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Writedowns related to troubled Dubai could have spoilt the party for DBS (DBSM.SI), Southeast Asia’s biggest bank, in an otherwise strong fourth quarter.
DBS had an exposure of $558 million to a unit of Dubai World (DBWLD.UL)— the only credit under the standstill notice — and analysts say the Singapore bank could take a loss of as much 30% on the loan.
That could dampen a strong October-December quarter for DBS, a period when loan growth expanded and fees from capital markets surged for most regional banks.
DBS — which could still post its second consecutive quarterly growth in earnings despite the writedowns — will kickstart the results season for Singapore banks on Friday.
”Total operating income has recovered since the first quarter last year to pre-crisis level and we anticipate it to continue,” said Brandon Ng, an analyst at Philip Capital.
“What can throw a spanner in the works is the allowance required for the Dubai World Finance exposure.”
Despite the Dubai loss for DBS, loan losses from corporate exposures for banks in general may be easing as economies recover. That, and a flurry of rights equity issues last year, are expected to make it unnecessary for Southeast Asia’s big banks to raise new capital immediately.
Eyes are on DBS’s new CEO Piyush Gupta and on how he could expand the bank’s reach outside its two main markets, Singapore and Hong Kong.
Malaysia’s top two lenders, Malayan Banking (Maybank) (MBBM.KL) and CIMB (CIMB.KL), are also expected to report strong quarterly results, underpinned by rising loan growth, lower credit costs and stable margins.
Maybank’s earnings will receive an extra boost from improvements in its Indonesian unit, said Nomura analyst Julian Chua.
For the full year, it may beat the record net profit of 3.18 billion ringgit ($1.31 billion) earned for the year ended June 30, 2007, he said.
The November listing of mobile phone operator Maxis (MXSC.KL) is expected to boost CIMB's fee income in the fourth quarter and Singapore CapitaLand's (CATL.SI) shopping mall trust’s US$2 billion IPO in the same month could push up the fees DBS earned as an adviser.
