52 Details of DBS Bank’s NPLs at December 31 are as follows:
In S millions Regional
Countries Singapore
Other Countries
Total 2003
Non- Performing Loans NPLs
a
448 1,253
420 2,121
- Substandard
335 842
334 1,511
- Doubtful 48
42 27
117
- Loss
65 369
59 493
2002 Non- Performing Loans NPLs
a
635 1,545
403 2,583
- Substandard 445
1,052 278
1,775 - Doubtful
96 23
68 187
- Loss 94
470 57
621
a NPLs include classified bank loans, contingent facilities and debt securities.
35.2.5 Concentration Risk
DBS Bank’s risk management processes also ensure that an acceptable level of risk diversification is maintained across the Bank on an ongoing basis. Limits are established and
regularly monitored in respect of country exposures and major industry groups, as well as for single counterparty exposures. Control structures are in place to ensure that appropriate limits
are in place, exposures are monitored against these limits, and action is taken if limits are breached.
35.2.6 Liquidity Risk
Liquidity risk is the risk that an enterprise will encounter difficulty in meeting its financial obligations. DBS Bank’s objective in liquidity management is to ensure that there is sufficient
liquidity to meet obligations under normal as well as adverse circumstances and take advantage of lending and investment opportunities as they arise. As part of its liquidity risk management,
DBS Bank focuses on a number of components, including limits on behavioural maturity mismatches, key ratios, diversification of funding sources, liquid assets, funding capacity and
contingency planning.
53 The table below analyses assets and liabilities of DBS Bank based on the remaining period at
balance sheet date to the contractual maturity date. However, contractual terms are not representative of the behaviour of assets and liabilities.
In S millions Less than 7
days 1 week to
1 month 1 –3
months 3 to 12
months 1 to 3
years Over 3
years No specific
maturity Total
December 31, 2003 Cash, and balances and placements
with central banks and banks 5,798
7,651 6,194
6,582 293
111 -
26,629 Securities
a
5,688 494
727 3,142
5,313 15,301
790 31,455
Loans to, and bills receivable from, non-bank customers
4,116 3,547
2,952 4,587
7,337 17,894
- 40,433
Other assets
b
23,539 23,539
Total assets
15,602 11,692
9,873 14,311
12,943 33,306
24,329 122,056
Subordinated term debts -
- -
- -
3,571 -
3,571 Deposits and balances of banks
1,788 1,942
1,461 1,152
850 6
- 7,199
Deposits and other accounts of non- bank customers
51,976 11,295
4,789 3,629
1,859 3,745
- 77,293
Other liabilities
c
30 125
230 771
932 1,102
14,553 17,743
Total liabilities 53,794
13,362 6,480
5,552 3,641
8,424 14,553
105,806 Equity
16,250 16,250
Total liabilities and equity 53,794
13,362 6,480
5,552 3,641
8,424 30,803
122,056
Net liquidity gap 38,192
1,670 3,393
8,759 9,302
24,882 6,474
-
a Securities include Singapore Government securities and treasury bills, trading securities and investment securities.
b Other assets include associated and joint venture companies, goodwill, fixed assets and other assets.
c Other liabilities include debt securities issued, other borrowings, bills payable, current and deferred taxation and other liabilities.
In S millions Less than 7
days 1 week to
1 month 1 –3
months 3 to 12
months 1 to 3
years Over 3
years No specific
maturity Total
December 31, 2002 Cash, and balances and placements
with central banks and banks 8,954
9,574 7,900
6,388 934
88 -
33,838 Securities
a
2,925 536
1,404 2,424
2,708 8,543
776 19,316
Loans to, and bills receivable from, non-bank customers
2,695 7,772
2,049 2,627
5,647 16,324
- 37,114
Other assets
b
- -
- -
- -
23,020 23,020
Total assets 14,574
17,882 11,353
11,439 9,289
24,955 23,796
113,288 Subordinated term debts
- -
- -
- 3,649
- 3,649
Deposits and balances of banks 1,679
1,510 907
363 31
- -
4,490 Deposits and other accounts of non-
bank customers 49,590
10,914 4,624
3,691 626
1,740 -
71,185 Other liabilities
c
385 3,563
99 938
484 2,174
10,658 18,301
Total liabilities
51,654 15,987
5,630 4,992
1,141 7,563
10,658 97,625
Equity -
- -
- -
- 15,663
15,663 Total liabilities and equity
51,654 15,987
5,630 4,992
1,141 7,563
26,321 113,288
Net liquidity gap 37,080
1,895 5,723
6,447 8,148
17,392 2,525
-
a Securities include Singapore Government securities and treasury bills, trading securities and investment securities.
b Other assets include associated and joint venture companies, goodwill, fixed assets and other assets.
c Other liabilities include debt securities issued, other borrowings, bills payable, current and deferred taxation and other liabilities.
36 FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES
Financial instruments comprise financial assets, financial liabilities and also off-balance sheet financial instruments. The fair value of a financial instrument is the amount at which the
instrument could be exchanged or settled between knowledgeable and willing parties in an arms length transaction. The information presented herein represents estimates of fair values as at the
balance sheet date.
Where available, quoted and observable market prices are used as the measure of fair values. Where such quoted and observable market pries are not available, fair values are estimated
based on a range of methodologies and assumptions regarding risk characteristics of various financial instruments, discount rates, estimates of future cash flows, future expected loss
experience and other factors. Changes in the uncertainties and assumptions could materially affect these estimates and the resulting fair value estimates.
54 In addition, fair value information for non-financial assets and liabilities is excluded as they do
not fall within the scope of FRS 32 which requires the fair value information to be disclosed. These include fixed assets and intangibles.
Except for loans to and bills receivable from customers, the following table summarises the carrying amounts and fair values of the Bank’s financial assets and liabilities. The Bank has
computed the fair values of loans to and bills receivable from customers, taking into account the relevant market interest rates and credit spread by product types and noted that the total fair
value is not materially different from the total carrying amount at year-end.
2003 2002
In S millions Carrying value
Fair value Carrying value
Fair value Financial assets
Cash, and balances and placements with central banks and banks
26,629 26,650
33,838 33,863
Securities
31,455 31,762
19,316 19,654
Financial liabilities
Deposits and balances of banks 7,199
7,202 4,490
4,493 Deposits and other accounts of non-
bank customers
77,293 77,297
71,185 71,184
Other borrowings, debt securities issued and bills payable
3,033 3,033
2,525 2,525
Subordinated term debts
4,902 5,593
5,007 5,883
Cash, and balances and placements with central banks and banks
The estimated fair value of placements is based on the discounted cash flows using the prevailing money market interest rates for placements with similar credit risk and remaining
maturity.
Securities
Securities include Singapore Government securities and treasury bills, trading securities and investment securities. Fair value is based on the market prices or brokerdealer price quotations.
Where market price are not available, fair values are estimated based on validated internal valuation models. For equities, where market price information is not available, fair value has
been estimated by reference to the net tangible asset backing of the investee.
Subordinated term debts
The estimated fair value of subordinated term debts is based on a discounted cash flow model using a current yield curve appropriate for the remaining term to maturity. The fixed rate USD
subordinated term debts issued by DBS Bank have been converted to floating rate via interest rate swaps. The difference between fair value and carrying amount will be largely offset by the
corresponding fair value of hedging the interest rate swaps Note 34.2.
55
Deposits, and balances of banks and non-bank customers
The estimated fair value of deposits with no stated maturity, which includes non-interest-bearing deposits, is the amount repayable on demand.
The estimated fair value of fixed interest-bearing deposits and other borrowings is based on discounted cash flows using prevailing interest rates with similar remaining maturity.
Other borrowings, debt securities and bills payable
The fair value approximates their carrying amounts.
37 ASSETS PLEDGED
The aggregate carrying amounts of assets that have been mortgaged or pledged in the normal course of business to secure the liabilities of DBS Bank at December 31 was S1,440 million
2002: S1,272 million. These relate to securities sold under repurchase agreements.
38 SEGMENTAL ANALYSIS
38.1 BUSINESS SEGMENT ANALYSIS