DBS profits increase 22pc in HK

PUBLISHED : Saturday, 05 May, 2007, 12:00am
UPDATED : Saturday, 05 May, 2007, 12:00am

The Hong Kong operations of DBS Group Holdings, the largest lender in Singapore, said first-quarter profit rose 22 per cent from a year earlier on higher loan growth even as net interest margin fell. Net profit rose to HK$907 million, a gain of 11 per cent from the previous quarter.

In Singapore dollar terms, net profit increased 14 per cent to S$178 million (HK$916.32 million) from a year ago or 9 per cent from the fourth quarter.

Net interest income, which rose 4 per cent to HK$1.38 billion from a year earlier, dropped 5 per cent from the previous quarter as net interest margin fell by 31 basis points to 2.34 per cent from a year earlier and was down 10 basis points from the previous quarter.

Amy Yip Yok-tak, chief executive at DBS Bank (Hong Kong), the sixth-largest bank in Hong Kong, said the margin squeeze was due to the industry spread between the prime lending rate, which banks charge their customers, and the interbank rates narrowing by 19 basis points to 3.79 per cent due to higher interbank rates in the quarter. 'Prime-Hibor spread could continue to narrow if US and Hong Kong short term rates rise again,' she said.

Ms Yip said the bank would make up the narrowing spread by increasing loan volumes.

Loans increased 17 per cent in the quarter from a year earlier, 7 per cent from the previous quarter, helped by the jump in lending for initial public offerings in the quarter.

Non-interest income jumped 60 per cent to HK$688 million from a year earlier, on a higher contribution from the sale of foreign exchange hedging products and unit trusts and increased fee income.

The bank's business in the rest of Greater China, of which the mainland accounted for 60 to 70 per cent, saw a threefold increase in first-quarter pre-tax profit to S$24 million from S$8 million a year earlier.

DBS Group vice chairman Jackson Tai said the bank was keen to expand on the mainland as well as in India and the Middle East. Asked if DBS would list on the mainland, he said it could consider listing abroad someday but was in no hurry to do so.

DBS was one of the foreign lenders permitted to establish a mainland subsidiary and expects final approval to be granted this month or next.

DBS Group's net earnings rose 19 per cent from a year earlier to S$617 million, up 11 per cent up from the previous quarter.