DBS first-half earnings rise 13% to record SGD 1.74 billion

Singapore, China, Hong Kong, India, Indonesia, Taiwan.03 Aug 2012

Second-quarter earnings up 10% to SGD 810 million

Singapore, China, Hong Kong, India, Indonesia, Taiwan, 03 Aug 2012 - DBS Group Holdings delivered record half-year net profits of SGD 1.74 billion for the first six months of 2012, up 13% from a year ago. Improved product and distribution capabilities, a strong balance sheet and consistent execution resulted in sustained business growth as half-year total income crossed SGD 4 billion for the first time. Return on equity increased to 11.9% from 11.4% a year ago.

First-half net earnings underpinned by broad-based income growth

Net interest income rose 15% from a year ago to a new high of SGD 2.66 billion. Loans expanded 22% or SGD 36 billion from June 2011 to SGD 205 billion. The increase was led by regional corporate borrowing, with trade loans accounting for half the increase. Net interest margin eased five basis points to 1.75%.

Non-interest income was little changed at SGD 1.44 billion. Fee income from trade and remittances, wealth management product sales and cards continued to expand. Income from treasury customer flows rose 15% to SGD 500 million, accounting for 45% of total Treasury interest and non-interest income. These increases were offset by declines in stockbroking commissions and investment banking fee income in line with weaker capital market activities.

Total income rose 9% to SGD 4.10 billion. Institutional Banking’s income grew 12% to SGD 2.21 billion with trade, cash management and treasury customer flows leading the increase. Consumer Banking/Wealth Management’s income rose 9% to SGD 1.17 billion, led by the Wealth Management segment. Treasury income (excluding customer flows) increased 12% to 604 million.

The cost-income ratio rose slightly to 43%. Expenses increased 13% to SGD 1.77 billion from higher headcount and investments to support business growth. Profit before allowances rose 7% to SGD 2.33 billion.

Second-quarter earnings rise 10% from year ago to SGD 810 million

For the second quarter, net profit grew 10% from a year ago to SGD 810 million.

Net interest income increased 10% to SGD 1.32 billion as loan growth was partially offset by lower net interest margin. Non-interest income fell 3% to SGD 621 million. Fee income from trade and remittances and cards was higher, while income from treasury customer flows rose 17% to SGD 244 million. These increases were offset by declines in investment banking fee income, stockbroking commissions and trading gains as a result of dislocations in financial markets in the second quarter.

Total income rose 6% to SGD 1.94 billion while expenses increased 9% to SGD 872 million. Profit before allowances grew 3% to SGD 1.07 billion.

Second-quarter earnings down 13% from previous quarter

Second-quarter net profit was 13% below the previous quarter, which had the benefit of strong trading gains.

Net interest income was little changed. Loans grew 4%, led by regional corporate loans as well as Singapore housing loans. Reported net interest margin fell five basis points. The underlying margin excluding treasury and markets interest income was stable.

Non-interest income fell 24%. Financial market dislocations contributed to a decline in trading gains, stockbroking commissions as well as investment banking and wealth management fees. Income from treasury customer flows was stable.

Total income fell 10% while expenses declined 3% in line with lower income. Profit before allowances fell 15%.

Balance sheet remains strong

DBS took steps to ensure that its balance sheet continued to be strong and resilient.

While credit conditions remained benign, DBS maintained a prudent provisioning policy and took additional general allowances of SGD 149 million during the six months. This brought allowance coverage of non-performing assets to 129%. The non-performing loan rate was stable at 1.3% and specific allowances of eight basis points of loans for the six months were similar to recent periods.

DBS also built up liquidity from diversified sources, ensuring that it had ample funding to support business growth and meet contingencies arising from prevailing market uncertainties. Deposits grew 10% or SGD 20 billion since June 2011 to SGD 231 billion, with US dollars and Singapore dollars leading the increase. In addition, SGD 16 billion of funding was raised during the 12 months from institutional funds, medium-term notes, commercial papers, certificates of deposit and other debt securities in issue, bringing the total from these sources to SGD 29 billion.

The investment portfolio was sound. Unrealised marked-to-market gains for available-for-sale securities rose to SGD 519 million from SGD 411 million at end-2011.

Capital adequacy ratios remained comfortably above regulatory requirements, with core Tier-1 at 12.8%, Tier-1 at 12.8% and the total capital adequacy ratio at 15.4%.

DBS CEO Piyush Gupta said, “DBS turned in another quarter of solid performance despite a difficult operating environment, characterised by the global macroeconomic slowdown and volatile markets. This marks ten quarters of strong growth and a record performance in the first half of this year. Our ability to execute bears testimony to the strength of our regional franchise and the calibre of our regional management team. I believe that we have what it takes to become a leading Asian bank.”

Added DBS Chairman Peter Seah, “As we expand steadily in Asia, I am heartened that DBS' organic growth initiatives have enabled us to deliver consistently strong performance. Underscored by our confidence in Asia and in particular Indonesia, we are committed to pursuing the Danamon transaction and will be fully guided by Bank Indonesia at every step of the way."

The Board declared a first-half dividend of 28 cents per share, unchanged from the previous half year. The scrip dividend scheme will be applicable to the dividend. Scrip dividends will be issued at the average of the last-dealt price on each of 15, 16 and 17 August 2012 to shareholders electing to receive dividends in scrip.

About DBS

DBS - Living, Breathing Asia

DBS is a leading financial services group in Asia, with over 200 branches across 15 markets. Headquartered and listed in Singapore, DBS is a market leader in Singapore with over four million customers and also has a growing presence in the three key Asian axes of growth, namely, Greater China, Southeast Asia and South Asia. The bank's strong capital position, as well as "AA-" and "Aa1" credit ratings that are among the highest in the Asia-Pacific region, earned it Global Finance's "Safest Bank in Asia" accolade for four consecutive years, from 2009 to 2012.

DBS provides the full range of services in consumer, SME and corporate banking activities across Asia and the Middle East. As a bank born and bred in Asia, DBS also understands the intricacies of doing business in the region’s most dynamic markets. This market insight and regional connectivity have helped to drive the bank’s growth as it sets out to be the Asian bank of choice. The bank believes that building lasting relationships with its customers is an integral part of banking the Asian way.

With its extensive network of operations in Asia and emphasis on engaging and empowering its staff, DBS presents exciting career opportunities. The bank acknowledges the passion, commitment and can-do spirit in all of our 18,000 staff, representing over 30 nationalities. For more information, please visit www.dbs.com.