DBS Third-Quarter GAAP earnings rise 28% to $446 million

Singapore.28 Oct 2005

Rebalanced asset composition, loan growth boost interest income to quarterly record; fee income also expands

Singapore, 28 Oct 2005 - DBS Group Holdings (DBS) today announced net profit of $446 million for the third quarter to September 30, 2005, up 28% from a year ago.

The higher profit was supported by sustained growth in interest and fee income as DBS' regional customer franchise captured higher business volumes in all customer segments. The stronger recurring income, however, was offset by lower treasury income.

Compared to second quarter 2005, net profit was largely unchanged. For the first nine months, net profit amounted to $1.30 billion, 11% higher than a year ago, excluding last year’s one-time gains.

DBS Vice Chairman and CEO Jackson Tai said, "The markets in the third quarter were unfavourable due to rising oil prices, natural disasters and terrorism. But our net profit was sustained by our work over the last three years to rebalance our asset book and to improve the contribution from recurring interest income and fees."

"Our third quarter net interest income rose 12% over last year, and this achievement reflects our emphasis on growing customer loans. Our loans now generate higher yields, and together with sustained fee income, offset year-to-date lower treasury earnings."

Interest income grows 12% as customer loans and margins increase
Net interest income rose 12% from a year ago and 5% from the previous quarter to $728 million, a quarterly record.

Customer loans expanded 17% from a year ago to $78.8 billion. The growth was broad-based and led by corporates and SMEs in the region, as well as mortgages in Singapore. On the back of strong 11% loan growth in the second quarter, loan volume was unchanged at end-September, as June 2005 loans included short-term financing that was repaid in the third quarter. The 69% loan-to-deposit ratio was the highest since 1999, and compares to 63% a year ago and 68% in June 2005.

Net interest margins were the highest since the first quarter of 2003, rising to 1.87% from 1.85% a year ago and 1.80% in the previous quarter. During the third quarter, loan yields were boosted by rising rates for corporate, SME and mortgage loans in Singapore, rising interbank rates in Singapore and improved prime-Hibor spreads in Hong Kong.

For the nine months, net interest income rose 7% from a year ago to $2.09 billion, with net interest margins stable at 1.82%.

Fee income maintains year-on-year growth trend
Fee income was $266 million, up 6% from a year ago. Double-digit growth rates were achieved for investment banking, asset management, stockbroking and credit card fees, although the gains were moderated by declines in loan syndication and wealth management fees.

Sales of wealth management products, comprising unit trusts, bancassurance and structured deposits, fell to $2.04 billion from $2.55 billion a year ago, but higher than the previous quarter’s $1.86 billion.

Market conditions and a flat yield curve continued to curtail trading and customer-related treasury opportunities. Net gain on treasury activities fell 82% from a year ago to $26 million, an amount similar to second quarter 2005. Total non-interest income declined 21% from a year ago and 12% from the previous quarter to $351 million.

For the nine months, fee income of $810 million was 4% higher than the previous year. All fee income categories registered growth except for stockbroking income and deposit-related fees. Lower treasury revenues led to a 23% decline in total non-interest income (excluding last year’s one-time gains) to $1.16 billion during the nine months.

Operating costs rise 5%
Operating expenses totalled $529 million, a 5% increase from a year ago and 6% from the previous quarter as a result of higher computerisation and general expenses. Staff costs also rose 3% from the previous year and 1% from the previous quarter. The cost-income ratio increased to 49% from 46% in both comparative periods, the result of lower non-interest income and higher operating expenses.

For the nine months, operating expenses rose 2% from the previous year to $1.54 billion. However, as operating income (excluding one-time gains) fell 6% during the period, the nine-month cost-income ratio increased from 44% last year to 47%.

Asset quality improves further
DBS' asset quality was further enhanced during the quarter. Non-performing assets (including debt securities and contingent liabilities) fell 7% from a year ago and 5% from June 2005 to $1.81 billion, mainly due to corporate loan recoveries. The non-performing loan rate improved to 2.0% from 2.6% a year ago and 2.2% in the previous quarter.

During the quarter, specific provisions of $30 million were set aside for loans, equivalent to 15 basis points of the loan book. As a result of better economic outlook, a general provision write back of $36 million was made during the quarter to incorporate improving collateral values, consistent with regulatory guidelines. Giving effect to the general provision write back, total cumulative general provisions were more than 1% of total loans. The total provision charge for the third quarter was $4 million compared to $28 million a year ago, and $81 million in the previous quarter.

For the nine months, specific provisions for loans amounted to 22 basis points of total loans compared to 11 basis points a year ago. Total provision charges for the nine months amounted to $148 million compared to $93 million a year ago.

Cumulative general and specific coverage rose to 97% of total non-performing assets, compared to 91% a year ago and 94% in June 2005.

The total capital adequacy ratio stood at 14.7% at end-September 2005, unchanged from that for June 2005. The tier-1 ratio was at 10.4%, down from 10.6% for the previous quarter. Our capital ratios are comfortably above the minimum regulatory requirements.

The Board of Directors declared an ordinary dividend of 15 cents a share for the quarter, the same as the previous quarter. Total dividends paid for the first nine months amounted to 41 cents a share, compared with 40 cents a share for the whole of 2004.


About DBS

Headquartered in Singapore, DBS is one of the largest financial services groups in Asia. The largest bank in Singapore and the fifth largest banking group in Hong Kong as measured by assets, 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 Thailand, Malaysia, Indonesia, India and The Philippines. In China, the bank has branches and representative offices in Shanghai, Beijing, Guangzhou, Shenzhen, Fuzhou, Tianjin and Dongguan. The Bank's "AA-" and "Aa2" credit ratings are among the highest in the Asia-Pacific region.