

DBS Group Holdings Ltd Chief Executive Officer Piyush Gupta said investors in Southeast Asia’s largest lender should be cautious about uncertainties stemming from Federal Reserve interest rate hikes and slowing Chinese growth.
That tone followed the release of strong profit growth for the fourth quarter, wrapping up a year which he described as the bank’s best financial performance in the last decade.
Gupta’s concern is a scenario where central bank’s tighten policy too quickly and choke off economic recoveries, an outcome that he said DBS hasn’t factored into its outlook. For now though, that’s unlikely, even if there are seven or eight Fed hikes, he said.
“If the central banks find that inflation is too sticky and therefore rates get back to three, three and a half, 4% above, then that’s another story. That’s not our base case,” Gupta said in a briefing.
In China, there remains uncertainty over the economy’s trajectory and consumption with its strategy to tolerate very little spread of the omicron variant, Gupta said.
The caution follows a 37% jump in fourth-quarter profit, boosted by its highest loan growth in seven years and increased fee income.
Net income climbed to S$1.39 billion ($1.03 billion) in the three months ended on December 31, beating the S$1.36 billion average estimate.
“It is quite clear from a financial strategy and business standpoint, this is probably the best performance we’ve had in certainly the entire of the last decade,” Gupta said.
Loan growth increased by 9%, which helped to mitigate the impact of interest rate cuts, Gupta said.