Singapore, Hong Kong, China, India, Indonesia, Taiwan, Regional.29 Oct 2004

Customer loans rise for the seventh consecutive quarter; net interest margin highest in six quarters

NPL rate falls to 2.6%; provision coverage of 91% and asset quality better than pre-asian crisis levels

Singapore, Hong Kong, China, India, Indonesia, Taiwan, Regional, 29 Oct 2004 - DBS Group Holdings (DBS) today reported net earnings of $362 million for the three months to September 30, 2004, up 24% over third quarter 2003.

The results reflected sustained growth across all customer segments and improved credit conditions across the region but also sluggish financial markets as uncertainties prevailed over US interest rates, rising oil prices and a slowdown in China's economy.

Total earnings for the first nine months of 2004 were $1.70 billion, a 132% increase over the same period in 2003.

Compared to second quarter 2004, net profit was 57% lower. However, if one-time gains of $497million from the disposal of Wing Lung Bank and DBS Thai Danu Bank (DTDB) stakes were excluded from the second quarter figures, net profit would be 3% higher.

DBS Vice-Chairman and CEO Jackson Tai said: “We have had three strong quarterly earnings in a row, reflecting the strength of our regional franchise and the diversity of our businesses.

"In the third quarter, growth in our lending activities helped offset declines in fee-based businesses that bore the brunt of subdued capital market conditions. We kept expenses in line with business growth.”


  • Net interest income for third quarter 2004 grew 10% from a year ago to $645 million, while total customer loans expanded at the same rate to $67.2 billion. Net interest margin at 1.83% was the highest in six quarters.

  • Non-interest income of $442 million was down 16% from last year's high base that benefited from higher treasury, stockbroking and investment banking income.

  • For the first nine months, operating profit before goodwill and provisions and excluding one-off gains was 8% higher at $1.93 billion compared to a year ago.

  • In the same period, net profit excluding one-off gains grew 64% to $1.20 billion.

  • Non-performing loan rate declined to 2.6% from 3.0% in the previous quarter. Loan provision coverage of 91% exceeded pre-Asian crisis levels.

  • Net profit for DBS Bank (Hong Kong) grew 14% over third quarter 2003 to $131 million, helped by higher net interest income and lower provisions. A provision, which is not material to the earnings of DBS Bank (Hong Kong) and DBS Group Holdings, was made for potential liabilities relating to the Mei Foo branch safe deposit box incident.

  • Annualised GAAP ROE of 9.0% and cash ROE of 11.7% for the third quarter were better than the previous three years’ annual returns.

  • The capital adequacy ratio was 15.4% with the tier 1 ratio at 11.8%, under the MAS capital framework.

Interest income up for fifth consecutive quarter

Net interest income for third quarter 2004 increased 10% from a year ago to $645 million but was 1% lower compared to second quarter 2004. If the deconsolidation of DTDB was taken into account in the comparative periods, net interest income grew for five consecutive quarters, up 14% from a year ago, and 3% from second quarter 2004. The growth was due to both higher loan volumes and better margins during the quarter.

Overall loans rose 10% over September 2003 and 3% over June 2004 to $67.2 billion. The expansion came from both corporate and consumer demand, and in particular, from small- and medium-sized enterprises in Hong Kong and Singapore, reflecting DBS’ concerted efforts to make inroads into this market segment. The growth in consumer loans was led by residential mortgage and car loans in Singapore. Taking into account the deconsolidation of DTDB, customer loans grew for the seventh consecutive quarter.

Loan-to-deposit ratio improved from 60% in both September 2003 and June 2004 to 63%, the highest rate in two years. If non-trading debt securities were included, the ratio rose to 84%.

Net interest margin rose to 1.83% from 1.72% in September 2003 and 1.79% in June 2004. The improvement was due to better yields on customer loans and debt securities as interest rates generally rose, and to our ongoing initiative to redeploy excess funds to higher yielding assets.

Wealth management sales boost non-interest income

Compared to second quarter 2004’s income excluding one-off gains, non-interest income of $442 million expanded 9% due to higher gains from treasury-related activities and wealth management product sales. However, it was 16% lower than third quarter 2003, which benefited from exceptional favourable market conditions.

Treasury-related activities contributed $145 million to non-interest income. The amount was 44% more than the previous quarter but 33% lower than a year ago.

Wealth management, boosted by the launch of guaranteed and interest-linked products, recorded sales of $2.23 billion, compared to $2.44 billion a year ago and $2.06 billion in the previous quarter. Fees from wealth management product sales rose to $42 million from $26 million a year ago and $24 million in the previous quarter. Total sales for the first nine months amounted to $7.03 billion, compared to $6.33 billion in the previous corresponding period.

Reflecting quieter equity markets, stockbroking revenues fell 32% from third quarter 2003 and 9% from the previous quarter to $40 million. Investment banking fees of $20 million were comparable to the previous quarter but 33% below a year ago. Loan-related fees remained strong at $45 million. Among the regional capital market and syndicated loan transactions that DBS led during the quarter were term loan facilities for Reliance Infocomm in India and Astro All Asia Networks in Malaysia, and an equity fund raising by CapitaMall Trust in Singapore.

Trade finance and remittance fees rose to $34 million from $29 million a year ago and $32 million in the previous quarter, driven partly by growth in the SME business across the region.

Cost-income ratio stable at 45%

DBS kept its operating expenses to 45% of operating income, similar to the previous quarter (excluding one-off gains) but higher than the 41% in third quarter 2003. Operating expenses rose 7% from the year-ago period and 2% from the previous quarter to $491 million. Most of the increase was due to higher bonus accruals for employees in line with better earnings for the year. The number of full-time staff rose 2% during the quarter to 11,083.

Revenue-related expenses fell as a result of lower stockbroking volumes, while other expenses increased from the year-ago period from higher advertising for consumer banking and outsourcing fees for operations.

Asset quality improves, capital position remains strong

Asset quality continued to improve as a result of further corporate loan recoveries. Non-performing loans (NPLs) fell to 2.6% from 3.0% of total loans in June 2004, the lowest level since 1998.

Total NPLs stood at $1.93 billion in September 2004, an 11% decline from June 2004 and (after adjusting for the deconsolidation of DTDB) 37% from September 2003. The sub-standard (least severe) category accounted for 70% of total NPLs. Certain loans (equal to one-third of total NPLs) are current but have been conservatively classified as NPLs.

Despite the better asset quality, DBS continued to set aside loan-loss reserves amounting to $17 million, practically all of which was for general provisions in line with regulatory guidelines. Provision coverage advanced to 91% of NPLs, a level that exceeded pre-Asian crisis levels.

As at September 30, 2004, DBS’s total capital adequacy ratio stood at 15.4%, comfortably above the minimum 10% required by the Monetary Authority of Singapore and which excluded the US$750m tier-2 subordinated debt issue that was settled on October 1, 2004. The tier-1 ratio was 11.8%.


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 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, Malaysia, Indonesia, India and The Philippines. In China, the bank has branches and representative offices in Shanghai, Beijing, Guangzhou, 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