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Wednesday, 7 March 2012

Peter Seah sees another record year for DBS

Bank is ready for opportunistic buys and to allocate more capital in China


By SIOW LI SEN

(SINGAPORE) Peter Seah, DBS Group Holdings' chairman, said he expects another year of record earnings as the bank continues to expand aggressively in all its core markets.

Mr Seah: 'Barring any unforeseen circumstances, I'm reasonably confident that we can do better than last year. I'm saying with a lot of courage ... '

In a press conference yesterday, Mr Seah also said the bank is ready for opportunistic acquisitions and is prepared to allocate more capital to its business in China, the biggest growth market in Asia.

Its full-year 2011 earnings hit a record $3.04 billion - the best ever for a Singapore bank. It's also only the second listed company here - after SingTel - to garner profits that topped the $3 billion mark.

This is up 86 per cent from $1.63 billion in 2010, which took $1.02 billion in goodwill charges. Without the goodwill item, 2011 net profit rose 15 per cent from 2010's $2.65 billion.

'Barring any unforeseen circumstances, I'm reasonably confident that we can do better than last year,' he said.

'I'm saying with a lot of courage, because it looks like the Europeans have temporarily found a solution but there's no definitiveness in this situation.'

He does not expect DBS to repeat the percentage growth of last year's profit over 2010, but 'in absolute terms, we should be able to beat the $3 billion mark'.

Mr Seah became DBS chairman on May 1, 2010. The bank has been transformed over the past two years and he gave much of the credit to chief executive Piyush Gupta who joined in November 2009.

'We have raised our coverage for NPLs (non-performing loans) from below 90 per cent to now 126 per cent, we are actually the highest among the Singapore banks in terms of coverage,' he said.

'We've also moved our ROE (return on equity) from 8.4 per cent in 2009, to 11 per cent which put us on par with our two other competitors,' he said. OCBC Bank and United Overseas Bank both posted 2011 ROEs of 11.1 per cent.

'And despite driving such a strong performance our cost to income ratio is the same as everybody else, 43 per cent, which suggests that our management team has really done an outstanding job of delivering the business revenues while at the same time expanding and building up the infrastructure.

'I would give very strong endorsement to my CEO Piyush and his senior team.'

He could also see Mr Gupta staying as CEO for 10 years. Mr Gupta in a recent interview said he expects to stay in the bank for 10 years, longer than all of his last five predecessors combined.

'I could say we are firing on all engines,' said Mr Seah.

He cited DBS' leadership position in the offshore renminbi market.

As at end-December 2011, DBS had a 15 per cent share of the offshore RMB (called CNH) interbank market, 3 per cent share of the CNH deposit market and 10 per cent share of CNH trade transactions in Hong Kong.

DBS has over 40 billion yuan ($8 billion) of CNH deposits in Singapore and Hong Kong.

'That's something we started just in the early stages when the market began to stir and therefore we were able to take a commanding position,' he said.

DBS will continue to aggressively build up its Greater China franchise, he said.

'We are a very rare bank that has got three wholly owned banks in the three territories (Hong Kong, China and Taiwan) but together they are one big market, they are connected,' he said.

Taiwan investors invest in China, and DBS' ability to connect up the three territories gives the bank tremendous advantage, said Mr Seah.

DBS is prepared to allocate more capital to expand its China operations, he said. It has 25 outlets in China and targets to open about 75 outlets by 2020, subject to regulatory approvals.

'The whole board met in Beijing last year and one of the principal purposes was to strategise on China and have the board agree on capital allocation for China and strategies on China,' said Mr Seah.

DBS China doubled its 2011 net profit to over 500 million yuan.

On potential acquisitions, Mr Seah said DBS will look at opportunities now that it has shown it can grow organically.

But so far, DBS has not come across any potential acquisition that it would 'entertain'.

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