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* DBS Q1 core net profit S$1.03 bln vs average forecast S$857 mln
* OCBC Q1 net profit S$899 mln vs average forecast S$727 mln
* Both banks signal strong business momentum
SINGAPORE, April 30 DBS Group Holdings and Oversea-Chinese Banking Corp, Singapore's two biggest banks, reported record quarterly profit and beat market estimates, powered by double-digit growth in loans and improving interest rate margins.
The better-than-expected results came despite a slowdown in Singapore housing market which most analysts have said will begin to hurt bank earnings in the second half of this year.
Both banks saw an improvement in interest rate margins - the difference between the interest a bank pays on deposits and the interest it charges on loans - which helped boost their net interest income to record levels.
DBS' core net profit rose to a record S$1.03 billion ($823 million) for the first three months of 2014, up from S$950 million in the same period a year earlier and above an average forecast of S$857 million from six analysts polled by Reuters.
DBS CEO Piyush Gupta said in a statement the bank's strong balance sheet meant it was well positioned to benefit from a rise in interest rates, which analysts say is inevitable as the U.S. Federal Reserve unwinds its massive stimulus.
Net profit including special items, climbed 30 percent to a record S$1.23 billion, boosted by items such as a one-off gain from the sale of a stake in a Philippine lender.
OCBC earned a record S$899 million in net profit for the quarter, up from S$696 million in the same period a year earlier, and above an average forecast of S$727 million from four analysts.
The housing market has become a key concern for Singapore's banks after loans to the sector slowed and showed a growth rate of 8.4 percent in the first two months of the year. That compares a compound annual growth rate of 15 percent in the past five years.
In an effort to tap new areas of growth, the two banks have announced acquisitions in the past few months.
DBS is buying the Asian unit of Societe Generale's private bank, while OCBC is paying $5 billion for one of Hong Kong's last remaining family-owned banks, giving it a much sought-after gateway to the Greater China region.
Shares of DBS are down 1.5 percent so far this year. OCBC has fallen 7.2 percent, hit by concerns that its acquisition of Wing Hang would require equity capital raising.
Shares of United Overseas Bank, whose shares are flat this year, is due to report after the market close. (Reporting by Saeed Azhar and Anshuman Daga; Editing by Edwina Gibbs)