DBS Group’s Q4 profit down 18% on sub-prime provisions

DBS Group, Southeast Asia’s biggest bank, said on Friday its fourth quarter net profit fell 18 percent from the previous year as it set aside heavy provisions to cover its exposure to risky US mortgages.

Net profit for the three months to December 2007 came in at S$491 million (US$347.15 million), down from S$596 million in the same period in 2006, the bank said in a statement.

DBS set aside an additional S$170 million in the fourth quarter to cover its exposure to US subprime assets, where massive defaults have triggered turmoil in global financial markets.

Including the S$70 million in allowances it set aside in the third quarter, provisions now total S$240 million, or 90 percent of the S$267 million of collateralised debt obligations (CDOs) with exposure to risky US assets, it said.

“With the the additional allowances we took this quarter, we are well covered for risks associated with US subprime assets,” said DBS chairman Koh Boon Hwee.

“I believe that despite the turmoil in the global financial market today, banks in Asia are much less affected. At DBS, we will continue to stay vigilant and strengthen our risk management capabilities,” he added.

Another S$30 million was set aside for S$944 million in CDOs backed by top-grade loans and bonds, the bank said.

Full-year net profit was S$2.28 billion, little changed from the S$2.27 billion the year before, DBS said. Revenue rose 15 percent to S$6.16 billion for the year, boosted by higher income from interest and fees.

DBS shares were trading at S$17.68 apiece, up 38 cents, before the midday break as investors approved its decision to raise provisions for its exposure to the US subprime credit market. – AFP/vm

Source : Channel NewsAsia – 15 Feb 2008

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