Trading losses drag down income, but earnings still better than expected
DBS Group’s first-quarter net profit dipped 2 per cent to $603 million from a year earlier, dragged down by trading losses amid financial market volatility, the bank said yesterday.
The lower net profit for the quarter was still better than analysts had expected. Net interest income – from the bank’s main lending business – rose 9 per cent to $1.06 billion from a year earlier, mainly due to strong growth in loans over the year, which helped offset narrower interest margins or the profit earned on loans.
Ms Wong: Loans growth this year is unlikely to match last year’s exceptional expansion, but should continue at a double-digit pace, given Q1’s strong growth — JOHN HENG
The group recorded a net trading loss of $161 million, including an $86 million loss announced in February from liquidating assets held in a special purpose vehicle, Red Orchid Secured Assets.
But overall non-interest income was supported by gains from financial investments, including $53 million from DBS’s stake in payment card firm Visa which listed in March.
Still, its non-interest income of $506 million was 11 per cent down from a year earlier.
Six analysts polled by Reuters had predicted an average net profit for DBS of $566 million, while the median estimate of six analysts surveyed by Bloomberg was $572.5 million.
Compared with Q4 last year, net profit was up 23 per cent, net interest income was flat as interest margins shrank slightly despite customer loans growth, and non-interest income rose 7 per cent.
Basic earnings per share for the quarter were 39.5 cents – against 40.75 cents a year earlier and 35.5 cents in the preceding quarter.
The group declared an interim tax-exempt dividend of 20 cents a share for the quarter. Its share price ended 1.1 per cent lower at $20.28 yesterday.
Chief financial officer Jeanette Wong said the bank will continue to manage pressures from low interest rates in Singapore by repricing its deposits and loans.
‘Credit spreads are improving for new corporate loans although the existing loan book may take a few quarters to be fully repriced,’ she said.
Net customer loans reached $114.2 billion at the end of March, up 21 per cent from a year earlier and 5 per cent higher than at end-December.
Loans growth this year is unlikely to match last year’s ‘exceptional’ expansion, but should continue at a double-digit pace given the strong growth in the first quarter and the existing pipeline of loans, Ms Wong said.
‘While this quarter’s growth was broad-based across industries and the region, the strongest growth was in Singapore corporate borrowing.
‘We continue to see a healthy pipeline in loan demand from our customers.’
Non-performing loans (NPLs) fell 15 per cent from a year earlier but rose 2 per cent from the previous quarter to $1.19 billion due to the larger loan base, DBS said. The proportion of NPLs in the bank’s loan book fell to one per cent, from 1.5 per cent a year ago and 1.1 per cent in the previous quarter.
Asked if provisions for bad loans could rise in the coming months if borrowers are hurt by slowing economic growth and financial market turbulence, Ms Wong said: ‘We are always very watchful of potential systemic risks. But so far, what we have not seen are things that would worry us.’
Still, she said, the bank is ‘keeping an eye’ on its loans to small and medium-size businesses ‘to make sure that if there is a downturn in the economy here in Asia, none of them goes through unnecessary stress’.
Source : Business Times – 8 May 2008
Fairmont, which is controlled by Saudi Prince Alwaleed bin Talal and US private equity firm Colony Capital, did not disclose the selling price, although Singapore media said the figure was around $650 million (US$471.7 million).
