Achieves record nine-month earnings of SGD 2.30 billion despite challenging operating environment
DBS Group Holdings recorded net profits of SGD 762 million for third-quarter 2011, an increase of 6% from a year ago and 4% from the previous quarter. Business volume and customer income trends were sustained as total income reached a new high.
DBS remains focused on building a leading Asian banking franchise, underpinned by prudent risk management and a solid balance sheet:
- Liquidity remains healthy. With steady deposit inflows, loan-deposit ratio is at 84%. Customer deposits rose 4% or SGD 9 billion during the quarter to SGD 220 billion, bringing growth to 19% or SGD 35 billion over the past 12 months.
- Asset quality remains strong. The non-performing loan rate improved to 1.3%.
- Specific allowances for loans of SGD 41 million were equivalent to nine basis points of loans, little changed from the previous quarter. General allowances were substantially increased to SGD 187 million, boosting the allowance coverage of non-performing assets by 11 percentage points to 124%. Allowance coverage was 158% if collateral was considered.
- The Group continues to be well capitalised, with core Tier 1 of 10.7%, Tier 1 of 12.6% and the total capital adequacy ratio of 15.5% being comfortably above regulatory requirements. If MAS’ lifting of the operational risk multiplier on 28 October 2011 was taken into account, core Tier 1 would rise to 10.9%, Tier 1 to 12.8% and the total capital adequacy ratio to 15.7%.
Net interest income rose 1% from the previous quarter to a record SGD 1.21 billion. Loans increased 10% during the quarter to SGD 186 billion. Excluding currency translation effects, the increase was 7%. There was broad-based corporate borrowing across the region, with trade finance accounting for slightly less than half of loan growth. Net interest margins declined seven basis points from the previous quarter to 1.73% as interest rates in Singapore softened further and deposits funding costs in Hong Kong were higher.
Non-interest income increased 18% from the previous quarter to SGD 754 million. Fee income rose 3% to SGD 397 million as contributions from trade and remittances and loan-related activities were partially offset by lower income from wealth management and investment banking. Other non-interest income grew 42% to SGD 357 million. Income from cross-selling treasury products to corporate and retail customers increased 15%. Gains of SGD 47 million from the transaction to combine DBS Asset Management with Nikko Asset Management were also recorded.
Total income rose 7% from the previous quarter to SGD 1.97 billion while expenses increased 6% to SGD 847 million. The cost-income ratio was unchanged at 43%. Return on equity was 10.8% while return on assets was 0.93%.
For the first nine months, net profit rose 17% from a year ago to a record SGD 2.30 billion. Total income grew 7% to SGD 5.72 billion, also a new high.
Net interest income grew 10% to SGD 3.54 billion. Broad-based borrowing by Singapore and regional corporates resulted in a 26% growth in loans from a year ago. Trade finance, led by customers in Singapore, Hong Kong and China, accounted for half of loan growth. Net interest margins were eight basis points lower at 1.78%.
Non-interest income grew 3% to SGD 2.18 billion. Fee income rose 15% to SGD 1.20 billion. The growth was broad-based and included higher income from trade and remittances, wealth management, loan-related and investment banking. Income from cross-selling treasury products rose 31%. These improvements were partially offset by lower trading income.
Investments in people and infrastructure for business growth resulted in a 13% increase in expenses to SGD 2.42 billion. The cost-income ratio rose from 40% a year ago to 42%. Total allowances fell 35% to SGD 493 million. Specific allowances for loans decreased 80% to SGD 102 million as asset quality improved, while general allowances rose 85% to SGD 347 million.
Return on equity improved from 10.2% a year ago to 11.3%, while return on assets was little changed at 0.99%.
DBS CEO Piyush Gupta said, “DBS continues to fire on all cylinders, achieving record earnings for the first nine months of this year. We are particularly pleased with our strong third-quarter earnings, given the challenging operating environment, characterised by prolonged interest rate headwinds, increasing market volatility and macroeconomic uncertainties. Looking ahead, we remain committed to growing in a focused and measured way, as we deliver on our ambition to become the Asian bank of choice.”
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 three consecutive years, in 2009, 2010 and 2011.
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.