SINGAPORE (Nov 11): While DBS Group Holdings CEO Piyush Gupta is confident of the bank’s prospects in Hong Kong, the political turmoil there has prompted the bank to take a prudent approach for its operations in the territory.
In particular, the bank more than doubled its allowances to $59 million in 3Q19 ended Sept 30 from $28 million in the same quarter last year.
This led its Hong Kong operations to record a 15% q-o-q decline in earnings to $334 million from $385 million.
“There has been a lot of concern and disquiet about Hong Kong,” he says in a results briefing on Monday.
“The net profit is down, but that’s only because we took a specific allowance in Hong Kong and we did that just to be prudent. But given the environment, we don’t know what is coming down the pipe, we said we put some money aside just in case,” he adds.
Chng Sok Hui, DBS chief financial officer, notes that the bank’s allowances are considered “generous” compared to the “conservative” provision levels of its Hong Kong peers.
But, if and when the political situation improves in Hong Kong, DBS has the ability to reverse these provisions, she adds.
Gupta says it’s hard to tell if the slowdown in Hong Kong trade is due to domestic unrest or the trade tensions between China and the US.
But he reckons that Hong Kong will continue to be an important market to DBS as the territory’s economy and financial market will continue to benefit from China’s capital market and economic activity.
For instance, he points out that Alibaba Group Holding is reportedly resuming with its listing plans in Hong Kong.
“So the capital market in HK is continuing to be quite active,” he says.
Moreover, as Hong Kong continues to leverage and integrate into the Greater Bay area, this will be a positive for the bank, he adds.
See also: DBS 3Q earnings up 15% to $1.63 bil on strong operating performance, broad-based growth
