By Saeed Azhar

DBS , Southeast Asia's biggest bank, said it is ready to capture growth opportunities after it posted a smaller-than-expected 15 per cent drop in quarterly profit as strong loan growth and higher fee income partially offset higher bad debt charges.

DBS Chairman Koh Boon Hwee, who has been running the bank since January, said the result reflects the underlying strength of its business and it will continue to manage risks and costs.

"DBS is well positioned to weather the uncertainties ahead as our balance sheet remains strong," he said in a statement.

The outlook for DBS has improved as it continues to seize market share from foreign rivals on loans and is poised to benefit from Asia's recovery with its strong presence in Singapore and Hong Kong.

But bad debt charges climbed about eight times to S$466 million from a year ago, hit by exposure to shipping and Middle East corporates.

The non-performing loan rate rose to 2.8 per cent from 2.0 per cent in the first quarter and 1.4 per cent a year ago.

Analysts were expecting a strong result from the bank after its rivals United Overseas Bank and Oversea-Chinese Banking Corp announced better-than-expected earnings this week.

The bank, which is 28 per cent owned by Temasek Holdings, did not make any announcement about its next chief executive after its last CEO Richard Stanley died of cancer.

DBS's April-June net profit fell to S$552 million from S$652 million a year ago, it said on Friday, above an analysts average forecast of S$455 million.

DBS saw loan growth of 8 per cent in the second quarter from the year-ago period, the fastest among the three listed Singapore banks.

DBS generates about 90 per cent of its earnings from Singapore and Hong Kong.

DBS said quarterly net interest income rose 5 per cent to S$1.1 billion from a year ago, and fee and commission income also climbed by 5 per cent. Trading and investment gains boosted other non-interest income, which surged 62 per cent.

Shares of DBS dropped 0.7 per cent on Thursday and have outperformed rivals and the benchmark stock index this year.

DBS shares are up around 60 per cent this year against a 48 per cent rise in the benchmark Straits Times Index.