Moody's may upgrade DBS Bank

Moody's Investors Service said it placed DBS Bank Ltd.'s B- bank financial strength rating on review for possible upgrade. The Aa2 long-term deposit rating, Prime-1 short-term deposit rating, Aa3 subordinated debt rating and A1 preference shares rating are unaffected and have a stable outlook.

Moody's said the review reflects DBS Bank's still strong financial fundamentals and what appear to be a more gradual regional expansion and a more cautious approach to acquisitions. The agency noted that DBS Bank's performance and capital levels remain strong, despite the poor earnings reported in 2005 as a result of the large goodwill impairment charge it took on its investment in DBS Hong Kong.

The agency had dropped the bank's financial strength rating to B- from B in 2001 upon its ultimately unsuccessful bid for Singapore rival Overseas Union Bank, which had come close on the heels of its acquisition of Dao Heng Bank in Hong Kong. Since then, Moody's has held the rating at B-, reflecting the concern that DBS's regional expansion ambitions could result in a series of good-sized acquisitions, which would put repeated pressure on capital levels and expose the bank to additional credit and operational risk.

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