Published on 05 Oct 2009
RAM Ratings has reaffirmed DBS Bank Limited’s (DBS Bank or the Bank) long- and short-term financial institution ratings at AAA and P1, respectively, with a stable outlook. The ratings reflect DBS Bank’s entrenched footing in its domestic market and its high level of systemic importance as Singapore’s top retail deposit-taker.
Amid the challenging economic climate, DBS Bank’s gross and net non-performing-loan (NPL) ratios rose to 2.84% and 2.02%, respectively, as at end-June 2009 (end-December 2008: 1.53% and 0.86%). The slip in asset-quality indicators had been caused by NPLs from the shipping sector and also the Bank’s loan exposure to Middle Eastern entities; we believe that additional provisions may be required for the Middle Eastern NPLs.
In 1H FY Dec 2009, DBS Bank clocked in a commendable pre-tax profit of SGD1.32 billion, albeit 20.35% lower year-on-year as the Bank had been affected by heftier credit costs. We anticipate DBS Bank to remain profitable in FY Dec 2009, despite rising loan-loss provisioning. Moving forward, the Bank will face the challenge of developing its regional footprint in efforts to expand its earnings base, given the limited growth potential on its home ground.
On the other hand, the challenges faced by DBS Bank are balanced by its solid overall and tier-1 risk-weighted capital-adequacy ratios of 16.17% and 12.55%, respectively, as at end-June 2009, which are well above those of similarly rated banks in RAM Ratings’ universe. “This level of capitalisation is expected to provide sufficient buffer for the Bank to weather through the current downturn. Additionally, the ratings take into consideration the implied shareholder support from the Singaporean government, which owns a 27.63%-stake in the Bank,” explains Promod Dass, RAM Ratings’ Head of Financial Institution Ratings.
On a separate note, Piyush Gupta is set to join DBS Bank as its new chief executive officer in November 2009. RAM Ratings will monitor the transition strategies of the Bank, if any.
Media contact
Josephine Ngiam
(603) 7628 1788
josephine@ram.com.my
The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations, transfer and convertibility risks, repatriation risk, currency risk or any other risk apart from credit risk.
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Published by RAM Rating Services Berhad
©Copyright 2009 by RAM Ratings
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