DBS cuts 900 jobs, reports 38% fall in Q3 profit

DBS cuts 900 jobs, reports 38% fall in Q3 profit
Posted: 07 November 2008 1405 hrs

SINGAPORE: Singapore's DBS Group, Southeast Asia's biggest bank by assets, said on Friday it would be laying off 900 staff to trim costs amid the global credit crisis. The bank also reported a drop in third quarter net profit.

Chief executive Richard Stanley said most of the cuts, which would be carried out at the end of the month, will come from its offices in Singapore and Hong Kong and will account for 6 per cent of the workforce. He added that this was the largest lay offs ever.

The job cut will be across all businesses and all levels. The bank did not want to specify if the affected staff would come from DBS or POSBank.

Laid off staff will be paid the equivalent of one month's salary for every year of service as per market practice.

"To be a streamlined organisation, I believe we must run a tighter ship," he told reporters.

He added: "We have been vigilant on costs, but as the economy enters a more difficult and uncertain phase, many financial institutions around the world and in Asia have made headcount reductions.

"To be more productive and efficient, we will restructure and streamline the organisation. Regrettably, this has resulted in the need to reduce our workforce by six per cent or about 900 people, primarily (in) Singapore and Hong Kong, by the end of the month."

DBS said it has no plans to cut beyond this and also clarified that there are no plans for salary cuts. Back in 2001, DBS laid off 200 staff in Singapore and implemented pay cuts.

The bank said the affected staff have not been informed and it stressed that this retrenchment exercise has nothing to do with DBS' sale of structured products linked to failed US investment bank Lehman Brothers.

Mr Stanley said: "We're still distributing unit trusts, basic products are still being sold and distributed. Once the dust settles, we will be coming up with more products... at a higher standard."

The bank added that so far no lawsuits have been filed against them. It has already made payouts to a small number of affected investors in Singapore and Hong Kong.

DBS declined to provide details on the number of investors who have been compensated, but said they make up a small percentage of the total number of claims. It said the S$70 million charge it had set aside in the third quarter for compensation to certain investors is sufficient.

It also clarified that investors of its DBS Triple Happiness Capital Guaranteed Fund had received letters from the bank explaining about AIG and what could potentially happen to their investments. It added they have no cause for concern even though the fund is guaranteed by a subsidiary of US insurer AIG.

Earlier on Friday, DBS said net profit in the three months to September fell 38 per cent as market-related income took a hit from the global financial crisis and bigger provisions. Third quarter net profit totalled S$379 million, down from S$610 million in the same period last year, it said in a statement.

Analysts polled by Dow Jones Newswires had predicted an average S$572 million net profit.

Mr Stanley said: "The operating environment is increasingly challenging for financial institutions the world over.

"We took upfront prudential levels of allowances to strengthen our balance sheet and with strong capital and liquidity, I believe we are well positioned to ride out the uncertainties ahead."

Net interest income in the September quarter grew 2 per cent to S$1.07 billion from last year, but net fee and commission revenues dropped 22 per cent to S$316 million. Other non-interest income plunged 87 per cent on-year to S$11 million.

The bank said it set aside S$129 million in provisions, compared with just S$10 million a year ago, partly to cover its collateralised debt obligations (CDOs) portfolio.

CDOs are securities backed by a range of assets including bonds, loans and their derivatives such as corporate loans, high-grade mortgages, sub-prime mortgages, car loans and credit card debt.

DBS was the last of three local banks to report earnings for the September quarter.

Oversea-Chinese Banking Corp (OCBC) said earlier this week that its third quarter net profit fell 13 per cent, while United Overseas Bank reported last week a 5.1 per cent drop in profit for the same period.

Singapore's deputy labour chief said retrenchments would still remain relatively low this year at about 10,000 jobs.

Heng Chee How, deputy secretary-general of NTUC, said: "For this year, overall retrenchments for Singapore will still remain relatively low, perhaps round about the 10,000 mark or slightly below that. That is because this recession has just started towards the end of the year, so we think that the unemployment and retrenchment numbers will go up next year."

He said with greater cost-consciousness, some companies are not retrenching staff, but going for reduced hours to cut costs. Mr Heng added that it is even more crucial at this point to ramp up retraining.

One bright spark in all of this is that the construction, land transport and healthcare sectors will still see strong demand for jobs.


- wong chee tat :)