DBS Group Holdings expects the coronavirus outbreak to hurt full-year revenue by as much as two percent after Southeast Asia's biggest lender topped market estimates with a strong rise in fourth-quarter profit. Singapore banks had previously forecast muted earnings growth for 2020 as interest rates soften and lending moderates after a robust performance in the past few years.

"Our base case is that, consistent with most research, the virus should start coming under control and die down once we get to the summer months. So, we have about a quarter of impact, much like SARS in 2003," CEO Piyush Gupta said on a webcast to reporters on Thursday.

Singapore-based DBS is factoring in a 1-2 percent revenue hit for its current year, on assumptions the virus outbreak will cut back on consumer spending, including on credit cards. "Spending on cards, both in Hong Kong and Singapore in February, is beginning to come off a bit," Gupta said, adding that the wealth management business is also seeing early signs of a slowdown.

In the fourth quarter, DBS reported a 7% rise in revenue

DBS Group
DBS Group. Reuters

In the latest fourth quarter, it reported a seven percent rise in revenue to S$3.46 billion ($2.49 billion), underpinned by loan growth and double-digit improvement in fee income, led by its wealth management and investment banking businesses. The coronavirus epidemic, which has already claimed more than 1,300 lives in China, and infected hundreds in dozens of other countries, has rattled financial markets and raised concerns about its impact on global economic growth.

DBS, in which state investor Temasek Holdings holds a 30 percent stake, reported a 14 percent rise in net profit to S$1.51 billion for October-December versus S$1.32 billion a year earlier. This was above an average estimate of S$1.48 billion from five analysts, according to data from Refinitiv.

"Given the current situation, in our view, it is a good set of numbers and there has to be some moderation of expectation due to the impact of the virus," Krishna Guha, an analyst at Jefferies, said in a report. Singapore contributed nearly 72 percent to DBS' net profit last year, while Hong Kong made up 22 percent. In November, DBS had forecast mid-to-single-digit increase in loan growth for 2020.

Singapore's export-reliant economy to contract this quarter: Economists

Economists expect Singapore's export-reliant economy to contract this quarter as the coronavirus hits trade and tourism. Last year, the economy grew 0.7 percent, the slowest pace in a decade as the Sino-US trade war took its toll. "As people get antsy and the environment gets more uncertain, people's willingness to do deals comes off," Gupta said.

Singapore has reported 50 coronavirus cases, one of the highest tallies outside China. On Wednesday, DBS asked 300 staff to work from home after an employee tested positive for coronavirus. To help customers cope with the impact of the epidemic, DBS announced a six months moratorium on principal repayments for small-and-medium enterprises' property loans in Singapore and Hong Kong, and for mortgage loans for its retail clients in Singapore.

The bank's full-year profit rose 14 percent to a record S$6.39 billion on broad-based business momentum and total income increased 10 percent to a record S$14.5 billion. It raised its quarterly dividend by 10 percent.