Singapore-based lender DBS Group is attributing its 2 percent dip in first-quarter profits to a weak trading environment.

The bank's first-quarter profits in 2007 were SGD 617 million (HK$3.54 billion), but they dropped slightly to SGD 603 million (HK$3.46 billion) this year.

The bank's net fee income dipped 7 percent over the previous quarter to SGD 353 million (HK$2.02 billion).

"Weaker investor sentiment resulted in a decline in wealth-management product sales, which fell by 33 percent compared with the previous quarter," DBS Bank Chief Financial Officer Jeanette Wong told reporters at the group's first- quarter financial results announcement yesterday.

Tepid capital market conditions also led to a net trading income loss of SGD 161 million (HK$829), compared with a SGD 25 million (HK$129) losd in the previous quarter.

Net interest income, on the other hand, remained stable in the first quarter.

DBS booked SGD 1 billion (HK$5.15 billion) in net interest income, unchanged compared with the previous quarter. "The outlook is challenging, but we do see opportunities despite the interest environment," DBS Group Chairman Koh Boon Hwee said.

A low interest-rate environment in both Hong Kong and Singapore pinched DBS's margins. Net interest margins (NIM) for the group narrowed by two basis points from the previous quarter to 2.09 percent, while Hong Kong operations saw a more severe squeeze with the NIM slumping 13 basis points to 1.9 percent.

"Interest rates plunged quite significantly in the fourth quarter, both in Hong Kong and in the US," DBS Managing Director of Greater China operations Chng Lay Chew said. "The drop in Hong Kong margins is partly due to a lag in the repricing of fixed deposit costs."

With little room for further interest rate reductions, Chng believes that after repricing the deposit costs, margins will improve later this year.

Looking ahead, DBS aims to expand its presence on the mainland and in Asian countries such as India.

The group's new chief executive officer, Richard Stanley, said the bank will focus on organic growth.

"That is our primarily focus. We will add people, products and services," he said, adding that if the right acquisition opportunities pop up, the bank will consider them.

DBS Vice-Chairman Frank Wong said the lender plans to open an additional 10 branches on the mainland by the end of the year. "We will attempt to open more sub-branches, tie our growth on the mainland with debit cards and maybe even credit cards," he said.

(HK Edition 05/08/2008 page2)