Full-Year 2006 earnings rise 32% to a record $2.18 billion
as interest and fee income reach new highs

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Fourth-quarter earnings up 45% to $556 million on sustained operating trends

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BOARD RECOMMENDS INCREASE IN QUARTERLY DIVIDEND
TO 20 CENTS AND A 5 CENTS SPECIAL DIVIDEND

 

SINGAPORE, 15 February 2007 - DBS Group Holdings today announced record earnings of $2.18 billion for full-year 2006, up 32% from the previous year. For the fourth quarter, net profit rose 45% to $556 million. The stronger performance for both the full year and the fourth quarter was underpinned by continued growth in our customer franchise as interest and fee income reached new annual and quarterly highs.

A one-time net gain of $94 million was recorded for the year from the sale of buildings in Singapore and Hong Kong, including $40 million booked in the fourth quarter. Including these gains, reported net profit was $2.27 billion for the full year and $596 million for the fourth quarter.

Full-year income increases 23%

Full-year total income grew 23% to $5.34 billion with all revenue streams showing increases.

Net interest income rose 22% to $3.59 billion as loans and margins expanded. Loans grew 9% to $86.6 billion, led by regional corporate loans and, in the latter part of the year, Singapore consumer loans. Interest margins climbed from 1.91% to 2.20% as DBS benefited from higher asset yields relative to funding costs.

Net fee income increased for an eighth consecutive year to cross $1 billion, rising 17% to $1.16 billion. The growth was from a wide range of corporate and consumer fee activities. Investment banking fees rose 12% as DBS led the domestic market in debt activities, loan syndication and the underwriting of real estate investment trusts. Wealth management fees increased 32% and stockbroking commissions grew 33% from buoyant equity markets. Credit card fees rose 28% with higher consumer spending.

Net trading income from trading businesses improved from $187 million to $340 million as DBS benefited from higher customer volumes and trading gains in foreign exchange, equity, credit and interest rate activities.

Total non-interest income rose 26% to $1.75 billion, accounting for 33% of total income and little changed from the 32% in 2005.

Expenses increased 17% to $2.37 billion. While headcount rose 1%, staff costs were 18% higher as a result of a higher salary base due to heightened competition in the labour market and higher bonus accruals in line with the Group’s better performance. However, as expenses rose less than income, the cost-income ratio improved from 47% to 44%.

Asset quality was enhanced with strengthening economic conditions. The non-performing loan rate reduced further from 2.1% to 1.7%, with the amount of non-performing assets (including debt securities and contingent liabilities) declining 18% to $1.53 billion. Specific loan allowances fell from 26 basis points of loans to 19 basis points. The amount of total allowances set aside fell from $203 million to $135 million, which included $88 million in general allowances compared with none in 2005. Cumulative general and specific allowances rose from 97% to 115% of non-performing assets.

Return on equity rose from 9.7% to 12.3%, while return on assets increased from 0.93% to 1.15%. The capital adequacy ratio stood at 14.5%, with the tier-1 ratio at 10.2%.

Recent operating trends sustained in fourth quarter

Operating trends seen in the earlier quarters of 2006 were sustained in the fourth quarter.

Net interest income rose 2% from the previous quarter and 17% from a year ago to $932 million. Net interest margins of 2.18% were stable from the previous quarter and were higher than the 2.06% a year ago. Customer loans grew 2% for the quarter with the increase led by Singapore housing loans as disbursements increased. The loan-deposit ratio was 66% compared to 67% in the previous quarter and 68% a year ago.

Net fee income increased 4% from the previous quarter and 26% from a year ago to $304 million, with fees from stockbroking, trade and remittances, loan syndication and credit cards leading the growth from a year ago. Net trading income from trading businesses fell to $32 million from $71 million in the previous quarter as trading activities slowed but was slightly higher than the $24 million a year ago.

Expenses rose 7% from the previous quarter and 14% from a year ago to $627 million. Computerisation costs were 29% higher than the previous quarter and 49% above the previous year as investments in technology continued to be made to enhance our infrastructure to support business expansion and the implementation of Basel II. Staff costs, which were slightly lower than the previous quarter, were 10% higher than a year ago due to wage cost pressures.

A specific provision write-back of $69 million for buildings in Singapore due to higher market valuations resulted in total loss allowances falling to $1 million from $41 million in the previous quarter and $55 million a year ago. Specific allowances for loans fell from $71 million in the previous year to $59 million this quarter but were higher than $27 million last quarter.

DBS Vice-Chairman and CEO Jackson Tai said, “Over the years, we focussed on extending and deepening our customer franchise in Singapore, Hong Kong and throughout Asia. There’s more to do, but the broad-based and disciplined 2006 results are an encouraging sign of DBS’ competitiveness in the region. We broke records in net interest income, net interest margins, fee income, and delivered the highest group net profit in DBS’ 38-year history. The strong results brought better returns to our shareholders and point to sustainable growth as an Asia-banking specialist. ”

The Board of Directors will recommend, for approval at the annual general meeting on 4 April 2007, a fourth quarter dividend of 20 cents per share, bringing the full-year payout to 71 cents per share. This would be a 22% increase over the 58 cents per share paid out in 2005. In addition, the Board will recommend a special dividend of five cents per share for 2006.

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 as measured by assets, and a leading bank in Hong Kong, 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.