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.
