DBS Group Holdings Ltd. of Singapore, Southeast Asia's largest bank by market capitalization, said Friday that its profit in the fourth quarter fell 18 percent, partly because of further write-downs in its debt-related portfolio.
Results for the quarter were also dragged down by a charge related to its stake in struggling Thai lender TMB Bank PCL, it said.
DBS reported a net profit of 491 million Singapore dollars (US$346 million; euro237 million), or S$1.37 (US$0.96; euro0.66) a share, for the three months ending Dec. 31. In the same quarter of 2006, its profit was S$596 million, or S$1.44 a share.
The bank said it made additional allowances for S$1.21 billion (US$853 million; euro583 million) of collateralized debt obligations, and reported charges of S$170 million (US$120 million; euro82 million) in the quarter for the S$267 (US$188 million; euro129 million) of CDOs with some exposure to U.S. subprime mortgages.
The write-down brings its cumulative losses for such CDOs to S$240 million, about 90 percent of the total.
For the remaining S$944 million (US$666 million; euro455 million) of investment CDOs, S$30 million (US$21 million; euro14 million) was taken as general allowances during the quarter "as a prudential measure," DBS said in a statement.
In addition, the bank recorded a charge of S$67 million (US$47 million; euro32 million) for its 6.8 percent stake in TMB Bank to reflect current market valuation for the investment.
"With the additional allowances we took this quarter, we are well covered for risks associated with U.S. subprime assets," DBS Chairman Koh Boon Hwee said in the statement. He remains "cautiously optimistic about the year ahead," he said.
The net quarterly profit was lower than the S$557 million estimated by a Dow Jones Newswires poll of analysts.
"DBS took a more aggressive approach to the write-down of CDOs, and it makes sense, since it will remove this overhang," said Kim Eng Securities analyst Pauline Lee.
Net interest income for the quarter was S$1.06 billion (US$748 million; euro511 million), up 14 percent from S$932 million. Noninterest income was S$474 million (US$334 million; euro228 million), up 1 percent from S$468 million reported a year earlier.
DBS said it will pay a dividend of 20 Singapore cents (14 U.S. cents; 10 euro cents) a share for the fourth quarter, bringing total dividends for the year to 80 cents (56 U.S. cents; 38 euro cents), up from 71 cents in 2006.
DBS shares were up 2.2 percent in early afternoon trade in Singapore at S$17.68.
Earlier this week, DBS named Richard Stanley, Citigroup Inc.'s top China manager, as its new chief executive effective May 1.
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