DBS SECOND QUARTER EARNINGS UP 21% TO SGD 664 MILLION
BEFORE ONE-TIME ITEMS

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Strong, broad-based business growth propels
net interest income and fees to quarterly records

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FIRST-HALF EARNINGS RISE 20% TO SGD 1.28 BILLION

SINGAPORE, 27 July 2007 - DBS Group Holdings (DBS) today reported net earnings for second quarter 2007 rose 21% from a year ago and 8% from the previous quarter to SGD 664 million before one-time items. The results were underpinned by strong, broad-based business volume growth. Net interest income and fees set quarterly records, with quarterly net interest income crossing SGD 1 billion for the first time. For the first half, net earnings rose 20% from a year ago to SGD 1.28 billion.

During the quarter, DBS took a SGD 159 million impairment charge to reflect lower market valuation for its 16% investment stake in TMB Bank. The impairment charge brings the value of the holding from approximately SGD 478 million to SGD 319 million. There was also an allowance write-back of SGD 55 million for an office property in Singapore as market valuations improved. Including both one-time items, net earnings for the second quarter were SGD 560 million.

Net interest income up 14% as loans expand 19% from year ago
Net interest income rose 14% from a year ago and 5% from the previous quarter to SGD 1.03 billion on higher asset volumes. For the first half, net interest income of SGD 2.00 billion was 15% above a year ago.

Customer loans rose 5% during the quarter to SGD 99.0 billion, bringing growth to 19% from a year ago. As with recent quarters, the increase was led by corporate and SME loans as DBS’ customer franchise captured strong economic conditions in Singapore and in the region. Singapore housing loans also grew, sustaining the high rate of applications and new disbursements in recent quarters.

Net interest margins were unchanged from the previous quarter at 2.21% as a better asset-liability mix offset the impact of declining interest rates in Singapore, narrower interest spreads in Hong Kong, and the additional interest costs in connection with the issuance of USD 2.0 billion of subordinated debt during the quarter.

Fees climb 25% from year ago
Fees climbed 25% from a year ago and 20% from the previous quarter to SGD 371 million as contributions from a wide range of corporate and consumer activities increased. This quarter’s growth was led by wealth management, stockbroking, credit cards and investment banking. Wealth management product sales rose 39% from a year ago to SGD 2.13 billion as the launch of new products and strong investor sentiment boosted demand. For the first half, net fee income grew 22% to SGD 680 million.

Net trading income from trading businesses declined to SGD 100 million from SGD 169 million in the previous quarter, when there were strong customer flows for hedging products as well as more favourable trading conditions. For the first half, net trading income from trading businesses amounted to SGD 269 million compared to SGD 348 million for the year-ago period.

Higher operating efficiency with cost-income ratio at 43%
Expenses of SGD 660 million were kept at the previous quarter’s level. An increase in revenue-related expenses resulting from higher business volumes was offset by lower staff expenses. Compared to a year ago, expenses were 11% higher. The costincome ratio of 43% was similar to the previous quarter and below the 44% a year ago.

For the half year, a 14% increase in expenses to SGD 1.32 billion compared to a higher 18% rise in income, resulting in a better cost-income ratio of 43% compared to last year’s 44%.

Asset quality remains strong
Asset quality continued to be strong. The non-performing loan rate improved to 1.4% from 1.5% in the previous quarter. Non-performing assets rose 2% during the quarter to SGD 1.49 billion on an expanded asset base.

Specific allowances for loans amounted to SGD 47 million or 19 basis points of loans, in line with recent quarters. Total cumulative allowances amounted to 124% of non-performing assets, little changed from the previous quarter.

Excluding one-time items, return on equity improved to 13.6%, while return on assets rose to 1.23%. For the first half, return on equity was 13.4% and return on assets was 1.22%, better than the 12.6% and 1.15% respective ratios a year ago.

The capital adequacy ratio stood at 14.7%, with the tier-1 ratio at 9.4%, compared with 13.6% and 9.6% in the previous quarter.

DBS Vice-Chairman and CEO Jackson Tai said, “Our regional customer franchise delivered yet another quarter of continued growth. We set new records in net earnings, customer loans, net interest income and fees, and we maintained our interest margins despite declining market rates. Our commitment to deliver better shareholder value is evident in our better returns on equity and assets, the highest we have seen in a long time.”

The Board of Directors declared a quarterly dividend of 20 cents per share, similar to the previous quarter. Total dividends for the first half of 40 cents per share are 18% higher than the same period last year.

 

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