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DBS Q3 net profit at S$1.071b, buys ANZ's wealth, retail units in 5 Asian countries

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(From left to right) Ms Pearlyn Phau, DBS Bank's deputy group head of consumer banking & wealth management, Ms Tan Su Shan, DBS Bank's group head of consumer banking & wealth management; Mr Piyush Gupta, DBS Group CEO with Mr David Hisco, ANZ group executive of Asia retail and wealth and Mr Sanjoy Sen, ANZ managing director of retail banking, Asia Pacific.

DBS Group reported on Monday that its net profit for the third quarter ended September 30, 2016 stood at S$1.071 billion on higher income and lower expenses, compared to S$1.066 billion a year ago.

The Singapore-based bank also unveiled that it will buy the wealth management and retail banking business of ANZ in five markets for about S$110 million above book value.

It will acquire ANZ's portfolio of businesses in Singapore, Hong Kong, China, Taiwan and Indonesia, representing total deposits of S$17 billion, loans of S$11 billion, investment asset under management of S$6.5 billion and total revenue of S$825 million for FY2016. They serve about 1.3 million customers, of which over 100,000 are affluent/ private wealth customers and 1.2 million are retail customers.

The transaction is expected to be return on equity (ROE) and earnings accretive one year after completion. Subject to obtaining regulatory approvals, the transaction is anticipated to be completed progressively from Q2 2017 onwards, and the target is for full completion in all markets by early 2018.

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The announcement came just as DBS unveiled its Q3 results.

Compared to a year ago, total income rose 8 per cent to a new high of S$2.93 billion. However, the improved earnings was offset by an increase in general and specific allowances.

Allowance for credit and other losses rose to S$436 million in Q3, from S$178 million a year ago as general allowances of S$169 million were taken as a prudent measure. Specific allowances for credit exposures amounted to S$261 million as specific allowances for loans rose to 30 basis points compared to 20 basis points a year ago.

Non-performing assets rose 12 per cent from the previous quarter to S$4.33 billion, which included an oil and gas service exposure in Singapore recognised as a non-performing loan during the quarter. By the end of Sept, non-performing loan ratio was at 1.3, compared to 0.9 a year ago.

Net interest income in Q3 was at S$1.815 billion, versus S$1.813 billion a year ago. Net interest margin was stable at 1.77 per cent.

Loans rose 5 per cent in constant-currency terms to S$290 billion. An 8 per cent increase in non-trade loans from regional corporates as well as market share gains in Singapore housing loans was partially offset by a 14 per cent decline in trade loans.

Non-interest income grew 24 per cent to S$1.11 billion. Net fee income rose 19 per cent to S$614 million from broad-based growth. It was led by a 47 per cent increase in wealth management fees to a new high of S$201 million from stronger bancassurance income. Investment banking fees rose 74 per cent to S$54 million from higher equity market and fixed income fees as well as higher advisory activities. Card fees increased 15 per cent to S$123 million as credit and debit card transactions in Singapore continued to rise.

Transaction services fees were 11 per cent higher at S$147 million from growth in cash management fees.

Other non-interest income increased 32 per cent to S$500 million from higher trading income and gains on investment securities. Income from treasury customer sales was stable at S$308 million.

DBS CEO Piyush Gupta said,''Broad-based growth has resulted in a consistently strong year-on-year increase in total income over the three quarters. Investments to digitise the bank and efforts to manage costs are galvanising into faster productivity gains. All this has enabled us to maintain earnings stability and balance sheet strength while taking higher allowance charges."