DBS Posts First Quarter 2002 Net Profit Before Goodwill Of S$346 Million

Singapore.29 Apr 2002

Operating profits up by 33% from first quarter 2001

Singapore, 29 Apr 2002 - DBS Group Holdings ("DBS") today announced its unaudited financial results for the first quarter of 2002.

In the first quarter of 2002, DBS' operating profit excluding goodwill amortisation was S$565 million, an improvement of 33% compared to the first quarter of 2001. The growth came from non-interest income and better interest margins, which were partly due to the consolidation of 71.6% owned Dao Heng Bank Group Limited ("Dao Heng")'s results as well as disciplined expense management. Dao Heng's financial statements were consolidated only from July 1, 2001 and therefore not included in the first quarter 2001 results.

Net profit before goodwill amortisation was S$346 million, an increase of 8% compared to the first quarter of 2001 despite an increase in provisions from S$38 million to S$96 million. Net profit after goodwill amortisation declined by 14% to S$278 million, due to the goodwill amortisation of S$68 million.

Compared to the fourth quarter of 2001, net profit before goodwill amortisation increased by 46% due to lower valuation reserves for treasury activities and the inclusion of restructuring / integration expenses for Dao Heng and DBS Vickers Securities ("DBS Vickers").

Revenue expansion

Compared to the same period last year, net interest income grew by 37% to S$670 million, due to stronger interest margins and an expanded loan book resulting from the Dao Heng acquisition. Net interest margin was 2.02%, up from 1.85% in the first quarter of 2001, while customer loans grew 29% to S$66 billion.

Benefiting from Dao Heng's strength in trade finance and credit cards, as well as the contribution in stockbroking fees from DBS Vickers, fee income increased by 64% over the first quarter of 2001 to S$193 million. Correspondingly, over the same period, fee income as a percentage of total income improved to 19% from 15%; DBS expects the fee component of its revenue to improve further over time as more fee-based products are originated and marketed to its customers, both retail and institutional.

Other income declined to S$152 million, a drop of 19% due to lower profits from the sale of Singapore Government Securities and the non-recurring profit from the sale of the DBS Securities Building in the first quarter of 2001.

Managing costs

Total staff and other operating expenses increased by 20% to S$459 million compared to the first quarter of 2001. However, excluding the expenses of newly acquired Dao Heng and DBS Vickers, as well as the associated restructuring / integration costs, operating expenses would have declined by 15%, due primarily to lower staff bonuses and headcount reduction made possible by workflow rationalisation. The cost to income ratio declined to 44.8% compared to 47.4% in the first quarter of 2001 and 49.1% for the entire year 2001.

Asset Quality and Capitalisation remain strong DBS' volume of NPLs (non-performing loans) remained unchanged. However, the ratio of NPLs to total non-bank loans increased marginally to 5.9% in the first quarter of 2002, compared to 5.7% at the end of 2001, due to a decline in the loan base. DBS continues to prudently monitor NPLs and record provisions to build up reserves against the possibility of future loan losses; the 60.4% provision coverage of NPLs was similar to that registered at the end of 2001.

The total capital adequacy ratio for DBS, as of March 31, 2002, remained strong at 17.7%, comfortably above the BIS minimum requirements. The Tier 1 ratio stood at 12.5%. Taking into consideration the second tranche of the Dao Heng transaction, and excluding the expected retained earnings for the rest of 2002, DBS' Tier 1 and total ratio would be 9.0% and 14.6% respectively.