DBS delivers stronger quarter-on-quarter performance with second-quarter net profit of SGD 552 million
Performance underpinned by record quarterly revenue and cost discipline
Revenues rose 8% from the previous quarter to a new high of SGD 1.79 billion as better net interest margins, capital market activities, trading and investment income resulted in broad-based revenue growth. Expenses were held at SGD 631 million, improving the cost-income ratio further to 35%, the best level in several years.
Allowances of SGD 466 million were 13% higher than the previous quarter.Net interest income grew 3% from the previous quarter to SGD 1.11 billion. Improved credit spreads and reduced funding costs were partially offset by lower returns on interbank assets, lifting net interest margins by two basis points to 2.01% in a soft interest rate environment.Following several quarters of growth, loan volume was unchanged for the quarter. Including currency translation effects, loans fell 2% from the previous quarter to
SGD 128.0 billion but remained 8% above a year ago. Singapore and Hong Kong savings and current deposit volume grew during the quarter. Including currency translation effects, deposits were stable at SGD 179.0 billion.
Non-interest income rose 16% from the previous quarter to SGD 680 million. Fee income increased 13% to SGD 358 million as revenues from stockbroking, investment banking and wealth management benefited from improved capital markets. Other fee income streams were maintained. Trading income of SGD 172 million was better than recent periods on the back of gains in foreign exchange and interest rate activities and better asset valuations. Investment gains of SGD 138 million, which were mainly from the sale of equity holdings this quarter, were also higher than the SGD 106 million in the previous quarter.Expenses were held at similar levels to the previous quarter at SGD 631 million, reflecting ongoing management focus on productivity improvements.
The non-performing loan rate rose from 2.0% in the previous quarter to 2.8%. The increase came primarily from exposures to shipping and Middle East corporates and institutions. Total allowances of SGD 466 million included SGD 183 million of general allowances taken to reinforce the balance sheet. Specific allowances rose to 83 basis points of loans from 70 basis points in the previous quarter.Allowance coverage taking into account collateral remained sound at 119% of non-performing assets, of which 38% were still current in principal and interest and were classified for prudential reasons. Capital adequacy ratios were comfortably above the regulatory minimum, with tier-1 at 12.6% and the total at 16.2%.
Return on equity improved to 9.1% from the previous quarter’s 8.0% but was below the 13.0% a year ago.DBS Chairman Koh Boon Hwee said, "Our operating performance in the first six months of 2009 reflects the underlying strength of our franchise and the depth of our relationships with customers. We will continue to focus on our customers, on managing risks and on being disciplined in managing our costs. DBS is well positioned to weather the uncertainties ahead as our balance sheet remains strong."The Board declared a dividend of 14 cents per share, unchanged from the previous quarter.
DBS is one of the largest financial services groups in Asia with operations in 16 markets. Headquartered in Singapore, DBS is a well-capitalised bank with "AA-" and "Aa1" credit ratings that are among the highest in the Asia-Pacific region.As a bank that specialises in Asia, DBS leverages its deep understanding of the region, local culture and insights to serve and build lasting relationships with its clients. DBS provides the full range of services in corporate, SME, consumer and wholesale banking activities across Asia and the Middle East. The bank is committed to expanding its pan-Asia franchise by leveraging its growing presence in mainland China, Hong Kong and Taiwan to intermediate the increasing trade and investment flows between these markets. Likewise, DBS is focused on extending its end-to-end services to facilitate capital within fast-growing countries in Indonesia and India.DBS acknowledges the passion, commitment and can-do spirit in each of its 14,000 staff, representing over 30 nationalities. For more information, please visit www.dbs.com .