Singapore: DBS issues fixed notes, start providing SME business loans amidst uncertain 2016 predictions
DBS Group Holdings Ltd has successfully priced the issue of S$250,000,000 ($173.8 million) fixed rate callable subordinated notes due in 2028, as a component of its $30 billion Global Medium Term Note Programme.
According to a release, this is This is DBSH's first Basel III- compliant Tier 2 issue. The notes will initially bear a fixed coupon of 3.80 per cent per annum with interest payable semi- annually. If the notes are not redeemed on 20 January 2023, the interest rate from that date will be reset at a fixed rate per annum of the then-prevailing 5-year swap offer rate and 1.10 per cent.
Expected to be issued on 20 January 2016, the notes are expected to qualify as Tier 2 capital of DBSH and its subsidiaries supplementary bank capital that includes items such as revaluation reserves, undisclosed reserves, hybrid instruments and subordinated term debt.
Net proceeds from the notes issue will be used for the finance and treasury activities of DBS Group, including the provision of intercompany loans or other forms of financing to subsidiaries and associated firms.
DBS Group has mandated DBS Bank Ltd. as the sole book runner, with the Bank of China Singapore Branch, Citigroup and Deutsche Bank as co-managers for the note issuance. The notes are expected to be rated A2 by Moodys Investors Service and A+ by Fitch Ratings Ltd.
Also Read: DBS, StanChart among banks facing forex business curbs in China
In separate developments involving DBS, the note issue comes as they formed a partnership with AMP Credit Technologies to roll out DBS mLoan, which targets small businesses for unsecured short-term loans. The partnership with AMP enables DBS to offer loans of up to SGD100,000 with no collateral required.
This is due to AMP technology enabling a credit assessment using information from electronically verifiable cash flows (eg card payments) to assess each application.
These developments serve to strengthen DBS, given that the DBS group CEO, Piyush Gupta, is predicting uncertainty in Singapores economy for the coming year, as well as strong risks from China. Gupta stated: Singapore, I think, will be particularly challenged because in addition to the overall macro global outlook, we're trying to do two things.
He added, One, we're trying to deflate parts of the economy, particularly the housing market, including consumer demand. Secondly, we're trying to restructure the supply side through the labour crunch, land This is not an easy transition for us. So I continue to think this is the trickiest and most sensitive time in Singapore's economic transformation that we'll see for a long time.
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