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DBS Group's Q1 earnings gets lift from Manulife bancassurance deal


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DBS Group's Q1 earnings gets lift from Manulife bancassurance deal

Aftercoming into effect in 2016, DBSGroup Holdings Ltd.'s bancassurance deal with may prove tobe a long-term contributor to the Singaporean banking group's income, based onthe lender's results for the first quarter.

ManulifeFinancial's payments to DBS Group over 15 years for access to its branchnetwork will contribute at least S$27 million per quarter to theSingapore-based banking group, CEO Piyush Gupta said at its press conference May 3.

and ManulifeFinancial Asia Ltd. forged the 15-year US$1.2 billion bancassuranceagreement in April 2015. Under the deal, the Canadian insurer will be able sellproducts through DBS Bank's branch network across Asia.

Inthe first quarter, DBS Group garnered an extra S$13 million through insuranceproduct sales under the bancassurance agreement, on top of Manulife's paymentof S$27 million, granting the group a total of S$40 million in earnings thatflowed through to its wealth management ledger, Gupta said.

Henoted that the extra cash made a solid difference as treasury business and thesale of unit trusts in wealth management eased in the quarter due to volatilemarkets. The additional income raised total wealth management income 5% toS$383 million.

"Therewas a nice lift for wealth management from the Manulife bancassuranceoperations," Gupta said, adding the figure could get better as the yeargoes on as revenue flows are assessed.

DBSGroup's outcome in the first quarter was different from the one seen byOversea-Chinese Banking Corp.Ltd. for its insurance unit, Great Eastern Holdings Ltd. OCBC was hit by losses from securitiesinvestments at Great Eastern, highlighting the difference in their approachesto insurance sales.

Guptasaid a key reason the deal has worked so far is the extent of in the process ofmoving from a client-sales representative's handshake to a signed, sealed anddelivered contract.

"Thatpaperwork used to take about a month," Gupta said. "We do it in aweek now." He added that handling more processes and services online notonly drives quicker outcomes, but also saves on costs.

"Ourcall center volumes are down 15%," he said, implying that the need forheadcount to service customers had eased.

Commentingon the group's nonperforming loan ratio for the rest of 2016, Gupta said hedoes not expect a major tail event, such as the collapse of a large corporate,but continued asset stress in oil and gas services could push up NPLs further.

Thegroup posted an NPL ratio of 1.0% as of March 31, up from 0.9% as of Dec. 31,2015. The CEO said that he does not expect the NPL ratio to surpass 1.3% in2016.

As of May 2, US$1 wasequivalent to S$1.34.