DBS second-quarter earnings up 16% to $549 million; first half earnings
increase 26% to cross $1 billion
* * *
Interest income and fees rise to quarterly record
on sustained operating trends
* * *
LOANS GROW 6% FROM PREVIOUS QUARTER
SINGAPORE, 28 July 2006 - DBS Group Holdings reported today
that second quarter net profit increased 16% from a year ago to $549 million
excluding one-time items, and 6% from the previous quarter. For the first
half, earnings rose 26% from the previous year to $1.07 billion.
Operating trends underpinning DBS’ first quarter
2006 performance were sustained in the second quarter, as DBS’ customer
franchise benefited from firmer economic conditions. Higher interest spreads
and business volumes resulted in record quarterly amounts for interest
income and fees. Trading income was maintained at the previous quarter’s
levels. Total operating income rose 20% year-on-year, and 7% quarter-on-quarter,
to $1.35 billion, the highest since DBS began quarterly reporting in 2001.
First half operating income rose 21% (both year-on-year and half-on-half)
to a record $2.62 billion.
If a one-time gain of $54 million from the sale of a Hong
Kong office building is included, second quarter earnings were $603 million
under Singapore financial reporting standards.
Interest income up 26% as loans grow 6% from year
ago
Net interest income for the quarter climbed 26% from a
year ago and 6% from the previous quarter to a record $897 million due
to improved interest spreads and higher asset volumes. For the first half,
net interest income was up 25% from a year ago to $1.75 billion.
Second quarter customer loans rose to $83.4 billion, up
6% compared to a year ago and to the previous quarter, led by lending
to corporates and SMEs in the region. Consumer loans were little changed
from both comparative periods, in line with industry trends in Singapore
and Hong Kong. The higher loan volumes raised the loan-deposit ratio to
69%, up from 66% in the previous quarter and 68% a year ago.
Net interest margins at 2.23% were the same as first quarter
2006 and sustained the improvement since the last quarter of 2004. Interest
margins were better than the 1.84% a year ago as a result of higher spreads
between asset yields and funding costs in Singapore and Hong Kong.
Non-interest income increase led by fees
Total non-interest income (excluding one-time gains) amounted
to $457 million, a 9% increase from a year ago and the previous quarter.
Fees surpassed the previous record set a year ago, rising
8% from second quarter 2005 to $296 million with improved stockbroking
commissions and investment banking fees. Compared to first quarter 2006,
fees rose 13% mainly from higher investment banking activities such as
IPOs and loan syndication, while credit card and trade and remittance
fees also grew.
Sales of wealth management products, comprising unit trusts,
bancassurance and structured deposits, amounted to $1.60 billion, 16%
lower than the previous quarter when market and investor sentiment was
stronger.
Net trading income from trading businesses of $112 million
was little changed from the previous quarter as customer flows and trading
opportunities were maintained.
For the first half, non-interest income amounted to $877
million, up 13% from a year ago, with fees rising 11% to $558 million.
Cost-income ratio maintained at 44%
Operating expenses increased 23% from a year ago and 5%
from the previous quarter to $594 million as a result of higher staff
costs and computerisation expenses. Staff costs rose 27% from a year ago
due to higher salaries arising out of a competitive labour market, and
because of increased bonus accruals in line with better second quarter
results. Non-wage costs were 18% higher from a year ago largely due to
computerisation expenses and professional fees. The cost-income ratio
stood at 44%, similar to both comparative periods.
For the first half, operating expenses rose 19%, in line
with the 21% increase in operating income, resulting in the cost-income
ratio being little changed at 44%.
Asset quality continues improvement
Asset quality strengthened during the quarter. Non-performing
assets (including debt securities and contingent liabilities) declined
6% from the previous quarter and 13% from a year ago. The NPL rate improved
to 1.9% from 2.1% in March 2006 and 2.2% in June 2005.
Specific provision charges amounted to $28 million compared
to $17 million in the previous quarter and $60 million a year ago. General
provision charges amounting to $34 million were taken during the quarter
for the higher loan balances.
For the first half, total specific provision charges amounted
to $45 million compared to $108 million a year ago. General provision
charges amounted to $48 million, compared to $36 million a year ago.
Total cumulative provision coverage reached 105%, surpassing
the previous high of 100% in March 2006 and compared to 94% in June 2005.
DBS’ return on assets improved to 1.18% compared
to 1.03% a year ago and 1.14% in the previous quarter. Return on equity
rose to 12.7% compared to 11.1% a year ago and 12.2% in the previous quarter.
The total capital adequacy ratio stood at 14.4%, and included
the US$900 million subordinated debt issued in June. The tier-1 ratio
stood at 10.1%. Both ratios were comfortably above regulatory requirements.
DBS Vice Chairman and CEO Jackson Tai said, “Our
customer franchise across Asia produced another quarter of growth and
better returns to our shareholders. We recorded new highs in net interest
income and fees in highly competitive markets, reflecting our dogged commitment
over many quarters to grow our loan book, change our business mix and
strengthen asset quality.”
The Board declared a dividend of 17 cents per share for
the quarter, similar to the previous quarter but above the 15 cents per
share paid in second quarter 2005. Together with the 17 cents paid for
the first quarter, total dividend for the first half was 34 cents, compared
to 26 cents for the year-ago period.
About DBS
Headquartered in Singapore, DBS is one of the largest financial services
groups in Asia with operations in 15 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.
|