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DBS profit lower on debt write-downs

DBS Group Holdings Ltd of Singapore (DBS, 星展銀行集團), Southeast Asia's largest bank by market capitalization, said yesterday that its profit in the fourth quarter fell 18 percent, partly because of further write-downs in its debt-related portfolio.

Results for the quarter were also dragged down by a charge related to its stake in struggling Thai lender TMB Bank PCL, it said.

DBS reported a net profit of S$491 million (US$346 million), or S$1.37 a share, for the three months ending Dec. 31. In the same quarter of 2006, its profit was S$596 million, or S$1.44 a share.

The bank said it made additional allowances for S$1.21 billion of collateralized debt obligations (CDO), and reported charges of S$170 million in the quarter for the S$267 million of CDOs it holds with at least some exposure to US subprime mortgages.

The write-down brings its cumulative losses for such CDOs to S$240 million, about 90 percent of the total.

For the remaining S$944 million of investment CDOs, S$30 million was taken as general allowances during the quarter "as a prudential measure," DBS said in a statement.

In addition, the bank recorded a charge of S$67 million for its 6.8 percent stake in TMB Bank to reflect current market valuation for the investment.

"With the additional allowances we took this quarter, we are well covered for risks associated with US subprime assets," DBS chairman Koh Boon Hwee said in the statement.

He remains "cautiously optimistic about the year ahead," he said.

The net quarterly profit was lower than the S$557 million that was estimated by a Dow Jones Newswires poll of analysts.

"DBS took a more aggressive approach to the write-down of CDOs and it makes sense, since it will remove this overhang," Kim Eng Securities analyst Pauline Lee said.

Net interest income for the quarter was S$1.06 billion, up 14 percent from S$932 million. Noninterest income was S$474 million, up 1 percent from the S$468 million reported a year earlier.

DBS said it would pay a dividend of S$0.20 a share for the fourth quarter, bringing total dividends for the year to S$0.80, up from S$0.71 in 2006.

DBS shares were up 2.2 percent in early afternoon trade in Singapore at S$17.68.

Earlier this week, DBS named Richard Stanley, Citigroup Inc's top China manager, as its new chief executive, effective May 1.
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