Leegalized Ah Longs' Q1 profit rises 38% to $1.9b

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<TABLE border=0 cellSpacing=0 cellPadding=0 width=452><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published May 8, 2010

</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Banks' Q1 profit rises 38% to $1.9b
Higher-than-expected earnings helped by fee and trading income

By CONRAD TAN
FIRST-QUARTER earnings at the Singapore banks have surpassed analysts' estimates, buoyed by higher fee and trading income and a sharp fall in bad-loan charges as economies in Asia rebounded.

<TABLE class=picBoxL cellSpacing=2 width=100 align=left><TBODY><TR><TD></TD></TR><TR class=caption><TD></TD></TR></TBODY></TABLE>Their combined net profit rose to $1.91 billion, up 38 per cent from a year ago and 26 per cent higher than in the fourth quarter of last year.
Total income grew to $4.6 billion, up 5 per cent over the year, and 15 per cent higher compared with the previous three months. The increase was due to a surge in non-interest income from stockbroking, investment banking, wealth management, insurance, trading and investment activities, and asset sales.
Over the year, their combined non-interest income grew 19 per cent to $1.93 billion. Compared with the previous quarter, it surged 49 per cent.
'Overall it's a good set of results for the banks - it shows they're recovering nicely,' said Pauline Lee, a banking analyst at Kim Eng Securities.
Total allowances for credit and other losses fell by more than half to $488 million, from $1.01 billion in Q1 last year, reducing the drag on the banks' earnings. Compared with Q4 last year, allowances were down 3 per cent.
The banks' combined customer loans - less allowances for bad loans - grew 5 per cent over the year to $323.4 billion at the end of March, though there were big differences in the pace of loans growth at the three banks.
OCBC Bank's customer loans - after allowances - grew the fastest, rising 13 per cent over the year and 10 per cent over the quarter, to $88.9 billion, partly due to the inclusion of Bank of Singapore, formerly ING Asia Private Bank, which became a wholly owned unit of OCBC on Jan 29. Excluding its contribution, OCBC's customer loans grew some 7 per cent over the year, and 4 per cent over the quarter, according to BT's estimates.
Loans growth at rivals DBS Group and United Overseas Bank was slower but is expected to pick up in the months ahead as business sentiment in Singapore and their biggest overseas markets improves, spurring new corporate borrowing.
'We can see the improvement in loans growth,' Ms Lee said.
But net interest margins at all three banks shrank - meaning their lending activities were less profitable compared with Q1 and Q4 last year - as analysts had predicted. As a result, their combined net interest income - still the bigger contributor to total income, at 58 per cent - fell to $2.67 billion, from $2.77 billion in Q1 last year and $2.71 billion in Q4, despite an increase in loan volumes.
Over the quarter, OCBC and UOB did manage to boost their net interest income slightly, but DBS's fell.
But the interest margins at all three banks - already squeezed by renewed competition limiting what they can charge on loans, and already-low interest rates limiting their ability to reduce what they pay on deposits - could suffer more in the coming months.
Interest rates in Singapore, the banks' biggest market, 'seem likely to continue downward in the near term', DBS research head David Carbon said in a report yesterday. The Monetary Authority of Singapore appears to have scaled back its earlier intervention in the currency markets to prevent the Singapore dollar from strengthening too much - action which also put upward pressure on interest rates - which means interest rates could now fall further, Mr Carbon said.
Kim Eng's Ms Lee said: 'I think net interest margins will remain under pressure due to the very low interest rate environment, as well as rising competition in mortgages.'
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<TABLE border=0 cellSpacing=0 cellPadding=0 width=452><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published May 8, 2010

</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Bank earnings
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>DBS Q1 net profit up 23% at $532m
Earnings are the smallest in absolute terms compared with those of UOB and OCBC

By SIOW LI SEN

HIT by historic low interest rates, DBS Group Holdings yesterday posted disappointing first-quarter net earnings of $532 million, up 23 per cent.

<TABLE class=picBoxL cellSpacing=2 width=100 align=left><TBODY><TR><TD></TD></TR><TR class=caption><TD>LENDING MARGIN FALL
'Due to our long Singapore dollar position, we are very vulnerable to interest rate cycles,' Mr Gupta said</TD></TR></TBODY></TABLE>The net profit reported by DBS, South-east Asia's biggest bank, was the smallest in absolute terms compared with those of its two domestic rivals.
Annualised earnings per share for the three months ended March 31 were higher at 92 cents against 84 cents a year ago. Dividend for the quarter was unchanged at 14 cents.
United Overseas Bank's net profit soared 71 per cent to $700 million, exceeding expectations, while at OCBC Bank, net earnings rose 24 per cent year-on- year to $676 million, its highest since Q2 2006.
DBS fared the worst as higher loans growth could not mitigate the fall in lending margins. 'Due to our long Singapore dollar position, we are very vulnerable to interest rate cycles,' said Piyush Gupta during the results briefing.

<TABLE border=0 cellSpacing=0 cellPadding=5 width=120 align=left><TBODY><TR><TD><TABLE border=0 cellSpacing=0 cellPadding=4 width=200 align=left><TBODY><TR bgColor=#4e6e78><TD height=8 colSpan=2>[FONT=Verdana, Arial, Helvetica, sans-serif]Related links: </TD></TR><TR bgColor=#d5e9f1><TD>

</TD><TD>[FONT=Verdana, Arial, Helvetica, sans-serif][SIZE=-1][SIZE=-2]Click here for DBS's news release[/SIZE][/SIZE][/FONT]</TD></TR><TR bgColor=#d5e9f1><TD>

</TD><TD>[FONT=Verdana, Arial, Helvetica, sans-serif][SIZE=-1][SIZE=-2]Presentation[/SIZE][/SIZE][/FONT] </TD></TR><TR bgColor=#d5e9f1><TD>

</TD><TD>[FONT=Verdana, Arial, Helvetica, sans-serif][SIZE=-1][SIZE=-2]Performance Summary[/SIZE][/SIZE][/FONT]</TD></TR></TBODY></TABLE></TD></TR></TBODY></TABLE>DBS said loans grew 3 per cent from the previous quarter but net interest margins fell nine basis points from the previous quarter to 1.93 per cent, as record low interest rates and increased competition resulted in lower loan yields for housing loans and trade finance. The lower interest margins resulted in net interest income declining 5 per cent from the previous quarter to $1.07 billion.
Many analysts - as well as DBS - have been projecting interest rate hikes later this year and that the bank is in the best position to benefit from them, given its surplus funds.
Mr Gupta noted that rates are going up around the region 'and I don't expect it to slow down'.
He said that 'unfortunately', Singapore interest rates are tied to the US, and if the contagion from the Greek crisis spreads, 'it's possible that dollar rates could stay low longer'.
'My own bias was that dollar rates would go up in the second half of the year and we were actually calling for 50-75 basis points rate hike,' he said. 'Bottomline is, if rates don't go up, it will take us longer to recover our income streams.'
For the quarter under review, DBS said it continued to gain market share in housing and corporate loans with its differentiated offerings.
DBS has been offering three-year and five-year fixed rate home loans, backed by its large stable customer deposit base. More than 40 per cent of new loans sold last quarter were fixed rate loans. Home loans in Singapore rose 6 per cent while business loans grew 3 per cent.
At the group level, DBS is expecting double-digit loan growth for the full year, Mr Gupta said.
Fee and commission income was up 8 per cent to $341 million from a year ago but down 5 per cent on quarter with lower investment banking income.
Other non-interest income grew 14 per cent to $306 million, reflecting better market opportunities and customer flows in interest rate, foreign exchange and credit activities.
Customer flows accounted for more than half of the net trading income for the quarter.
Non-performing loan rate fell to 2.7 per cent from 2.9 in the previous quarter. Additional general and specific allowances of $355 million were set aside during the quarter, with a substantial portion for its Middle East exposure. For the corresponding period last year, allowances for credit and other losses totalled $414 million.
Asked about its exposure to Piigs (Portugal, Ireland, Italy, Greece and Spain), Mr Gupta said corporate exposure is close to zero while there is very small exposure to a 'leading Spanish bank' in interbank loans.
On risks the booming property market is posing to the banking sector, he said he is not worried as the majority live in HDB flats.
'In general there is exuberance in property prices in Singapore and around the region' fuelled by cheap loans and the lack of alternative investment opportunities, and inflows into the region, he said.
Asian central banks are ahead of the curve and have used various measures to rein this in including raising the loan-to-value ratio, he said. Banks here have also started pricing in higher margins as property prices continue to rise, he noted.
Banks are now charging 100 basis points spread for property loans compared with 50 basis points in February.
Looking ahead to the rest of the year, Mr Gupta said the 'economic recovery is in place but there are uncertainties'.
'By and large the Asian recovery is stronger, is more stable than the global recovery.'
At the macroeconomic level, Asia has decoupled from the Western markets but not entirely, he said.
DBS said its scrip dividend scheme will be applicable to the dividend and new shares will be issued at a 5 per cent discount to the average of the last dealt prices for DBS shares on May 20, 21 and 24, 2010.
DBS will maintain the frequency of its dividend payments for first half 2010. With effect from the second half of the year, DBS will move to semi-annual dividend payments because it will be more efficient for its scrip dividend scheme.
There are no other changes to DBS's dividend payout policy.
The stock eased 30 cents to $14.36 yesterday.
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<TABLE border=0 cellSpacing=0 cellPadding=0 width=452><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published May 8, 2010

</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Bank earnings
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>UOB posts 71.2% gain in Q1 net profit

By CONRAD TAN

UNITED Overseas Bank's first-quarter net profit rose 71.2 per cent to $700 million from a year ago, exceeding analysts' estimates, due to much lower bad-loan charges and higher non-interest income.

<TABLE border=0 cellSpacing=0 cellPadding=5 width=120 align=left><TBODY><TR><TD><TABLE border=0 cellSpacing=0 cellPadding=4 width=200 align=left><TBODY><TR bgColor=#4e6e78><TD height=8 colSpan=2>[FONT=Verdana, Arial, Helvetica, sans-serif]Related articles: </TD></TR><TR bgColor=#d5e9f1><TD>

</TD><TD>[FONT=Verdana, Arial, Helvetica, sans-serif][SIZE=-2]Click here for UOB's news release[/SIZE][/FONT]</TD></TR><TR bgColor=#d5e9f1><TD>

</TD><TD>[FONT=Verdana, Arial, Helvetica, sans-serif][SIZE=-2]Financial results [/SIZE][/FONT]</TD></TR></TBODY></TABLE></TD></TR></TBODY></TABLE>Excluding a one-time gain of $82 million from the sale of its life insurance unit, UOB Life Assurance, to Prudential in January, net profit rose 51.1 per cent.
The results showed the group's ability to ride on Asia's economic recovery, UOB chief executive Wee Ee Cheong said, but he warned that the ride would be bumpy.
'Asian economies appear to be back on track, and we believe that this part of the world is well-positioned for the post-crisis era.'
However, 'the rebound will be volatile as the West continues to grapple with de-leveraging issues'.
Non-interest income - from trading and investment activities, as well as fees from loan-related and fund management business - rose 38.6 per cent to $602 million, from $434 million a year earlier. Compared to the fourth quarter of last year, non-interest income rose 72 per cent.
Allowances for credit and other losses were sharply lower at $108 million, compared with $378 million a year earlier, as the quality of the group's loan portfolio improved. But allowances rose compared to Q4 last year, when UOB wrote back some general provisions it had made earlier against possible loan losses.
Non-performing loans (NPLs) fell to $2.15 billion at end-March, from $2.26 billion three months earlier, and $2.19 billion at the end of March last year. The proportion of NPLs fell to 2 per cent, from 2.2 per cent at end-December and 2.1 per cent at end-March last year.
Five analysts polled by Reuters had forecast an average Q1 net profit of $519 million for UOB. The average forecast of four analysts surveyed by Bloomberg was $566.2 million.
UOB's share price rose after the lunchtime announcement yesterday, but fell back to end 3.1 per cent lower at $18.72.
Over the quarter, UOB's customer loans - less allowances for bad loans - expanded 1.4 per cent, or $1.4 billion, to $100.6 billion, due mainly to an increase in housing loans, which now make up 27.8 per cent of the group's total loans. Compared to a year earlier, its net customer loans grew 0.9 per cent.
Malaysia - UOB's biggest overseas market - led the loan growth for the quarter, while both Singapore and Malaysia contributed to the improvement year-on-year, UOB said.
But UOB's net interest margin, which measures how profitable its lending activities are after deducting funding costs, fell compared to Q1 and Q4 last year.
As a result, its net interest income slid 5.2 per cent to $900 million, compared to a year earlier, though it rose slightly - by 0.9 per cent - from Q4 last year.
UOB's annualised earnings per share for Q1 - what the group would earn for a whole year if its earnings continued at the same pace - rose to $1.63, up from $1.31 in Q4 last year and $1.01 in Q1 last year. Its annualised return on equity improved to 14.2 per cent, from 12.1 per cent in Q4 2009 and 11.2 per cent in Q1 2009.
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<TABLE border=0 cellSpacing=0 cellPadding=0 width=452><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published May 8, 2010

</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Sembcorp Marine's Q1 net profit rises 24%
Earnings up at $148.8 million, but revenue falls 0.3% to $1.36 billion

By JOYCE HOOI
COMING off a record year in 2009, Sembcorp Marine saw a 23.8 per cent growth in net profit from $120.2 million to $148.8 million for the first quarter, supported by stronger operating margins from rig building and offshore and conversion projects.

<TABLE class=picBoxL cellSpacing=2 width=100 align=left><TBODY><TR><TD></TD></TR><TR class=caption><TD>CHALLENGING CONDITIONS
Revenue for Sembcorp Marine's ship repair segment declined from $196 million to $143.7 million
</TD></TR></TBODY></TABLE>Revenue for the three months ended March 31 dipped 0.3 per cent to $1.36 billion. For the quarter, the group's operating margin stood at 12 per cent, compared with 10 per cent for the corresponding period a year ago.
The period saw a net foreign exchange loss of $10.4 million against a net foreign exchange gain of $14.9 million a year earlier. This was partially offset by the absence this time round of a $9.3 million expense for fair value adjustment on hedging instruments. While the group's rig-building turnover grew 16.7 per cent to $886.5 million, its offshore and conversion and repair business saw revenue shrink 20.2 per cent and 26.7 per cent respectively.
The decline in revenue for Sembcorp Marine's ship repair segment from $196 million to $143.7 million was attributed to 'the challenging market conditions faced by the shipping companies'.
Excluding ship repair contracts, the group has secured $680 million worth of contracts since January this year, out of which $550 million was for the construction of ConocoPhillips Skandinavia AS's Ekofisk accommodation topside for the North Sea. The remaining $130 million was for the pre-floating, production, storage and offloading conversion contract for Petrobras Netherlands BV. The group has a net order book of $5 billion with completion and deliveries stretching to December 2012.
While the group acknowledged that the current oil spill in the Gulf of Mexico may affect offshore drilling there, it said that it currently sees no major cause for immediate concern.
Earnings per share for the quarter stood at 7.21 cents, a 23.2 per cent increase from 5.85 cents in Q1 FY2009. 'FY2009 was an exceptional year in terms of profit. The group expects to achieve satisfactory results for FY2010,' Sembcorp Marine stated yesterday. The group's counter closed four cents higher at $4.09 in trading yesterday.

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<TABLE border=0 cellSpacing=0 cellPadding=0 width=452><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published May 8, 2010

</TD></TR><TR><TD vAlign=top width=452 colSpan=2>UE Q1 profit more than trebles to $28m

By KALPANA RASHIWALA
UNITED Engineers' first-quarter net profit has more than trebled as sales of residential apartments propelled a surge in revenue. The group yesterday announced a net profit of $28.2 million for the three months ended March 31, up from $8.5 million for the corresponding year-ago period. Revenue rose 32 per cent year-on-year to $195.9 million.

<TABLE class=picBoxL cellSpacing=2 width=100 align=left><TBODY><TR><TD></TD></TR><TR class=caption><TD>UE BIZHUB EAST
UE's office, hotel, retail and convention centre project at Changi Business Park is slated for completion in 2013



</TD></TR></TBODY></TABLE>The improvements in top and bottom lines were due mainly to progressive recognition of revenue and income from sales of apartment units at The Rochester in one-north and Park Central @ AMK in Ang Mo Kio. The latter is a Housing & Development Board Design, Build and Sell project. Both developments are scheduled to receive Temporary Occupation Permit next year.
Earnings per share rose from 3.8 cents for Q1 2009 to 11 cents for Q1 2010. Net asset value per share was $3.51 as at March 31, 2010, against $3.43 at end-2009. On the stock market yesterday, the counter eased five cents to $2.23. UE had cash and cash equivalents of $319.6 million at end-March 2010, up slightly from $318.2 million at the end of last year.
<!-- REPLACE EVERYTHING IN CAPITALS WITH YOUR OWN VALUES --><TABLE class=quoteBox border=0 cellSpacing=0 cellPadding=0 width=144 align=left><TBODY><TR><TD vAlign=bottom>

</TD></TR><TR><TD bgColor=#fffff1><TABLE border=0 cellSpacing=0 cellPadding=0 width=124 align=center><TBODY><TR><TD vAlign=top>Both The Rochester in one-north and Park Central @ AMK are scheduled to receive TOP next year.




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</TD></TR></TBODY></TABLE>The group - which is involved in construction, engineering and property development and investment - is currently developing an office, hotel, retail and convention centre project at Changi Business Park which is slated for completion in 2013. UE BizHub East, as the development will be known, is being built on a site with 30-year leasehold tenure from February 2008 with an option to extend for a further 30 years at prevailing lease premium.
Last month, UE clinched two industrial buildings at Ang Mo Kio for about $25 million, as part of its plans to increase its portfolio of build-to-suit properties.
Motorola owned the two buildings - Motorola Innovation Centre and Motorola Excellence Centre. They will collectively be known as UE BizHub Central after the ownership change. The two buildings have a total gross floor area of 378,426 sq ft. UE will move its headquarters from UE Square in the River Valley/Clemenceau area to this location at year-end.
The company also hopes to expand UE BizHub Central.
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<TABLE border=0 cellSpacing=0 cellPadding=0 width=452><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published May 8, 2010

</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Rotary Q1 profit more than trebles to $13.8m
Group revenue surges 36% to $179.7m; it is seeking opportunities in Middle East

By CHAN YUPING
ROTARY Engineering has posted a first-quarter net profit of $13.8 million, more than three times that of $4.3 million a year ago.

<TABLE class=picBoxL cellSpacing=2 width=100 align=left><TBODY><TR><TD></TD></TR><TR class=caption><TD>MR CHIA
'We have a robust business model, an experienced management team and a clear strategic roadmap'
</TD></TR></TBODY></TABLE>The net profit attributable to shareholders for the three months ended March 31 came as group revenue surged 36 per cent to $179.7 million. Also helping was the absence this time round of a $6.1 million allowance for doubtful debts that it saw for the year-ago period.
The group, a provider of engineering, procurement, construction and maintenance services specialising in the oil, gas and petrochemical industries, said its growth was 'underpinned by strong industry fundamentals and rising opportunities in the global and regional oil and gas sector in line with the gradual turnaround in the global economy'.
Gross profit margin was maintained at 18 per cent while earnings per share trebled to 2.4 cents from 0.8 cents a year earlier.
Chairman and managing director Chia Kim Piow was upbeat about Rotary's prospects. 'Rotary is well-positioned to continue to chart this upward trend. We have a robust business model, an experienced management team and a clear strategic roadmap,' he said.
The group's order book stands at $1.1 billion, more than 80 per cent of which came from outside Singapore, with projects continuing to end-2012.
Rotary said its total debt-to-equity ratio remained low at 1.6 per cent as at March 31 and it had a net cash position and net working capital of $129.1 million and $168.8 million respectively.
Mr Chia said Rotary will continue with 'controlling costs to ensure alignment with revenue growth and the current level of business activity'. 'In the near term, Rotary will continue to develop existing territories in Asia while driving its business development efforts beyond Saudi Arabia to include the Gulf Cooperation Council (GCC) countries in the Middle East,' it said.
Rotary shares ended trading yesterday at $1.01

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