Hong Kong's rich prop up DBS results
Local operations soar 34 per cent on surging wealth-management business
DBS Group Holdings relied on Hong Kong's monied classes to prop up an otherwise denng set of results last year, as the bank's local operations posted net profit growth of 34 per cent to HK$2 billion on the back of a surging wealth-management business.
Poor results elsewhere led to a 6.6 per cent fall in the group's overall net profit to S$1.02 billion (HK$4.72 billion), and highlighted the increasing reliance of Singapore's largest bank on the Hong Kong market.
The group has made aggressive moves into Hong Kong in recent years, having bought Kwong On Bank in 2001 and Dao Heng Bank a year later.
Hong Kong's contribution to DBS's bottom line surged to more than 33 per cent last year, from less than 25 per cent in 2002.
The increase was led by a 40 per cent surge in non-interest income - a figure group vice-chairman and chief executive Jackson Tai attributed primarily to the bank's wealth management business.
'The 64 branches we have in Hong Kong are amazing in distributing wealth-management products,' Mr Tai said. 'Our ability to engineer new products also played an important role.'
Retail wealth management sales in Hong Kong increased more than threefold, surpassing those in Singapore for the first time. That represented a dramatic reversal from 2002, when wealth-management sales in the bank's home market were more than double that in Hong Kong.
In that regard, DBS's results mirrored those of rivals Bank of East Asia and Standard Chartered, both of which recently reported strong results based largely on strong growth in fee and other non-interest income.
All three banks have seen narrowing margins take their toll on net interest income.
Chronically low interest rates are driving an increasing number of Hong Kong retail banking clients to investment alternatives that provide higher potential returns.
Elsewhere, DBS attributed its worse than expected 6.6 per cent fall in overall net profit to a new accounting policy and a Sars-struck first half that later growth in wealth-management business and a regional economic recovery could not totally offset.
'If you took away the effect of the new accounting method we've used in valuation of trading and investment securities, our net profit would've been at pretty much the same level as last year,' DBS chief financial officer Jeanette Wong said.
Benefiting from the economic recovery across the region, the group recorded its lowest non-performing loan ratio - 5.2 per cent - in six years.