Future bright for Dah Sing
DAH Sing Financial's earnings growth in the next two years should be protected by continuing benefits from its takeover of Wing On Bank and a more diversified earnings base.
The acquisition of Wing On Bank in 1993 has been successfully managed to bring increased benefits and economies of scale ahead of schedule.
Brokerage S G Warburg estimates Dah Sing's deposits will grow 20 per cent in 1994, helped by the bigger network of branches brought about by the Wing On acquisition.
Deposit growth is expected to slow only slightly in the next two years. Retail banking, a source of cheap deposits, is a strong new focus for the bank, which has previously relied on small corporate deposits from firms earning $25 million to $250 million a year.
Dah Sing is also less vulnerable to competition from medium-sized banks than its larger rivals.
To increase medium-term funds, it launched a five-year US$75 million floating rate certificate of deposit (CD) in March, 1994. The following month, a $100 million floating rate CD was issued in Singapore. Further issues are likely.
The bank is less vulnerable to a downturn in the banking cycle as it has strengthened core earnings and emphasised the growth of new income streams. These include new credit card and life insurance operations.
Non-interest income currently accounts for only 20 per cent of gross operating income, but Dah Sing has set an internal target of 30 per cent, which the brokerage believes it can achieve by 1998.
The company is expected to post stable profit growth of about 20 per cent in 1995 and 1996.