TEXT-S&P summary: DBS Bank Ltd.

(The following statement was released by the rating agency)

July 24 -

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Summary analysis -- DBS Bank Ltd. --------------------------------- 24-Jul-2012

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CREDIT RATING: AA-/Stable/A-1+ Country: Singapore

Primary SIC: Commercial banks,

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Mult. CUSIP6: 233048

Mult. CUSIP6: 23305D

Mult. CUSIP6: 23305E

Mult. CUSIP6: 23305G

Mult. CUSIP6: 24023C

Mult. CUSIP6: 24023D

Mult. CUSIP6: 251594

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Credit Rating History:

Local currency Foreign currency

10-Jul-2005 AA-/A-1+ AA-/A-1+

16-Jul-1999 A+/A-1 A+/A-1

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Ratings Score Snapshot

Issuer Credit Rating AA-/Stable/A-1+

SACP a

Anchor bbb+

Business Position Strong (+1)

Capital and Earnings Adequate (0)

Risk Position Adequate (0)

Funding and Liquidity Above Average

and Strong (+1)

Support +2

GRE Support 0

Group Support 0

Sovereign Support +2

Additional Factors 0

Major Rating Factors

Strengths:

-- Market leader in Singapore with a strong franchise

-- Strong funding profile

-- Strong risk management capabilities to safeguard loan quality

Weaknesses:

-- Exposure to increasing economic and credit risk due to continuous

expansion in emerging Asian markets

-- Pressure on capitalization due to loan book expansion

Outlook

The stable outlook on DBS reflects our belief that DBS will remain a bank with

"high systemic importance" in Singapore, and its SACP will stay within the 'a'

category over the next one to two years. The outlook also reflects the outlook

on the sovereign credit rating on Singapore.

We could downgrade DBS if: (1) we lower the sovereign credit rating on

Singapore; (2) we no longer believe DBS has high systemic importance in

Singapore; (3) the bank's SACP declines by two notches; or (4) the wider DBS

group's credit profile significantly weakens. We could lower DBS' SACP if the

bank's risk-adjusted capital ratio is likely to decline below 7% due to

aggressive expansion or if the bank's asset quality declines substantially.

The wider DBS group's credit profile could weaken if it undertakes further

aggressive or debt-funded acquisitions or its overall asset quality

deteriorates.

We consider an upgrade of DSB unlikely in the next one to two years. We could

raise the rating if the bank strengthens its capitalization and business

position, such that we raise the SACP by two notches.

Rationale

We base our ratings on DBS Bank Ltd. on the bank's "strong" business position,

"adequate" capital and earnings, "adequate" risk position, "above-average"

funding, and "strong" liquidity, as our criteria define those terms. The

stand-alone credit profile (SACP) on DBS is 'a'.

Our 'bbb+' anchor SACP for DBS draws on our Banking Industry Country Risk

Assessment methodology and our view of the economic and industry risks in the

countries where the bank operates. The economic risk score of '4' is based on

the weighted average of DBS' private-sector loans to nonbanks in each country

in which it operates, including over 40% in Singapore, about 20% in Hong Kong,

and the rest across Asia. Our economic risk assessment of Singapore reflects

its high income, and diverse and resilient economy, although we believe some

potential imbalances are building up in the property sector. DBS' industry

risk score of '2' benefits from Singapore's well-developed institutional

framework, prudent banking practices, and stable funding support of core

customer deposits.

DBS' strong market leader position in Singapore, with the largest branch

network and customer deposit base, contributes to our assessment of the bank's

business position. We expect DBS to maintain its resilient revenue stream and

high customer retention despite the increasingly challenging macroeconomic

conditions in Asia. The bank is likely to further diversify its revenue mix

and increase contribution from markets outside Singapore over the next few

years.

We expect DBS's risk-adjusted capital ratio to stay above 7% over the next two

years. This is based on the assumption that loan growth will slow down

substantially, as compared to the rapid growth rate in 2011. We also believe

the bank's profit generation and retention will partially mitigate the

negative impact of continuous loan growth on capitalization. In our view, the

bank's net interest margin and profitability will remain fairly stable. These

factors support our assessment of the bank's capital and earnings.

Our risk position assessment for DBS reflects our expectation that the bank's

credit risk exposure is likely to shift continuously towards emerging markets,

such as China and India, where the inherent economic risk is higher, in our

view. We believe the bank will maintain its conservative underwriting

standards and focus on selective market segments while expanding in these

countries.

DBS' strong customer deposit franchise in Singapore, with the largest retail

branch network in the country, supports its funding profile. We assess DBS'

liquidity as strong because of the bank's rich pool of liquid assets. We

expect the bank to manage its liquidity in a prudent manner despite a surge in

the U.S. dollar loan-to-deposit ratio over the past two years.

The rating on DBS is two notches higher than the SACP, reflecting our view of

a high likelihood of support from the government of Singapore

(AAA/Stable/A-1+; axAAA/axA-1+). This is due to DBS' "high systemic

importance" in Singapore and our assessment of the government as "highly

supportive" to the banking sector. The bank has the largest market share of

loans and deposits in Singapore.

DBS' parent, DBS Group Holdings Ltd. (DBSGH; not rated), proposes to acquire

PT Bank Danamon Indonesia Tbk. (Danamon; BB/Positive/B). The deal is now

pending regulatory approvals. In our view, the move will not directly affect

the financial strength of DBS. However, Danamon's business has higher credit

risks than DBSGH's and integration will involve execution risks. Nonetheless,

the immediate negative pressure on the credit profile of the DBS group is

limited due to Danamon's relatively small size and stronger profitability.

Related Criteria And Research

-- Hong Kong And Singapore Banks' Credit Quality Can Withstand A Mild

Recession In Europe, May 17, 2012

-- Research Update: DBS Bank Ltd. And DBS Bank (Hong Kong) Ltd.

'AA-/A-1+' Ratings Affirmed On Parent's Announced Acquisition Of Danamon,

April 3, 2012

-- Banking Industry Country Risk Assessment: Singapore, March 16, 2012

-- Banks: Rating Methodology And Assumptions, Nov. 9, 2011

-- Banking Industry Country Risk Assessment Methodology And Assumptions,

Nov. 9, 2011

-- Group Rating Methodology And Assumptions, Nov. 9, 2011

-- Bank Hybrid Capital Methodology And Assumptions, Nov. 1, 2011

Source: http://news.yahoo.com/text-p-summary-dbs-bank-ltd-102353319--sector.html

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