Thursday, May 7, 2009

DBS Profit Beats Estimates on Trading Increase

DBS Group Holdings Ltd., Southeast Asia’s biggest bank, became the third Singaporean lender to report first-quarter profit that beat analysts’ estimates as trading revenue surged and staff costs declined.

Net income fell 28 percent from a year earlier to S$433 million ($294 million), the bank said today in a statement. That exceeded the S$353 million mean estimate of seven analysts surveyed by Bloomberg.

DBS rose 10 percent in Singapore trading over the past two days, after its two local rivals reported better-than-estimated first-quarter profits, spurring optimism that the credit freeze is easing. Goldman Sachs Group Inc. analyst David Ng on May 6 raised his rating on the stock to “buy,” saying DBS’s S$4 billion share sale in December gave it the resources to expand market share at home and in China.

“They’ve averted the worst case scenario,” David Lum, an analyst at Daiwa Institute of Research in Singapore, said in an interview. “But their non-performing loan ratio actually went up quite a bit, and this suggests Singapore’s banks may not be totally out of the woods yet.”

DBS fell 1 percent to S$11.88 at 9:28 a.m. in Singapore. The shares have risen 41 percent this year, while United Overseas Bank Ltd., the city’s second-largest bank, has jumped 17 percent. Oversea-Chinese Banking Corp., which owns Singapore’s biggest insurer, has advanced 41 percent.

First-quarter profit was curbed by rising impairment losses, which jumped to S$414 million from a year earlier. The non- performing loan ratio rose to 2 percent at the end of March from 1.5 percent at the end of 2008.

New CEO Sought

Non-interest income jumped 16 percent to S$586 million, bolstered by S$150 million in trading income. Net interest income rose 2 percent to S$1.08 billion and fee income slipped 10 percent to S$317 million, DBS said.

DBS is expanding in mainland China and in Southeast Asia. The bank will focus on “organic growth” in existing markets, Chairman Koh Boon Hwee said in February.

“Given continuing uncertainties over how protracted the downturn will be, we remain vigilant in managing our balance sheet and ensuring that the franchise is in a solid position to capture future growth opportunities,” Koh said in today’s statement.

The bank is seeking a replacement for former Chief Executive Officer Richard Stanley, who died last month after being diagnosed with leukemia in January. Koh is overseeing management until a replacement is found.

DBS, which posted its biggest profit drop in more than three years in the fourth quarter, and competitors are contending with a deepening recession. The city-state’s economy may shrink as much as 9 percent this year, the most since independence in 1965, the trade ministry predicted on April 14.

Impairment Losses

Still, there are signs that the economic decline may be moderating. Total loans in Singapore rose to S$270.7 billion in March from S$270.5 billion a month earlier, the first increase in five months, data from the Monetary Authority of Singapore show.

United Overseas earlier this week reported profit fell 23 percent to S$409 million as loan impairment charges nearly quadrupled. The profit surpassed the S$384 million average estimate of six analysts in a Bloomberg survey.

Oversea-Chinese reported first-quarter net income fell 12 percent to S$545 million, after provisions for bad loans increased and one-time gains a year earlier weren’t repeated. That exceeded the S$297 million mean estimate of eight analysts.