DBS to raise $2.7 bln to boost capital

December 22, 2008
Singapore Democrats

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Kevin Lim

Singapore’s DBS Group, Southeast Asia’s biggest lender by assets, said on Monday it plans to raise about S$4 billion ($2.74 billion) through a rights offering to shore up its capital.

The bank will offer shareholders one new share for every two existing shares at S$5.42 apiece, which is a discount of about 45 percent to Friday’s closing share price. DBS said it would lift a suspension on trading in its shares at 0600 GMT on Monday.

Singapore state investor Temasek, DBS’s largest shareholder with 27.6 percent, has agreed to subscribe for up to one-third of the rights issue, the bank said in a statement.

The bank also said its fourth quarter earnings could show a moderate decline from the third quarter, when it reported a 38 percent fall in quarterly net profit to S$379 million and said it would cut 900 jobs or 6 percent of its staff.

“The capital-raising exercise will further strengthen DBS’ balance sheet at a time when investor preference globally has shifted in favour of banks with higher capital levels, especially core capital levels,” the Singapore bank said.

It said its core Tier-1 capital will rise to 9.9 percent from 7.8 percent after the rights issue, while its Tier-1 ratio will increase to 11.8 percent from 9.7 percent.

DBS said it has initiated the fund raising “from a position of strength” and that its business continued to perform well despite the global economic downturn.

DBS raised S$1.5 billion in May through a sale of preference shares that paid investors 5.75 percent per annum.

The rate was higher than the 5.05-5.1 percent offered by rivals United Overseas Bank and Oversea-Chinese Banking Corp, which also sold preference shares to strengthen their capital around the same time.