SINGAPORE – According to the chief executive of Singapore's largest bank, there are signs that higher prices are "more firmly anchored" and more difficult to reverse.
"You're starting to see firmer inflation coming through," DBS Group Holdings CEO Piyush Gupta told CNBC's Capital Connection on Friday. "Part of the inflation that we're seeing is really wage inflation. Salaries are starting to go up and I don't think these can be reversed that easily."
The Federal Reserve claimed Wednesday that price increases in the US were "temporary". However, rising inflation in the US and other major economies has raised concerns among investors that central banks would be forced to hike rates sooner and faster than expected.
While inflation could add to costs, banks benefit from higher interest rates, Gupta said when DBS announced third-quarter earnings that exceeded analysts' estimates.
The bank on Friday reported net income of $ 1.7 billion ($ 1.26 billion) for the July-September quarter – 31% more than a year ago, beating the average forecast of $ 1.57 billion – Dollars for refinitive.
DBS stock was up 0.3% in early trading on Friday. The stock is up 28.6% this year from closing on Thursday, outperforming the Benchmark Straits Times Index's gains of 13.2% over the same period.
In my opinion, we have seen the worst of the interest rate cycle, from our point of view of course, and you will see some recovery.
CEO, DBS Group Holdings
The net interest margin, a measure of the profitability of lending, was 1.43%, two basis points lower than the previous quarter due to lower short-term interest rates.
However, Gupta said this is likely the bank's worst margin as interest rates rise and some central banks – like those in Singapore and South Korea – tightened monetary policy.
"In my opinion we have seen the worst of the interest rate cycle, from our point of view of course, and you will see some recovery," said the CEO.
"I think that central bank actions have a tendency to tighten, the pace is a bit uncertain," he added.
Here are other highlights of the bank's third quarter results:
The bank wrote back $ 70 million in write-downs – previously earmarked for potential loan losses – as the economic recovery continues. The DBS board announced a quarterly dividend of 33 Singapore cents per share.
The publication of the financial results of DBS rounded off the reporting season for Singapore's top banks.
Earlier this week, the other two banks – Oversea-Chinese Banking Corp and United Overseas Bank – also reported third-quarter earnings that exceeded expectations.
OCBC's net income rose 19% year over year to $ 1.22 billion (US $ 904.5 million), while UOB reported a 57% increase in net income to $ 1.05 billion over the same period.