DBS to cut 900 jobs
By Saeed Azhar and Kevin Lim Reuters
Published: November 7, 2008
DBS Group, the biggest Southeast Asia bank, said Friday that it would cut 900 jobs, or 6 percent of its staff, after posting a bigger-than-expected drop in quarterly profit as losses from bad debts quadrupled.
DBS and its Asian peers like Bank of China, which largely escaped the credit market meltdown that crippled Western banks, are now being hit by slowing economies, sliding property prices and a sharp fall in capital market activity.
DBS shares, which fell nearly 9 percent in early trade after it said profit had fallen 38 percent, recovered to close up 2.7 percent. DBS shares have almost halved in value this year.
Richard Stanley, who took over as DBS chief executive in May, said 900 jobs, most of them in Singapore and Hong Kong, would be eliminated.
"The job cuts will be across businesses and functions and at all levels," Stanley said at a news conference. "The reasons for these cuts is to allow DBS to be a much leaner and more streamlined organization for many years to come."
The job cuts were the biggest for the Singapore bank, which shed 200 staff members in 2001. Its crosstown rival, United Overseas Bank, said it would cut jobs only as a last resort; Oversea-Chinese Banking Corp. said cuts were not on its agenda.
Stanley said DBS would continue to review its costs and organizational structure but was comfortable with its capital position.
July-September net profit dropped to 379 million Singapore dollars, or $254 million, from 610 million Singapore dollars a year ago. Analysts had predicted 475 million dollars, according to five forecasts compiled by Reuters.
DBS took 319 million dollars in impairments on bad debt, including general writedowns of 129 million dollars to cover losses from risky derivatives, and took a 70 million dollar charge for compensating customers for Lehman-linked structured products.
DBS had already written down 90 percent of its asset-backed securities, which suffered more because of a meltdown in the U.S. subprime mortgage market.
The result came after smaller local rivals reported below-forecast earnings, hurt by writedowns on bad debts. United Overseas Bank posted a 5 percent drop, and Oversea-Chinese Banking Corp. posted a 13 percent slide in third-quarter profits.
Credit Suisse warned in a report that loan growth in Singapore could collapse to zero next year. Analysts have warned that the end of cheap credit, a downturn in the property market and a slowdown in exports could further increase banks' bad debt charges.
This came as a complete surprise to me. I believe it is the first local company to trim it's workforce. The previous retrenchment news were mainly from MNCs which are from other countries. Furthermore, DBS did not a have lot of exposure to the sub-prime crisis and it is still making profits. Perhaps, this piece of news serves to remind us that this wave of retrenchment is just about to begin.
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