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SCMP Reporter

DBS Group, owner of Dao Heng Bank, reported a softer than expected set of second-quarter figures yesterday that underlined the tough economic climate in both of its key markets.

The Singapore-based group said April to June net profit dipped 9 per cent compared with the first quarter to S$253 million (about HK$1.13 billion), lower than forecast.

Jackson Tai, speaking at his first results briefing as chief executive, said: 'In terms of a tough environment . . . we controlled what we could control.'

With Singapore emerging only gradually from last year's recession and Hong Kong's economy stuttering, pressure has built up on the government-linked bank's numbers, especially provisions.

Compared with the preceding quarter, operating income fell 3 per cent to S$995 million; net profit before goodwill was down 7 per cent at S$322 million and provisions were raised 10 per cent to S$105 million.

Expenses were level at S$460 million but the lower revenues pushed the cost-to-income ratio up to 46.3 per cent from 44.8 per cent in the first quarter.

DBS bought Dao Heng last year for HK$45 billion, boosting its presence in the SAR beyond its initial purchase of DBS Kwong On. It is now Hong Kong's fourth-largest banking group.

Analysts said as the Dao Heng accounts were consolidated into the group figures from July last year, quarter-on-quarter comparisons were more meaningful than year-on-year matches.

DBS executives remained exceedingly cautious about the general outlook, saying a substantive improvement in its performance depended on a turnaround in the United States economy.

DBS Vickers executive chairman Greg Seow said: 'I would not want to be too optimistic here. At best we will see a modest recovery [in Asia].'

The rise in loan-provisioning was particularly evident in Hong Kong, where the bankruptcy rate had risen while property values had fallen.

For Dao Heng alone, provisions rose 371 per cent to S$104 million in the first half of this year from the first six months of last year.

DBS said its credit card write-off rate for Hong Kong was 10.3 per cent over the first-half, below the industry average.

Mr Tai said integration of Dao Heng was largely complete, with HK$296 million in cost savings achieved over the first half compared with a full-year target of HK$450 million and eventual total target of HK$750 million.

Mr Tai said no more Hong Kong staff reductions were planned. He did not comment on the possibility of further reductions in its branch network, which dropped to 81 last month from 101 in December 2000.

The bank, which reiterated its over-arching strategy to build a regional franchise and expand in the mainland, indicated its continuing focus in Hong Kong.

Mr Tai said DBS would hold its next board meeting in the SAR.



DBS bottom line takes knock in tough times