|
|
|
Singapore's DBS
takes more writedowns, Q4 falls 18 pct
Saeed
Azhar
Reuters
15 Feb
08
http://www.reuters.com/article/bankingFinancial/...
DBS,
Southeast Asia's biggest bank by assets, said quarterly profits
fell 18 percent due to further writedowns linked to the global
credit crisis, but the decline was less than feared and its
shares rose.
The Singapore lender said it was cautiously
optimistic about the year ahead despite financial market turmoil
wrought by the U.S. subprime mortgage collapse and expectations
of slowing global economic growth.
DBS announced S$200
million ($141 million) in writedowns, including S$170 million on
subprime-related collateralised debt obligations (CDOs). The
charges were at the top end of market forecasts for S$150-S$200
million.
"They have taken the CDO medicine,"
said Matthew Wilson, analyst at Morgan Stanley, adding that loan
growth was expected to remain strong though DBS may face pressure
from lower interest margins and volatile markets that may hurt
fees.
The bank also took an additional loss of S$146
million on a special-purpose vehicle that invests in debt such as
CDOs, spreading it over 2007 and 2006, while it plans to take
another S$86 million loss on it in the first quarter of
2008.
DBS said it divided up the S$1 billion vehicle last
month into riskier and less risky debt instruments. This reduced
direct exposure to risky debt derivatives to S$1.5 billion, from
S$2.36 billion at the end of September.
"We view this
as a very positive development as it clearly quantifies the
losses and should work toward removing the overhang from the
stock," said Harsh Modi, an analyst at JPMorgan.
DBS
shares, 28 percent-held by state investor Temasek Holdings, were
up 2.8 percent by 0639 GMT, outperforming a 0.4 percent rise
Singapore Straits Times Index .FTSTI, but the stock is still down
about 14 percent this year as credit worries weigh on financial
shares around the world.
DBS also took another S$67
million impairment charge for its 6.8 percent stake in Thailand's
TMB Bank TMB.BK to reflect the falling value of its investment in
the loss-making lender.
Jeanette Wong, chief financial
officer at DBS, said the bank still plans to keep its stake in
TMB, despite the value of its stake falling by 45 percent in 2007
from S$460 million in 2004.
DBS said the additional
charges cover the risks associated with U.S. subprime assets as
it had written down 90 percent of the S$267 million debt linked
to risky U.S. mortgages.
October-December net profit fell
to S$491 million from S$596 million a year earlier. Four analysts
had expected profit of S$466 million. Full-year earnings,
including one-off charges and goodwill, edged up to S$2.28
billion from S$2.27 billion in 2006.
New
CEO
The
writedowns come before the bank's new chief executive Richard
Stanley joins on May 1. Stanley, the head of Citigroup in China,
replaces Jackson Tai, who resigned last year, and is expected to
breathe life into its China business and expand beyond
Singapore.
"I believe that despite the turmoil in the
global financial market today, banks in Asia are much less
affected," said Chairman Koh Boon Hwee. "Our balance
sheet is strong and I remain cautiously optimistic about the year
ahead."
Standard & Poor's estimates that the
total exposure of Asian banks to structured derivative
instruments is about $34 billion - only 10 perent of their equity
and far less than their U.S. and European peers.
But with
investor fears of a U.S. recession and a global credit crunch
threatening to slow Asian economies and corporate borrowings,
analysts have become more bearish on bank earnings.
UBS
expects the Singapore economy to grow at 3.5 percent, slower than
a government forecast of 4-6 percent and following a 7.7 percent
year-on-year expansion in 2007.
Singapore's central bank
warned in December that the worsening of the credit squeeze or a
sharp slowdown in the U.S. economy may hurt profits of Singapore
banks in 2008.
But other analysts said loan demand will
still be healthy, helped by a property boom and billions of
dollars of state spending on two subway lines and a new
expressway.
BNP Paribas expects loans to grow 13 percent
in 2008, slowing from 20 percent in 2007 - the fastest since
September 1995.
DBS said lending grew 25 percent in the
quarter from a year earlier to S$108.4 billion, led by loans to
regional businesses and mortgages.
DBS shares fell around
8 percent last year on worries about its direct exposure to the
credit turmoil. It trailed local rivals United Overseas Bank,
which rose 2.6 percent, and Oversea-Chinese Banking Corp, which
advanced 7.7 percent. OCBC reports its quarterly results on Feb
21 and UOB on Feb 27.
DBS will pay a 20 cent dividend,
increasing the 2007 payout to 80 cents from 71 cents in
2006.
Editing
by Neil Chatterjee and Lincoln Feast
|
|
