DBS - Core Profit S$456m: Strong Operating Performance

Reported net profit S$433m (vs. Citi S$400m): Excluding a S$23m impairment charge on TMB, DBS posted a 1Q09 core net profit of S$456m, driven by record revenues and lower costs, leading to a 31%qoq jump in pre-provision profit to S$1,024m. DBS used this good result to raise provisions to S$414m (131bps of loans), conservatively including S$182m general provisions. HK net profit recovered to S$94m (4Q: S$16m) from better non-interest income and lower costs. Tier-1 capital ratio 12.5%; quarterly dividend maintained at S$0.14/share.

1Q09 core profit S$456m (4Q: S$383m), +19%qoq: 1Q09 NII S$1,076m down 3%qoq: Loans +3%qoq, NIM 199bps (4Q: 205bps). Loan-to-deposit spread 2.59% (4Q: 2.61%), LDR 74%. Non-II S$586m, fees S$317m (+21%qoq, higher loan fees), other income S$269m (4Q: S$93m) on higher trading gains. Costs S$638m -7%qoq, as staff costs fell 5%qoq and other costs fell 9%qoq; cost-income ratio 38%. Provisions S$414m (4Q: S$269m), 131bps of loans. NPL ratio 2.1% (NPA: 2.4%). Tier-1 ratio 12.5%, CAR 16.7%. 1Q09 EPS S$0.83, BPS S$10.27.

1Q09 Provisions S$414m (annualized 131bps of loans, 4Q: S$269m): S$225m in specific allowances (flat qoq), S$182m set aside for general allowances (including S$49m GP against corporate CDOs) vs. 4Q08 S$46m, and S$7m for other securities. In addition, DBS took a S$23m impairment charge on its stake in TMB (regarded as a non-core item). DBS has 93% coverage of its S$276m ABS CDO and 36% coverage of its S$736m corporate CDO investment, plus another S$218m CDOs in its trading book for a total of S$1,230m CDO portfolio.

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