DBS Group Holdings, South-east Asia's biggest bank, posted an 18 per cent drop in fourth-quarter profit, but still beat market expectations, as strong loan growth offset writedowns linked to the global credit turmoil.

The Singapore-based bank, in which state investor Temasek Holdings has a 28 per cent stake, reported on Friday net profit of $491 million for its fourth quarter from October to December, compared with $596 million a year earlier.

Four analysts had expected DBS to post profit of $466 million, according to Reuters Estimates two days before the result.

Singapore's banking loans grew by 20 per cent in 2007, the highest pace since the end of September 1995, according to official data, boosted by a property boom and rebounding construction sector.

But analysts have become cautious about the sector this year because of fears that the credit crisis, which began with defaults in United States subprime mortgages, may lead to a global economic slowdown.

Singapore's central bank warned in December that the worsening of the recent credit squeeze or a sharp slowdown in the US economy may hurt profits of Singapore banks in 2008.

Investors punished DBS shares in the second half of last year when it disclosed it had more direct exposure to credit derivatives than earlier thought.

DBS ended the year 8.4 per cent lower, trailing United Overseas Bank, which rose 2.6 per cent while shares of Oversea-Chinese Banking Corp jumped 7.7 per cent.

DBS shares are down about 17 per cent since the start of the year and have fallen more than 30 per cent since hitting a year high of $25 in late May last year.

DBS derives about one-third of its earnings from Hong Kong, where it has around a third of its assets.

The bank is ramping up its China operations and recently bought Taiwan's failed lender Bowa Commercial Bank in a government auction to strengthen its North Asian operation. -- REUTERS