OVERVIEW
2011 2010
chg
Selected income statement items m Net interest income
4,825 4,318
12 Net fee and commission income
1,542 1,397
10 Net trading income
698 915
24 Net loss from financial instruments designated at fair value
18 20
10 Net income from financial investments
454 310
46 Other income
130 146
11 Total income
7,631 7,066
8 Less: Expenses
3,303 2,925
13 Profit before allowances
4,328 4,141
5 Less: Allowances for credit and other losses
722 911
21 Profit before tax
3,733 3,332
12 Net profit
3,035 2,650
15 Add: Goodwill charges
– 1,018
NM
Net profit including goodwill charges 3,035
1,632 86
Selected balance sheet items m
Customer loans
1
194,720 152,094
28 Interbank assets
1
27,183 23,298
17 Total assets
340,847 283,710
20 Customer deposits
2
225,346 193,692
16 Total liabilities
307,778 250,608
23 Shareholders’ funds
28,794 26,599
8
Key financial ratios excluding goodwill charges
Net interest margin 1.77
1.84 –
Non-interesttotal income 36.8
38.9 –
Costincome ratio 43.3
41.4 –
Return on assets 0.97
0.98 –
Return on equity 11.0
10.2 –
Loandeposit ratio 86.4
78.5 –
NPL ratio 1.3
1.9 –
Specific allowances loansaverage loans bp 11
43 –
Tier 1 capital adequacy ratio 12.9
15.1 –
Total capital adequacy ratio 15.8
18.4 –
Core Tier 1 ratio
3
– with phase in deduction of 0 to end 2013 12.9
14.5 –
– with full deduction 11.0
11.8 –
Per share data
Per basic share – earnings excluding goodwill charges
1.30 1.15
– – earnings
1.30 0.70
– – net book value
11.99 11.25
– Per diluted share
– earnings excluding goodwill charges 1.26
1.11 –
– earnings 1.26
0.68 –
– net book value 11.75
11.04 –
1 Includes financial assets at fair value through profit or loss on the balance sheet 2 Includes financial liabilities at fair value through profit or loss on the balance sheet
3 In June 2011, the MAS announced the Basel III requirements for Singapore-incorporated banks, which included a progressive phase-in for deductions against
common equity starting from an initial 0 in 2013 and reaching 100 by 2018
NM
Not Meaningful
MANAGEMENT DISCUSSION AND ANALYSIS
33 DBS Annual Report 2011
MANAGEMENT DISCUSSION AND ANALYSIS
DBS Group Holdings reported net profit of 3.04 billion, a 15 increase from a year ago.
Earnings crossed the 3 billion mark for the first time as increased business volumes and customer flows propelled total
income to a new high of 7.63 billion. DBS’ focused execution of strategic initiatives, prudent risk management and strong
balance sheet enabled it to capture opportunities across the region in a challenging environment. Return on equity rose to
11.0 from 10.2 a year ago. DBS’ balance sheet strength was a key differentiating factor enabling it to gain customers
and wallet share during the year.
Net interest income grew 12 to 4.83 billion. Total loans rose 28 or 42.6 billion to 194.7 billion. Trade finance, led
by customers in Singapore, Hong Kong and China, accounted for half of loan growth. Deposits increased 16 or 31.7 billion
during the year to 225.3 billion, with deposit inflows bolstered by DBS’ leading domestic deposit franchise and sound
fundamentals. With the loan-deposit ratio at 86, liquidity continued to be healthy. The benefit of higher loan and deposit
volumes was partially offset by lower net interest margins, which fell 7 basis points to 1.77 as interest rates in Singapore
softened and deposit costs in Hong Kong were higher.
Non-interest income grew 2 to 2.81 billion as higher customer-driven income was offset by a decline in market-
related income. Fee income rose 10 to a record 1.54 billion from increases in a wide range of activities, led by wealth
management and trade and remittances in line with efforts to develop these businesses. Net trading income including
financial instruments designated at fair value fell 24 to 680 million as lower trading gains more than offset an
increase in income from customer flows. Income from customer flows accounted for 42 of Treasury income, up from 36 in
the previous year. Gains from the sale of investment securities rose 46 to 454 million.
Expenses grew 13 to 3.30 billion as headcount and infrastructure investments were made to support higher
business volumes and future growth. The cost-income ratio was healthy at 43. Profit before allowances rose 5 to a
record 4.33 billion.
Asset quality improved, with the NPL rate falling from 1.9 in 2010 to 1.3. Specific allowances of 244 million were
one-third the charge taken in 2010 while general allowances of 478 million more than doubled. Allowance coverage
was high at 126 and at 165 if collateral was considered.
DBS remained well capitalised. Its Tier 1 of 12.9 and total capital adequacy ratio of 15.8 were comfortably above
regulatory requirements, which incorporate Basel 2.5 rules with effect from 31 December 2011. Based on the progressive
phase-in of deductions mainly goodwill against common equity, the core Tier 1 ratio would be 12.9. Assuming full
deductions which will be effective 1 January 2018, the core Tier 1 ratio would be 11.0.
There were no significant accounting changes for the year.
34
Net interest income rose 12 from a year ago to 4.83 billion, representing 63 of total income. The increase was due
to higher loan volumes, partially offset by a decline in interest margins.
Average customer loans grew 20 from a year ago from broad-based loan growth across industries and the region.
Trade finance loans accounted for half the loan growth. Net interest margins fell 7 basis points to 1.77. Overall asset
yields were 3 basis points lower at 2.40. This was due to a nine basis point decline in customer loan yields to 2.70,
which was partially offset by a 20 basis point increase in interbank asset yields to 1.03. Funding costs rose 5 basis
points to 0.69. Customer deposit costs rose 8 basis points to 0.61 as US dollar and Hong Kong dollar deposit costs
were higher.
NET INTEREST INCOME
2011 2010
Average Average
Average Average
balance Interest
rate balance
Interest rate
Average balance sheet m
m m
m
Interest-bearing assets
Customer loans 169,397
4,571 2.70
141,245 3,937
2.79 Interbank assets
51,575 532
1.03 43,190
