UPDATE 1-DBS eyes Asia expansion as outlook improves

* Expects new CEO to expand bank's reach in Asia

* Chairman says 2010 "quite positive" for DBS

* Analysts expect 2010 profit to rise 26 pct (Adds detail on expansion, background)

SINGAPORE, Jan 13 (Reuters) - DBS Group (DBSM.SI), Southeast Asia's biggest lender, said on Wednesday an improving economic climate will help boost its earnings and expects its new chief executive to beef up the bank's presence in Asia.

DBS hired ex-Citibanker Piyush Gupta last year as chief executive in a bid to muscle the bank's expansion outside its two main markets, Singapore and Hong Kong, that currently provide the bulk of its earnings.

The bank has been trying to build its existing businesses in India, Indonesia and China, but has been cautious in acquisitions. [nSIN215607]

"I am sure DBS will further take advantage of the improving economic conditions to extend our franchise strength," DBS Chairman Koh Boon Hwee said in a speech made to DBS's private banking clients. "This includes expanding our footprint in Asia."

He said Gupta will unveil a roadmap over the next few months about the bank's business strategy.

Koh said the bank was "reasonably optimistic" about its earnings' outlook in 2010 despite expectations that the regulatory environment could become tougher for banks in the second half of the year.

"I think the year forward is actually quite positive for DBS," Koh later told reporters. "Things are getting back to normal, risk appetite is returning. It should be a relatively good year."

DBS, which will report 2009 earnings on Feb 5, could report a net profit of S$503 million, ($363 million) in its fourth quarter according to a mean forecast of analysts on Thomson Reuters I/B/E/S, up 70 percent from a year ago when it was dented by higher bad-debt charges.

Analysts expect DBS's full-year earnings to rise 26 percent to S$2.609 billion in 2010 from a year earlier.

Koh said that bank has sufficient capital and is prepared for an expected tightening of capital requirements by the regulators.

"While I expect the regulatory environment to become more stringent, we think we are well capitalised."

Singapore banks have traditionally maintained high capital adequacy ratios than their regional and global peers in order to illustrate the city-state's status as a safe haven for capital, analysts say.

DBS, which did a S$4 billion rights issue in 2009, had a Tier 1 ratio of 12.5 percent at the end of the third quarter of 2009.

The Monetary Authority of Singapore wants banks to maintain a minimum Tier 1 ratio of 6 percent, but analysts expect regulators around the world could further tighten the rules for core Tier 1 capital in the aftermath of the financial crisis.

DBS shares were down 0.92 percent at 0718 GMT, in line with the fall in the benchmark Singapore index .FTSTI. DBS shares have slightly weakened this year after surging 83 percent in 2009. ($1=1.387 Singapore Dollar) (Reporting by Saeed Azhar; Editing by Muralikumar Anantharaman)