UPDATE 2-DBS leads Q3 surge in Singapore bank profits

* DBS Q3 net profit S$563 mln; consensus S$480 mln

* Bad debt charges fall 17 pct, net interest income up 6 pct

* Says well positioned to take advantage of recovery

* UOB, OCBC also beat Q3 forecasts as bad debts ease

* DBS shares open up 3.2 pct, UOB up 2.1 pct (Updates throughout)

By Saeed Azhar

SINGAPORE, Nov 6 (Reuters) - DBS Group (DBSM.SI), Southeast Asia's biggest bank, led a surge in quarterly profits among Singapore's three listed banks, all of which beat forecasts and are better positioned than global peers for post-crisis growth.

DBS, whose new CEO and former Citibanker Piyush Gupta will join the bank this month, said net interest income was at a quarterly record and fee income at its highest since the onset of the global financial crisis.

Earnings at Singapore's banks are poised to improve further next year with bad debts peaking, a recovery in Asian economies boosting loan demand and rising fees from a buoyant capital market.

"You will continue to see the same momentum going forward," said Thilan Wickramasinghe, a bank analyst at CLSA. "If you are talking about recovery and demand returning in the region, they are geared towards some of the high-growth geographies."

JPMorgan analyst Harsh Wardhan Modi, who maintained its 'overweight' on DBS, said Singapore bank stocks should outperform the broader market going into 2010.

"The key drivers for these stocks would be across-the-board estimate revisions," he said.

Analysts had predicted strong results from DBS after rivals United Overseas Bank (UOBH.SI) and Oversea-Chinese Banking Corp (OCBC.SI) beat forecasts last week. [ID:nSIN440140]

DBS said on Friday its July-September net profit rose to S$563 million ($404 million) from S$379 million year ago, and beat analysts' forecasts for S$480 million, according to an average of six forecasts in a Reuters survey.

Its shares opened 3.2 percent higher, outperforming a 1.5 percent rise in the benchmark Singapore index .FTSTI.

"I believe DBS is well positioned to take advantage of the nascent economic recovery -- we will emerge fitter and stronger," said DBS Chairman Koh Boon Hwee in a statement.

For a DBS earnings Graphics, click here

PULLED OUT OF ING RACE

DBS has been focusing on a strategy to grow its existing business in Indonesia, India and China to lower its reliance on Singapore, which accounted for more than half of January-September net profit.

It has shied away from expensive acquisitions, recently pulling out of a race to buy ING's Asia private banking business, which was bought instead by OCBC.

Investors want to know if DBS will adopt new strategies to expand aggressively in the region, though the bank did not make any references to acquisitions when announcing its results. [ID:nSIN215607]

Koh, who has been running the bank since January, told Reuters in September that DBS plans to double its branch network in Indonesia over the next three years as it seeks expansion in Southeast Asia's biggest economy.

DBS, 28 percent-owned by state investor Temasek [TEM.UL], saw loan growth of 1 percent in the third quarter from a year ago.

Quarterly net interest income rose 6 percent to S$1.1 billion as net interest margins rose to 2.03 percent from 1.99 percent, and fee and commission income climbed by 14 percent.

Bad debt charges fell 17 percent to S$265 million.

Shares of DBS are up about 58 percent this year, outperforming the benchmark index's 52 percent gain and beating UOB, though on a par with OCBC. (Editing by Neil Chatterjee and Valerie Lee)