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DBS Plans S$4 Billion Rights Offering at 45% Discount
By Chia-Peck Wong and Cathy Chan
Dec. 22 (Bloomberg) -- DBS Group Holdings Ltd., Southeast Asia’s biggest bank, is seeking S$4 billion ($2.76 billion) in a rights offering to weather a credit crisis that’s forced it to cut jobs for the first time since 2001.
DBS will issue one new share for every two held by existing investors at S$5.42 apiece, according to a statement today. That’s a 45 percent discount to Dec. 19’s closing price of S$9.85.
Chief Executive Officer Richard Stanley is turning to investors for cash after a slowdown in Singapore’s economy and rising provisions for losses on credit investments caused DBS’s steepest profit decline in two years. DBS today said fourth- quarter profit will fall from the previous three months and predicted credit costs will increase in 2009.
“The world is demanding banks have more capital and the outlook is very tough for Singapore banks right now,” Brian Hunsaker, a Hong Kong-based analyst at Fox-Pitt Kelton Asia Ltd., said before DBS’s announcement. DBS’s so-called core Tier 1 capital, a gauge of financial strength, is lower than at rival Singapore banks, he said.
Temasek Holdings Pte, one of Singapore’s two state-owned investment firms, will underwrite up to one-third of the rights issue, DBS said. Temasek owns 27.6 percent of DBS.
DBS said staff costs will increase in this quarter as it pays out bonuses. Job cuts announced in November will result in cost savings in the first quarter, the bank said.
Capital-Raising
DBS joins financial firms that have raised about $920 billion worldwide to survive the global recession brought about by frozen credit markets. Its shares rose 1.6 percent to close at S$9.85 on Dec. 19. The stock has slumped 52 percent this year, compared with a 48 percent drop in Singapore’s benchmark index. The bank’s shares were suspended from trading today in Singapore.
Standard & Poor’s said Dec. 19 that it expects banks to face more uncertainty in funding markets and a higher level of stress than in a “typical business-cycle trough.”
Banks around the world are raising cash to combat the credit crunch. Standard Chartered Plc, the U.K. bank that makes most of its profit in Asia, said Dec. 18 it raised 1.8 billion pounds ($2.8 billion) in a rights offer.
In Asia, lenders including Mizuho Financial Group Inc. and National Australia Bank Ltd. have raised a combined $52 billion as the U.S. recession dragged down growth in the region, according to data compiled by Bloomberg.
Norinchukin Bank, the Japanese agricultural bank stung by wrong-way bets on credit derivatives, said Nov. 27 it will seek more than 1 trillion yen ($10.5 billion) in Asia’s biggest capital-raising since the global credit crisis began.
Shinhan Financial Group Co. last week agreed to inject 800 billion won ($620 million) into unit Shinhan Bank, South Korea’s third-biggest lender, to boost its capital as the nation edges closer to a recession.
DBS said Nov. 7 it will cut 900 jobs, or 6 percent of its workforce, in the bank’s first mass layoffs since 2001. DBS’s net income fell 38 percent to S$379 million for the quarter ended Sept. 30, the most among Singapore’s three banks.
DBS Plans S$4 Billion Rights Offering at 45% Discount
By Chia-Peck Wong and Cathy Chan
Dec. 22 (Bloomberg) -- DBS Group Holdings Ltd., Southeast Asia’s biggest bank, is seeking S$4 billion ($2.76 billion) in a rights offering to weather a credit crisis that’s forced it to cut jobs for the first time since 2001.
DBS will issue one new share for every two held by existing investors at S$5.42 apiece, according to a statement today. That’s a 45 percent discount to Dec. 19’s closing price of S$9.85.
Chief Executive Officer Richard Stanley is turning to investors for cash after a slowdown in Singapore’s economy and rising provisions for losses on credit investments caused DBS’s steepest profit decline in two years. DBS today said fourth- quarter profit will fall from the previous three months and predicted credit costs will increase in 2009.
“The world is demanding banks have more capital and the outlook is very tough for Singapore banks right now,” Brian Hunsaker, a Hong Kong-based analyst at Fox-Pitt Kelton Asia Ltd., said before DBS’s announcement. DBS’s so-called core Tier 1 capital, a gauge of financial strength, is lower than at rival Singapore banks, he said.
Temasek Holdings Pte, one of Singapore’s two state-owned investment firms, will underwrite up to one-third of the rights issue, DBS said. Temasek owns 27.6 percent of DBS.
DBS said staff costs will increase in this quarter as it pays out bonuses. Job cuts announced in November will result in cost savings in the first quarter, the bank said.
Capital-Raising
DBS joins financial firms that have raised about $920 billion worldwide to survive the global recession brought about by frozen credit markets. Its shares rose 1.6 percent to close at S$9.85 on Dec. 19. The stock has slumped 52 percent this year, compared with a 48 percent drop in Singapore’s benchmark index. The bank’s shares were suspended from trading today in Singapore.
Standard & Poor’s said Dec. 19 that it expects banks to face more uncertainty in funding markets and a higher level of stress than in a “typical business-cycle trough.”
Banks around the world are raising cash to combat the credit crunch. Standard Chartered Plc, the U.K. bank that makes most of its profit in Asia, said Dec. 18 it raised 1.8 billion pounds ($2.8 billion) in a rights offer.
In Asia, lenders including Mizuho Financial Group Inc. and National Australia Bank Ltd. have raised a combined $52 billion as the U.S. recession dragged down growth in the region, according to data compiled by Bloomberg.
Norinchukin Bank, the Japanese agricultural bank stung by wrong-way bets on credit derivatives, said Nov. 27 it will seek more than 1 trillion yen ($10.5 billion) in Asia’s biggest capital-raising since the global credit crisis began.
Shinhan Financial Group Co. last week agreed to inject 800 billion won ($620 million) into unit Shinhan Bank, South Korea’s third-biggest lender, to boost its capital as the nation edges closer to a recession.
DBS said Nov. 7 it will cut 900 jobs, or 6 percent of its workforce, in the bank’s first mass layoffs since 2001. DBS’s net income fell 38 percent to S$379 million for the quarter ended Sept. 30, the most among Singapore’s three banks.
