Mortgage wars hit DBS loan volume

PUBLISHED : Saturday, 29 April, 2006, 12:00am
UPDATED : Saturday, 29 April, 2006, 12:00am

Singapore's DBS Group Holdings blames the decline in its loan volume in the past three months, the first in three years, on the mortgage wars in Hong Kong and Singapore.

The group posted a net profit of S$518 million ($2.53 billion) for the first quarter, up 39 per cent from a year ago, while DBS Bank (Hong Kong) recorded a 29 per cent increase in net profit to S$156 million.

But with housing loan volume falling 2 per cent from December, the group's customer loans shrank 1 per cent to S$78.8 billion during the quarter, ending three years of positive growth.

A group spokeswoman said the decline in home loans came after 'DBS exercised discipline amid intense mortgage competitive pricing pressures'.

DBS Bank (Hong Kong), which incorporates the former Dao Heng Bank in its operations, had 6.4 per cent of the local home loan market last month, down from 6.6 per cent in February.

Industry players expect the mortgage price war in Hong Kong to intensify.

Randolph Sullivan, the chief executive at DBS (Hong Kong), said the lender's main growth driver would be wealth management and credit cards.

The Hong Kong unit recorded a S$19 million provision during the quarter, double from a year ago, due to a general provision write-back in the first quarter last year.

'There has been a bit of an uptake in bankruptcies filing in the past three months but it's still at quite low levels,' Mr Sullivan said.

'We don't see any trend yet that is worrying in terms of spillover that will require a lot of additional provisioning from the personal bankruptcies.'

Net interest income for DBS Bank (Hong Kong) rose 36 per cent to S$278 million from a year ago. Net interest margin rose 0.22 percentage point to 2.64 per cent from the previous quarter.

Mr Sullivan said he was optimistic on the lender's prime-Hibor spread, now at 3.6 per cent, although it averaged 3.85 per cent in the first quarter.