DBS first-half earnings up 23% to record SGD 1.54 billion
Focused execution of strategy drives broad-based growth in business volumes and customer income
First-half net interest income increased 9% from a year ago to a record SGD 2.32 billion. DBS captured the benefits of the region’s economic strength as loans expanded 11% or SGD 16.6 billion from end-2010 to SGD 168.7 billion. Balance sheet management efforts offset the impact of a soft interest rate environment, enabling margins to stabilise at 1.80% compared to the previous half-year.
First-half non-interest income of SGD 1.43 billion was also a new high. Fee income from wealth management and trade and remittances achieved double-digit percentage growth as initiatives to develop these businesses gained momentum. Investment banking fee income benefited from strong capital market activity. Customer flows for treasury products were higher and accounted for a larger proportion of total Treasury income than a year ago.
First-half expenses rose 11% to SGD 1.57 billion. Headcount was increased and investments were made to support higher business volumes and build capacity for future growth. The cost-income ratio was 42%.
Asset quality improvements resulted in a halving of total allowances in the first six months to SGD 262 million, with most of the decline accounted for by specific allowances. Non-performing assets fell 23% from a year ago to SGD 2.9 billion with the non-performing loan rate declining from 2.3% to 1.5%. Allowance coverage rose to 113% and to 148% if collateral was considered.
Hong Kong’s earnings rose 36% to SGD 333 million. In local currency terms, its earnings grew 51% to a record HKD 2.06 billion as a result of better all-round performance. Earnings from operations outside the core markets of Singapore and Hong Kong rose 41% to SGD 308 million, accounting for 20% of group earnings compared to 17% a year ago.
First-half return on equity increased to 11.4% from 9.8% a year ago, while return on assets improved to 1.05% from 0.93%. DBS remained well capitalised, with the total capital adequacy ratio of 16.5%, total Tier 1 ratio of 13.5% and core Tier 1 ratio of 11.5% comfortably above recently-announced regulatory requirements.
Second-quarter performance
DBS recorded second-quarter earnings of SGD 735 million, up 2% from a year ago. The results were 9% below the previous quarter as market-related non-interest income fell.
Net interest income increased 7% from the previous quarter and 12% from a year ago to SGD 1.20 billion. Loans expanded 7% during the quarter and 15% from a year ago, led by corporate loan demand. Net interest margins of 1.80% remained stable at recent quarters’ levels.
Non-interest income fell 19% from the previous quarter and 15% from a year ago to SGD 639 million. Investment banking fee income declined from the previous quarter, which had benefited from significant IPO activity. Stockbroking commissions were below both comparative periods as market volumes fell. Trading gains also fell due to the marked-to-market impact of hedges taken for a portion of fixed income investments in the available-for-sale portfolio. Lower contributions from these activities more than offset continued growth in wealth management and trade and remittance fee income. Income from customer flows for treasury products was comparable to the previous quarter and higher than a year ago.
Expenses rose 3% from the previous quarter and 11% from a year ago to SGD 798 million, bringing the cost-income ratio to 43%. Specific allowances for loans remained low at seven basis points of loans compared to nine basis points in the previous quarter and 19 basis points a year ago. General allowances of SGD 99 million were taken in line with loan growth.
DBS CEO Piyush Gupta said, “DBS’ record first-half results are a validation of the bank’s Asian strategy and our ability to execute well. We have benefitted from our growth in China and India and the improved management of our businesses in Singapore and Hong Kong, our two largest markets. As we continue to build out and strengthen our Asian franchise, we will remain focused and vigilant in an increasingly uncertain macro-economic environment."
The Board declared a first-half dividend of 28 cents per share, unchanged from the previous half-year. The scrip dividend scheme will be applicable to the dividend. New shares will be issued, to shareholders who elect to have their dividend in scrip, at a price that is at a 5% discount to the average of the last-dealt price on each of 8, 10 and 11 August 2011.
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About DBS
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.