Full-Year 2006 earnings rise 32% to a record $2.18 billion as interest and fee income reach new highs
Fourth-quarter earnings up 45% to $556 million on sustained operating trends
A one-time net gain of $94 million was recorded for the year from the sale of buildings in Singapore and Hong Kong, including $40 million booked in the fourth quarter. Including these gains, reported net profit was $2.27 billion for the full year and $596 million for the fourth quarter.
Full-year income increases 23%
Full-year total income grew 23% to $5.34 billion with all revenue streams showing increases.
Net interest income rose 22% to $3.59 billion as loans and margins expanded. Loans grew 9% to $86.6 billion, led by regional corporate loans and, in the latter part of the year, Singapore consumer loans. Interest margins climbed from 1.91% to 2.20% as DBS benefited from higher asset yields relative to funding costs.
Net fee income increased for an eighth consecutive year to cross $1 billion, rising 17% to $1.16 billion. The growth was from a wide range of corporate and consumer fee activities. Investment banking fees rose 12% as DBS led the domestic market in debt activities, loan syndication and the underwriting of real estate investment trusts. Wealth management fees increased 32% and stockbroking commissions grew 33% from buoyant equity markets. Credit card fees rose 28% with higher consumer spending.
Net trading income from trading businesses improved from $187 million to $340 million as DBS benefited from higher customer volumes and trading gains in foreign exchange, equity, credit and interest rate activities.
Total non-interest income rose 26% to $1.75 billion, accounting for 33% of total income and little changed from the 32% in 2005.
Expenses increased 17% to $2.37 billion. While headcount rose 1%, staff costs were 18% higher as a result of a higher salary base due to heightened competition in the labour market and higher bonus accruals in line with the Group’s better performance. However, as expenses rose less than income, the cost-income ratio improved from 47% to 44%.
Asset quality was enhanced with strengthening economic conditions. The non-performing loan rate reduced further from 2.1% to 1.7%, with the amount of non-performing assets (including debt securities and contingent liabilities) declining 18% to $1.53 billion. Specific loan allowances fell from 26 basis points of loans to 19 basis points. The amount of total allowances set aside fell from $203 million to $135 million, which included $88 million in general allowances compared with none in 2005. Cumulative general and specific allowances rose from 97% to 115% of non-performing assets.
Return on equity rose from 9.7% to 12.3%, while return on assets increased from 0.93% to 1.15%. The capital adequacy ratio stood at 14.5%, with the tier-1 ratio at 10.2%.
Recent operating trends sustained in fourth quarter
Operating trends seen in the earlier quarters of 2006 were sustained in the fourth quarter.
Net interest income rose 2% from the previous quarter and 17% from a year ago to $932 million. Net interest margins of 2.18% were stable from the previous quarter and were higher than the 2.06% a year ago. Customer loans grew 2% for the quarter with the increase led by Singapore housing loans as disbursements increased. The loan-deposit ratio was 66% compared to 67% in the previous quarter and 68% a year ago.
Net fee income increased 4% from the previous quarter and 26% from a year ago to $304 million, with fees from stockbroking, trade and remittances, loan syndication and credit cards leading the growth from a year ago. Net trading income from trading businesses fell to $32 million from $71 million in the previous quarter as trading activities slowed but was slightly higher than the $24 million a year ago.
Expenses rose 7% from the previous quarter and 14% from a year ago to $627 million. Computerisation costs were 29% higher than the previous quarter and 49% above the previous year as investments in technology continued to be made to enhance our infrastructure to support business expansion and the implementation of Basel II. Staff costs, which were slightly lower than the previous quarter, were 10% higher than a year ago due to wage cost pressures.
A specific provision write-back of $69 million for buildings in Singapore due to higher market valuations resulted in total loss allowances falling to $1 million from $41 million in the previous quarter and $55 million a year ago. Specific allowances for loans fell from $71 million in the previous year to $59 million this quarter but were higher than $27 million last quarter.
DBS Vice-Chairman and CEO Jackson Tai said, “Over the years, we focussed on extending and deepening our customer franchise in Singapore, Hong Kong and throughout Asia. There’s more to do, but the broad-based and disciplined 2006 results are an encouraging sign of DBS’ competitiveness in the region. We broke records in net interest income, net interest margins, fee income, and delivered the highest group net profit in DBS’ 38-year history. The strong results brought better returns to our shareholders and point to sustainable growth as an Asia-banking specialist. ”
The Board of Directors will recommend, for approval at the annual general meeting on 4 April 2007, a fourth quarter dividend of 20 cents per share, bringing the full-year payout to 71 cents per share. This would be a 22% increase over the 58 cents per share paid out in 2005. In addition, the Board will recommend a special dividend of five cents per share for 2006.
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About DBS
DBS - Living, Breathing Asia
DBS is a leading financial group in Asia, with over 280 branches across 18 markets. Headquartered and listed in Singapore, DBS has a growing presence in the three key Asian axes of growth: Greater China, Southeast Asia and South Asia. The bank's capital position, as well as "AA-" and "Aa1" credit ratings, is among the highest in Asia-Pacific. DBS has been recognised for its leadership in the region, having been named "Asia's Best Bank" by The Banker, a member of the Financial Times group, and "Best Bank in Asia-Pacific" by Global Finance. The bank has also been named "Safest Bank in Asia" by Global Finance for seven consecutive years from 2009 to 2015.
DBS provides a full range of services in consumer, SME and corporate banking activities across Asia. As a bank born and bred in Asia, DBS understands the intricacies of doing business in the region’s most dynamic markets. These market insights and regional connectivity have helped to drive the bank’s growth as it sets out to be the Asian bank of choice. DBS is committed to building lasting relationships with customers, and positively impacting communities through supporting social enterprises, as it banks the Asian way. It has also established a SGD 50 million foundation to strengthen its corporate social responsibility efforts in Singapore and across Asia.
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 20,000 staff, representing over 30 nationalities. For more information, please visit www.dbs.com.