DBS reports record quarterly earnings with growth in all key business segments
First quarter 2004 net profit up 80.1% to $488 million
Fees from stockbroking, investment banking and wealth management sales rise sharply.provisions fall 57.6%
Net profit attributable to members rose 80.1% to $488 million for the first quarter ended March 31, 2004, compared to the first quarter of 2003.
DBS Vice-Chairman and CEO Jackson Tai said: "We are pleased to report our best quarterly results ever.
"Our initiatives over the last several years to diversify our businesses, expand overseas, manage asset quality and improve our operations and infrastructure - all served to reduce downside risks during difficult times. Now, with better economic prospects in the region, these same initiatives extend and broaden DBS' upside and growth potential."
1Q 2004 versus 1Q 2003
1Q 2004 versus 4Q 2003
· Net profit up 80.1% to $488 million
· Net profit up 67.1% to $ 488 million
· Cash* net profit up 58.2% to $598 million
· Cash* net profit up 48.8%
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· Operating profit before goodwill amortisation and provisions up 26.1% to $763 million
· Operating profit before goodwill amortisation and provisions up 33.6%
· Provision charges down 57.6% to $50 million
· Provision charges down 39%
· Non-performing loan (NPL) ratio improved from 5.9% to 4.6%
· NPL ratio improved from 5.2% to 4.6%
· Cash* ROA was 1.42% vs 0.99%
· Cash* ROA was 1.42% vs 1.01%
· GAAP ROA was 1.16% vs 0.71%
· GAAP ROA was 1.16% vs 0.73%
· Cash* ROE was 15.8% vs 10.52%
· Cash* ROE was 15.8% vs 10.91%
· GAAP ROE was 12.89% vs 7.54%
· GAAP ROE was 12.89% vs 7.93%
· Return on tangible equity (ROTE) was 30.58% vs 22.47%
· ROTE was 30.58% vs 21.98%
· Annualised Basic EPS* was $1.60 vs $1.02
· Basic EPS* was $1.60 vs $1.08
* Excluding goodwill amortisation
Before goodwill amortisation and provisions, first quarter operating profit was 26.1% higher at $763 million, driven by growth in both interest and non-interest income.
A 57.6% decline in provisions charges, from $118 million to $50 million, contributed to the stronger bottom line. Excluding goodwill amortisation, net profit attributable to members rose 58.2% to $598 million in the first quarter.
The buoyant business conditions in Hong Kong continued to benefit DBS Bank (Hong Kong) Limited, which reported another robust quarter. First quarter net profit surged 52% to $149 million. Operating profit before provisions was up 23.8% to $198 million. Non-interest income rose 33.8% to $107 million on the back of yet another record quarter of wealth management product sales.
In the first quarter, Hong Kong contributed 26% to the Group's net profit attributable to members, while Singapore's operations contributed 68%, with the balance coming from operations in other countries.
Strong non-interest income drives profits
For the quarter, Group operating income reached $1.3 billion, or 20.9% higher than the level for the corresponding period last year. Although net interest margin eased to 1.79% from 1.87% in the first quarter of 2003, net interest income was nonetheless higher at $634 million, up 5.8% over first quarter 2003, a result of the Group's initiative to deploy more funds to interest bearing assets including loans and away from the low-yielding inter-bank market.
Total loans grew 1.6% to $65.3 billion since the beginning of the year, marking the fifth consecutive quarterly increase in the volume of loans.
The margin squeeze in the first quarter was mainly due to the compression of interest spreads on consumer loans, particularly in the competitive housing loan market. Net interest margin for the quarter was marginally higher than that for the full-year 2003, and compared to the fourth quarter of 2003, the drop in net interest margin was only two basis points.
Non-interest income continued its consistent growth over the past two years amid higher activity in the financial markets. Fee and commission income rose 73.1% to $277 million from the first quarter of 2003.
Stockbroking, investment banking and wealth management registered triple-digit growth. Income from stockbroking soared 283.3% to $69 million from $18 million. DBS' leadership in financial engineering and in the capital markets continued to generate a growing revenue stream from product structuring and distribution.
Investment banking recorded another strong quarter, with a 271.4% increase in fee income to $26 million. Fees from several Singapore and regional transactions contributed to first quarter income, including the IPOs of Astro and United Test and Assembly Center, and the loan syndications for Mitra Global and Hanaro Telecom.
Wealth management income grew 161.5% to $34 million on another record sales of unit trusts and insurance products. Together with structured products, total wealth management sales amounted to $2.7 billion. Singapore accounted for 44% of the volume and Hong Kong, 56%.
Gains from Treasury activities were the largest contributor to non-interest income, rising 24.4% to $342 million. Earnings were underpinned by higher sales of structured products to retail and corporate customers, gains from interest rate and currency trading, and equity derivatives, including the eight covered warrant issues completed in the first quarter. During the quarter, DBS realised $46 million in investment gains from the redemption of funds managed by third party asset managers.
Overall, the ratio of non-interest income to operating income improved to 49.9% in the first quarter against 42.8% in the year-ago quarter.
Operating expenses up on higher commissions and bonus
Operating expenses rose 13.8% in the first quarter to $503 million, mainly from increases in staff costs and revenue-related expenses.
The rise in staff costs resulted from higher bonus accruals for performance-related incentives, in line with improved operating profit. Most of the increase in revenue-related expenses came from commissions paid as a result of higher business volumes in stockbroking and sales of wealth management products.
As a reflection of the Group's improved ability to manage fixed and variable expenses, the cost to income ratio was managed down to below 40% from 42.2% in the first quarter of 2003.
NPLs continue to decline as economy recovers
Asset quality improved sharply amid more favourable business conditions throughout the region. Total non-performing loans (NPLs) fell 19% from a year ago to $3.4 billion or 4.6% of total non-bank loans, at March 31. Of these, 75% are graded substandard and 25% as doubtful or loss.
Specific provision charges fell 70.9% to $30 million in line with improving asset quality, while general provisions increased by 33.3% to $20 million in line with the fifth consecutive quarterly increase in the volume of loan assets. Total provision coverage of NPLs improved to 67.6% from 59.9% a year ago.
At March 31, 2004, DBS' total capital adequacy ratio (CAR) stood at 15.2%, comfortably above the minimum 8% total CAR, as measured under BIS standards. DBS' Tier 1 CAR was 10.7%.
Headquartered in Singapore, DBS is one of the largest financial services groups in Asia. The largest bank in Singapore and one of the top five in Hong Kong as measured by assets, DBS has dominant 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, The Philippines, and Indonesia. In China, the bank has branches and representative offices in Shanghai, Beijing, Shenzhen, Fuzhou and Tianjin. The Bank's credit ratings are among the highest in the Asia-Pacific region. More information about DBS Group Holdings and DBS Bank can be obtained from our website www.dbs.com .