DBS third quarter earnings up 32% to $552 million

Singapore, Hong Kong, Indonesia, India, China, Taiwan, 27 Oct 2006 - DBS Group Holdings today reported net earnings of $552 million for third quarter 2006, up 32% from a year ago. Earnings levels were maintained from the previous quarter as operating income trends were sustained. Net profit for the first nine months (excluding one-time gains recorded in the second quarter) increased 28% from a year ago to $1.62 billion.

Third-quarter operating income rose 25% from a year ago to $1.32 billion, with all revenue streams contributing to the improvement. Interest and fee income grew on higher business volumes as DBS captured the benefits of strengthened economic conditions. Compared to the previous quarter, net interest income continued to grow but was offset by a decline in net trading income.

Net interest income up 22% as loans grew 8% from year ago

Net interest income rose 22% from a year ago and 2% from the previous quarter to a record $912 million. For the nine months, net interest income was up 24% to $2.66 billion.

Customer loans rose 2% during the quarter and 8% from a year ago to $85.3 billion. While corporate borrowing continued to lead, loan growth was more broad-based than in the previous quarter. Consumer loans grew 3% during the quarter, led by housing loans in Singapore as disbursements increased while early repayments eased further.

Interest margins of 2.17% were higher than the 1.92% a year ago as asset yields increased faster than funding costs in Singapore and Hong Kong. Compared to the previous quarter, margins fell six basis points due to a higher proportion of fixed deposits in the funding mix and to additional interest costs arising from two recent subordinated debt issues. As deposits grew faster than loans, the loan-deposit ratio fell to 67% from 69% in both the previous and year-ago quarters.

Non-interest income rises from year ago on better net fee and trading income

Net fee and commission income amounted to $293 million, 21% higher than a year ago as contributions from a wide range of fee activities grew. Fees from investment banking, loan syndication, credit cards and wealth management led the increase from a year ago. Compared to the previous quarter, net fee and commission income was little changed. For the nine months, net fee and commission income rose 14% from a year ago to reach $851 million, contributed by almost all categories of fees.

Sales of wealth management products fell 22% from a year ago but rose 4% from the previous quarter to $1.59 billion.

Net trading income from trading businesses amounted to $65 million compared to $9 million a year ago as trading gains improved, but they were below the $112 million in the previous quarter. For the nine months, net trading income from trading businesses more than doubled to $290 million.

Cost-income ratio at 44%

Operating expenses rose 16% from a year ago to $584 million as a result of higher staff and computerisation costs. Staff costs grew 24% due to a higher salary base as a result of a tight labour market and to higher bonus accruals in line with the Group’s better financial performance. Computerisation costs were higher due to equipment depreciation and major ongoing projects. As operating expenses rose less quickly than operating income, the cost-income ratio fell to 44% from 48% a year ago and was similar to the previous quarter.

For the nine months, operating costs increased 18% from a year ago to $1.74 billion, with the cost-income ratio improving from 46% to 44%.

Asset quality remains strong

Asset quality remained healthy. The amount of non-performing assets (comprising loans, debt securities and contingent liabilities) was $1.65 billion, unchanged from June 2006 and 9% below a year ago. The non-performing loan rate fell to 1.8% from 1.9% in the previous quarter and 2.0% a year ago.

Specific loan provision charges of $27 million were little changed from both comparative periods. General provisions of $29 million were also made for higher loan balances during the quarter. For the nine months, specific loan provision charges amounted to $100 million, 20% below a year ago. General provisions for the nine months amounted to $77 million, compared with no charges a year ago.

Total cumulative provision coverage stood at 105%, similar to June 2006 and higher than the 97% a year ago.

DBS’ return on assets improved to 1.14% from 0.92% a year ago, but was below the 1.18% in the previous quarter. Return on equity was 12.3%, compared to 9.7% a year ago and 12.7% in the previous quarter.

The capital adequacy ratio stood at 14.6%, and included a $500 million tier-2 subordinated debt issue that was closed in July 2006. The tier-1 ratio was 10.1%. Both ratios were comfortably above regulatory requirements.

DBS Vice-Chairman and CEO Jackson Tai said, “We are working on being more disciplined and consistent in our performance, and it is beginning to show in yet another quarter of strong operating results. Our customer franchise is delivering broad-based growth in our loan book, another quarter of record net interest income, and sustained fee income. Asset quality continued to be strong, giving us plenty of latitude to support our customers’ growth throughout the region.”

The Board declared a dividend of 17 cents per share for the quarter, similar to the previous quarter but above the 15 cents per share paid in third quarter 2005. This brings the total amount of dividends paid for the first three quarters of 2006 to 51 cents per share compared to 41 cents per share for the same period a year ago.

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About DBS

Headquartered in Singapore, DBS is one of the largest financial services groups in Asia with operations in 15 markets. The largest bank in Singapore and the fifth largest banking group in Hong Kong as measured by assets, DBS’ “AA-” and “Aa2” credit ratings are among the highest in the Asia-Pacific region. DBS has leading 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 China, India, Indonesia, Malaysia, Thailand and The Philippines. More information about DBS Group Holdings and DBS Bank can be obtained from our website www.dbs.com.