DBS third-quarter earnings rise 28% from year ago to a record SGD 722 million

Singapore.04 Nov 2010

Performance underpinned by customer-driven flows as execution of strategy progresses

Singapore, 04 Nov 2010 - DBS Group Holdings’ third-quarter 2010 earnings rose 28% from a year ago to a record SGD 722 million.

The performance was underpinned by loan growth and customer-driven non-interest income as execution of the new strategy continued to progress.Net interest income rose 1% from the previous quarter to SGD 1.08 billion as the benefit of loan growth was offset by continued softness in interest rates. Loans increased 1% during the quarter from broad-based corporate borrowing across the region and housing loans in Singapore. Excluding currency translation effects, loans rose 4% or SGD 5.7 billion from the previous quarter. Net interest margins declined four basis points to 1.80%.

Yields for new housing loans were lower than those that had run off while deposit costs in Hong Kong were higher.Non-interest income fell 2% from the previous quarter to SGD 730 million. Fee income declined 5% to SGD 340 million as a fall in loan-related fees was partially offset by an increase in investment banking revenues. Most other fee activities were maintained at the previous quarter’s level. Customer revenues from treasury products rose 10%.

However, lower trading gains and a more prudent valuation reserve methodology more than offset the improvement in customer flows, resulting in overall trading income declining to SGD 223 million. Net gains from the sale of investment securities rose 26% to SGD 123 million as market conditions were conducive for taking profit on investments.Expenses rose 1% to SGD 726 million on higher technology costs to support business expansion.

The cost-income ratio stayed at 40%.Non-performing assets declined 6% to SGD 3.51 billion as recoveries and write-offs exceeded new non-performing loans. DBS remained prudent in its classification and 38% of non-performing assets were still current in interest and principal. The nonperforming loan rate improved to 2.1% from 2.3% in the previous quarter. An additional SGD 195 million was set aside as specific and general allowances.

Cumulative allowances amounted to 97% of non-performing assets and to 124% if collateral was considered.For the first nine months, net profit (before one-time items) rose 26% from a year ago to SGD 1.97 billion. The results were driven by higher customer flows in non-interest income and by lower allowances as asset quality improved. Since December 2009, loans expanded by 13%, and by 17% or SGD 22.1 billion if currency translation effects were excluded. DBS’ differentiated offerings enabled it to improve its market share of Singapore-dollar loans by 1% point to 21% during the nine months.

Return on equity for the third quarter was 11.1%, similar to the previous quarter. For the nine months, it improved to 10.2% from 8.7% a year ago. DBS remained well capitalised, with the total capital adequacy ratio at 16.3% and the tier-1 ratio at 13.1%.DBS CEO Piyush Gupta said, "As the execution of our strategic roadmap gathers momentum, it is evident that our core revenue drivers are gaining greater traction. This year, we have been able to leverage the strength of our customer franchise to expand our loan book and increase cross-sell, thus mitigating the effect of headwinds in a low rate market. Going forward, we will continue to focus single-mindedly on execution so as to consistently deliver quality earnings."

About DBS

DBS - Living, Breathing Asia

DBS is one of the largest financial services groups in Asia with operations in 15 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 such as 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.