When the man in the street has known it better a long time ago? Cos they are so overpaid and have been living in their ivory towers for too long?
<TABLE cellSpacing=0 cellPadding=0 width=452 border=0><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published November 8, 2008
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Banks warn of difficult times ahead
Sharply higher provisions for bad loans start eating into profits
By CONRAD TAN
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SINGAPORE banks are sounding warnings about the state of the economy, raising provisions sharply in anticipation of bad loans in the months ahead.
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</TD></TR><TR class=caption><TD>FLAGGING PERFORMANCE
UOB posted a 5% dip in net profit y-o-y to $475m for the three months to end-Sept, after loan-impairment charges soared $154m from last year</TD></TR></TBODY></TABLE>'Some months ago, I said that this financial crisis was the worst I'd ever seen. For all my pessimism then, I could not have imagined the extent of the turmoil that would follow on Wall Street, nor the additional stress that would be placed on the world banking system,' said DBS Group chief executive Richard Stanley yesterday.
DBS's third-quarter net profit slumped 38 per cent to $379 million compared to a year earlier - its worst quarterly performance since Q4 2005, when it reported a net loss of $441 million due to a one-time goodwill charge of $1.13 billion for its investment in its Hong Kong unit.
The sharp fall in profit was far steeper than analysts expected. Analysts surveyed by Reuters had predicted an average of $475 million in net profit, while those polled by Bloomberg had expected $455 million.
Total allowances for bad loans and soured investments ballooned to $319 million, from $80 million a year earlier and $56 million in the second quarter.
That included specific allowances for bad loans of $106 million - more than double the $52 million in Q2 - mostly due to charges taken for equity-financing loans to private banking customers in Singapore and Hong Kong. Bad-loan charges for loans to small and medium-size companies in Hong Kong and other countries also rose, said the bank.
For the nine months to end-September, net profit dipped 9 per cent to $1.63 billion.
DBS's results were 'pretty disappointing', said Phillip Securities analyst Brandon Ng. 'We didn't expect so much impairment, especially on the Hong Kong side.'
The bank will likely see more charges for losses on equity-financing loans to wealthy customers in the fourth quarter, given that October was an even worse month than September for stock markets, he added.
Net interest income for the third quarter rose slightly to $1.07 billion - up 2 per cent from a year earlier and one per cent higher than in Q2 - supported by continued rapid growth in the group's main lending business.
DBS's net customer loans rose to $127.5 billion at the end of September, up 22 per cent from a year earlier and 8 per cent over the quarter - the fastest growth among the three banks.
But its net interest margin or NIM - which measures how much profit banks make on loans after deducting funding costs - was the only one among its peers to fall over the year.
'Among the three banks, OCBC did relatively well because they held up their NIM but DBS was a bit disappointing because their NIM has been coming down since Q4 last year,' said Mr Ng.
Non-interest income at DBS fell 33 per cent over the year to $327 million, dragged down by sagging fees and commissions from stockbroking, investment banking and wealth management, as well as net trading losses.
All three banks' results were 'below my expectations', said Pauline Lee, an analyst at Kim Eng Securities.
'DBS is the most unexpected because of the huge impairments that they provided.'
The 900 jobs that DBS is cutting 'may be a good measure in the short term, but I'm not sure whether it will affect the business momentum in the long term', said Ms Lee.
On Wednesday, OCBC Bank said its net profit fell 13 per cent to $402 million in the third quarter compared to a year earlier, as allowances for bad loans surged to $156 million from $39 million.
And on Friday last week, United Overseas Bank (UOB) said its net profit dipped 5 per cent year-on-year to $475 million for the three months to end-September, after loan-impairment charges jumped to $158 million from $4 million a year earlier.
Mr Ng said that while OCBC and UOB are unlikely to follow DBS in announcing drastic staff cuts in the near term, 'in 2009, if the entire economy slows down, we may be facing another recession where in order for businesses to survive, that's the only way out'.
All three banks warned of difficult times ahead.
'The impact of deleveraging and credit crunch will be increasingly evident in the real economy,' said UOB chief executive Wee Ee Cheong.
OCBC CEO David Conner said that the next few quarters 'are expected to be challenging for individuals and businesses around the world'.
Earlier this week, UOB also told Reuters that demand for loans from small and medium-sized businesses could fall as firms suffer from the economic slowdown.
At DBS, 'we're watching our exposures very carefully', said Mr Stanley yesterday. 'Our intent is to support our best clients. We haven't stopped lending, but certainly the growth in lending will slow.'
Annualised basic earnings per share at DBS fell to $1.03 from $1.68 a year earlier and $1.74 in Q2. The group declared a dividend of 20 cents per share for the quarter, unchanged from the previous quarter, to be paid on Dec 4.
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<TABLE cellSpacing=0 cellPadding=0 width=452 border=0><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published November 8, 2008
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Banks warn of difficult times ahead
Sharply higher provisions for bad loans start eating into profits
By CONRAD TAN
<TABLE class=storyLinks cellSpacing=4 cellPadding=1 width=136 align=right border=0><TBODY><TR class=font10><TD align=right width=20>
</TD><TD>Email this article</TD></TR><TR class=font10><TD align=right width=20>
</TD><TD>Print article </TD></TR><TR class=font10><TD align=right width=20>
</TD><TD>Feedback</TD></TR></TBODY></TABLE>SINGAPORE banks are sounding warnings about the state of the economy, raising provisions sharply in anticipation of bad loans in the months ahead.
<TABLE class=picBoxL cellSpacing=2 width=100 align=left><TBODY><TR><TD>
</TD></TR><TR class=caption><TD>FLAGGING PERFORMANCEUOB posted a 5% dip in net profit y-o-y to $475m for the three months to end-Sept, after loan-impairment charges soared $154m from last year</TD></TR></TBODY></TABLE>'Some months ago, I said that this financial crisis was the worst I'd ever seen. For all my pessimism then, I could not have imagined the extent of the turmoil that would follow on Wall Street, nor the additional stress that would be placed on the world banking system,' said DBS Group chief executive Richard Stanley yesterday.
DBS's third-quarter net profit slumped 38 per cent to $379 million compared to a year earlier - its worst quarterly performance since Q4 2005, when it reported a net loss of $441 million due to a one-time goodwill charge of $1.13 billion for its investment in its Hong Kong unit.
The sharp fall in profit was far steeper than analysts expected. Analysts surveyed by Reuters had predicted an average of $475 million in net profit, while those polled by Bloomberg had expected $455 million.
Total allowances for bad loans and soured investments ballooned to $319 million, from $80 million a year earlier and $56 million in the second quarter.
That included specific allowances for bad loans of $106 million - more than double the $52 million in Q2 - mostly due to charges taken for equity-financing loans to private banking customers in Singapore and Hong Kong. Bad-loan charges for loans to small and medium-size companies in Hong Kong and other countries also rose, said the bank.
For the nine months to end-September, net profit dipped 9 per cent to $1.63 billion.
DBS's results were 'pretty disappointing', said Phillip Securities analyst Brandon Ng. 'We didn't expect so much impairment, especially on the Hong Kong side.'
The bank will likely see more charges for losses on equity-financing loans to wealthy customers in the fourth quarter, given that October was an even worse month than September for stock markets, he added.
Net interest income for the third quarter rose slightly to $1.07 billion - up 2 per cent from a year earlier and one per cent higher than in Q2 - supported by continued rapid growth in the group's main lending business.
DBS's net customer loans rose to $127.5 billion at the end of September, up 22 per cent from a year earlier and 8 per cent over the quarter - the fastest growth among the three banks.
But its net interest margin or NIM - which measures how much profit banks make on loans after deducting funding costs - was the only one among its peers to fall over the year.
'Among the three banks, OCBC did relatively well because they held up their NIM but DBS was a bit disappointing because their NIM has been coming down since Q4 last year,' said Mr Ng.
Non-interest income at DBS fell 33 per cent over the year to $327 million, dragged down by sagging fees and commissions from stockbroking, investment banking and wealth management, as well as net trading losses.
All three banks' results were 'below my expectations', said Pauline Lee, an analyst at Kim Eng Securities.
'DBS is the most unexpected because of the huge impairments that they provided.'
The 900 jobs that DBS is cutting 'may be a good measure in the short term, but I'm not sure whether it will affect the business momentum in the long term', said Ms Lee.
On Wednesday, OCBC Bank said its net profit fell 13 per cent to $402 million in the third quarter compared to a year earlier, as allowances for bad loans surged to $156 million from $39 million.
And on Friday last week, United Overseas Bank (UOB) said its net profit dipped 5 per cent year-on-year to $475 million for the three months to end-September, after loan-impairment charges jumped to $158 million from $4 million a year earlier.
Mr Ng said that while OCBC and UOB are unlikely to follow DBS in announcing drastic staff cuts in the near term, 'in 2009, if the entire economy slows down, we may be facing another recession where in order for businesses to survive, that's the only way out'.
All three banks warned of difficult times ahead.
'The impact of deleveraging and credit crunch will be increasingly evident in the real economy,' said UOB chief executive Wee Ee Cheong.
OCBC CEO David Conner said that the next few quarters 'are expected to be challenging for individuals and businesses around the world'.
Earlier this week, UOB also told Reuters that demand for loans from small and medium-sized businesses could fall as firms suffer from the economic slowdown.
At DBS, 'we're watching our exposures very carefully', said Mr Stanley yesterday. 'Our intent is to support our best clients. We haven't stopped lending, but certainly the growth in lending will slow.'
Annualised basic earnings per share at DBS fell to $1.03 from $1.68 a year earlier and $1.74 in Q2. The group declared a dividend of 20 cents per share for the quarter, unchanged from the previous quarter, to be paid on Dec 4.
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