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Ref No: 10/2006
DBS First-Quarter earnings rise 39% to $518 Million
* * *
Broad-based improvement in interest and non-interest
income
underpins stronger performance
SINGAPORE, 28 April 2006 DBS Group Holdings announced today that net
profit for the first quarter to March 31, 2006 rose 39% year on year
to $518 million. Total operating income grew 22% as interest and fee
income continued to expand while trading income recovered after several
quarters of subdued market activity.
The increase in total operating income compared to a year ago resulted
from a combination of healthier interest margins, higher business volumes
and a better trading environment as market conditions improved.
Compared to fourth quarter 2005, net profit was 35% higher while total
operating income grew 14% if one-time gains and goodwill charges booked
during the previous quarter were excluded. First quarter loan volumes,
however, dipped slightly from December 2005 after 12 consecutive quarters
of growth due to declines in housing loans in Singapore and Hong Kong
as DBS exercised discipline amid intense mortgage competitive pricing
pressures.
Interest income and margins at quarterly record
Net interest income climbed 24% from a year ago and 6% from the previous
quarter to a record $850 million.
Interest margins rose from 1.82% a year ago and 2.06% in the previous
quarter to a record 2.23%. In Singapore, loan yields, including housing
loan yields, continued to increase across the board while the increase
in funding costs was slower. In Hong Kong, the spread between prime
lending rates and funding costs reached their highest level in five
quarters.
Customer loans rose 11% from a year ago to $78.8 billion from lending
to corporates and SMEs across the region. Compared to December 2005,
customer loans fell 1% as housing loans declined 2%. Higher interest
rates encouraged residential mortgage borrowers in Singapore to repay
portions of their loans ahead of schedule with lower-yielding Central
Provident Fund savings, while the housing loan market remained competitive
in Hong Kong. By geographical region, a fall in customer loans booked
in Singapore and Hong Kong was partially offset by higher volumes from
the rest of the region.
The overall loan-deposit ratio stood at 66%, up from 61% a year ago
but lower than the 68% in December 2005 as deposits continue to grow.
Non-interest income up 19% as both fee and trading incomes
grow
Non-interest income amounted to $420 million, up 19% from a year ago
and 34% from the previous quarter.
Fee income rose 14% from a year ago and 9% from the previous quarter
to $262 million. The strongest growth was from fund management and stockbroking
as a result of buoyant equity markets, while fees from trade and remittances,
credit cards and wealth management also increased.
Sales of unit trusts, bancassurance and structured deposits were 7%
below a year ago but rose 32% from the previous quarter to $1.92 billion.
Unit trust sales were boosted by improved investor sentiment.
Net trading income from trading businesses amounted to $113 million,
compared to $73 million a year ago and $5 million in the previous quarter.
There were increased trading opportunities in foreign exchange and interest
rate instruments, as well as higher demand from corporate and SME clients
to hedge their foreign exchange risks against more volatile currency
markets.
Cost-income ratio improves to 44%
Operating expenses grew 16% from a year ago and 2% from the previous
quarter to $564 million. Staff costs increased 13% from a year ago on
a 9% rise in headcount to 12,673. Compared to the previous quarter,
headcount fell slightly while staff costs grew 8% as a result of higher
bonuses and salaries amid a tight labour market. Non-staff costs were
19% higher than a year ago as technology and general expenses rose,
but they were slightly below the previous quarters.
With total operating income rising faster than operating expenses,
the cost-income ratio improved to 44% from 47% a year ago and 49% in
the previous quarter.
Asset quality remains strong
The non-performing loan rate of 2.1% was unchanged from the previous
quarter and below the 2.4% a year ago. Total non-performing assets,
including debt securities and contingent liabilities, fell to $1.75
billion, 9% below a year ago and 6% below the previous quarter.
Specific provision charges set aside for loans amounted to $40 million
or 20 basis points of average loans, compared to the 25 basis points
a year ago and the 35 basis points in the previous quarter. Provision
charges for new NPLs were lower during the quarter than in the two comparative
periods and more than offset a decline in provision write-backs for
loan recoveries. A general provision charge of $14 million was also
taken during the quarter as a result of higher off balance sheet liabilities.
Total cumulative provision coverage reached 100%, the highest in DBS
history, compared to 97% in December 2005 and 90% a year ago.
The total capital adequacy ratio stood at 14.1% with the tier-1 ratio
at 10.2%, both comfortably above minimum regulatory requirements.
DBS Vice-Chairman and CEO Jackson Tai said, Our better top-line revenues
and bottom-line profit reflect margin expansion as well as our work
over many quarters to re-shape our asset mix and grow our loan book.
We are encouraged by the sustained growth in net interest margins and
income, and the double digit increase in fee and trading income. We
will build on this momentum as we continue to grow our customer franchise
across the region.
The Board of Directors declared an ordinary dividend of 17 cents per
share for the quarter, unchanged from the previous quarter but 55% above
the 11 cents per share paid a year ago.
About DBS
Headquartered in Singapore, DBS is one of the largest financial services
groups in Asia with almost five million customers and operations in
14 markets. The largest bank in Singapore and the fifth largest banking
group in Hong Kong as measured by assets, DBS AA- and Aa2 credit
ratings are among the highest in the Asia-Pacific region. DBS has leading
positions in consumer banking, treasury and markets, asset management,
securities brokerage, equity and debt fund raising. Beyond the anchor
markets of Singapore and Hong Kong, DBS serves corporate, institutional
and retail customers through its operations in China, India, Indonesia,
Malaysia, Thailand and The Philippines. More information about DBS Group
Holdings and DBS Bank can be obtained from our website www.dbs.com.
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