dbs2004ar complete
DBS Group Holdings Ltd Annual Repo rt 2 0 0 4
DBS Group Holdings Ltd
Annual Repo rt 2 0 0 4
Corporate Information
Management Committee
DBSH Board of Directors
Registrar
Jackso n Tai – Vice Chairman &
Chief Executive O fficer
S Dhanabalan – Chairman
Jackso n Tai – Vice Chairman &
Chief Executive O fficer
Frank W o ng – Chief O perating O fficer
Ang Ko ng Hua
Bernard Chen
Fo ck Siew W ah
G ail D Fo sler
G o h G eo k Ling
Kwa Cho ng Seng
Leung Chun Ying
N arayana Murthy
Peter O ng
Jo hn A Ro ss
Thean Lip Ping
W o ng N g it Lio ng
Barbinder & Co . Pte Ltd
8 Cro ss Street # 11 -0 0
PW C Building
Sing apo re 0 4 8 4 2 4
Tel: (6 5 ) 6 2 3 6 3 3 3 3
Fax: (6 5 ) 6 2 3 6 4 3 9 9
David Lau – Manag ing Directo r & Jo int
Head, G lo bal Financial Markets
Audit Committee
Registered Office
Rajan Raju – Manag ing Directo r & Head,
So uth and So utheast Asia
Bernard Chen – Chairman
G o h G eo k Ling
Peter O ng
S Dhanabalan – Adviso r
Board Risk Management Committee
6 Shento n W ay
DBS Building To wer O ne
Sing apo re 0 6 8 8 0 9
Tel: (6 5 ) 6 8 7 8 8 8 8 8
Fax: (6 5 ) 6 4 4 5 12 6 7
Email: dbs@ dbs.co m
W ebsite: www.dbs.co m
Frank W o ng – Chief O perating O fficer
Vice Chairman, DBS Bank
Chairman, DBS Bank (Ho ng Ko ng ) Limited
Jeanette W o ng – Chief Financial O fficer
Eric Ang – Manag ing Directo r & Jo int
Head, G lo bal Financial Markets
Steve Ing ram – Manag ing Directo r & Head,
Techno lo g y and O peratio ns
G ro up Chief Info rmatio n O fficer
Susan Ho – Principal Secretary
Fo ck Siew W ah – Chairman
Bernard Chen
Kwa Cho ng Seng
Peter O ng
Jo hn A Ro ss
Compensation Committee
Thean Lip Ping – Chairman
S Dhanabalan
Fo ck Siew W ah
Leung Chun Ying
W o ng N g it Lio ng
Executive Committee
S Dhanabalan – Chairman
Jackso n Tai
Frank W o ng
Bernard Chen
Fo ck Siew W ah
Kwa Cho ng Seng
Nominating Committee
Bernard Chen – Chairman
S Dhanabalan
G ail D Fo sler
Leung Chun Ying
Thean Lip Ping
Group Secretary
Heng Lee Cheng
Auditors
Ernst & Yo ung
Certified Public Acco untants
10 Co llyer Q uay # 21 -0 1
O cean Building
Sing apo re 0 4 9 315
Partner in charg e o f the audit
Fang Ai Lian
Contents
Performance at a Glance
Chairman’s Statement
Board of Directors
Year in Review
CEO’s Report
Corporate Governance Report
Remuneration Report
Awards and Accolades
Risk Exposures and Risk Management Approach
Management Discussion and Analysis
2
4
10
12
16
32
46
49
52
58
By the Numbers
Co nso lidated Pro fit and Lo ss Acco unt – DBS G ro up Ho lding s
Co nso lidated Balance Sheet – DBS G ro up Ho lding s
Co nso lidated Cashflo w Statement – DBS G ro up Ho lding s
Co nso lidated Statement o f Chang es in Shareho lders’ Equity –
DBS G ro up Ho lding s
Balance Sheet – DBS G ro up Ho lding s
N o tes to the Co nso lidated Financial Statements – DBS G ro up Ho lding s
Pro fit and Lo ss Acco unt – DBS Bank
Balance Sheet – DBS Bank
N o tes to the Supplementary Financial Statements – DBS Bank
Directo rs’ Repo rt – DBS G ro up Ho lding s
Statement by the Directo rs – DBS G ro up Ho lding s
Repo rt o f the Audito rs – DBS G ro up Ho lding s
Ten-Year Summary o f O peratio ns o f DBSH G ro up – DBS G ro up Ho lding s
Further Info rmatio n o n Directo rs – DBS G ro up Ho lding s
Shareho lding Statistics – DBS G ro up Ho lding s
71
72
73
74
75
76
143
144
145
148
153
154
155
156
163
DBS Directory
Internatio nal Banking O ffices
Main Subsidiaries & Asso ciated Co mpanies
165
166
Financial Calendar
Notice of Annual General Meeting
Proxy Form
167
168
171
DBS G roup Holdings Ltd Annual Report 2 0 0 4
1
Performance at a Glance
Financial Summary – DBS G ro up Ho lding s Ltd and its Subsidiary Co mpanies
2004
2003
2002
2,435
2,018
2,458
1 ,3 8 6
1 ,0 2 5
1 ,4 5 5
1 ,4 7 3
1 ,0 9 7
1 ,3 7 5
175,553
69,664
113,206
16,502
1 5 9 ,5 9 5
6 4 ,3 3 5
1 0 8 ,0 4 1
1 4 ,8 9 6
1 4 9 ,4 4 5
6 0 ,7 0 9
1 0 1 ,3 1 5
1 4 ,2 3 7
1.34
1.64
0.40
10.76
0 .6 8
0 .9 8
0 .3 0
9 .7 5
0 .7 4
0 .9 3
0 .3 0
9 .3 0
12.85
15.66
40.7
7 .0 4
9 .9 9
4 3 .9
7 .9 4
9 .9 5
4 4 .6
11.3
15.8
1 0 .5
1 5 .1
1 0 .3
1 5 .5
Profit and Loss ($ millions)
O perating pro fit
N et pro fit attributable to members (N PAM)
N PAM excluding g o o dwill amo rtisatio n
Balance Sheet ($ millions)
To tal assets
Custo mer lo ans
Custo mer depo sits
To tal shareho lders’ funds
Per Ordinary Share ($)
Basic earning s
Basic earning s excluding g o o dwill amo rtisatio n
G ro ss dividend
N et assets backing
Selected Ratios (%)
Return o n averag e to tal shareho lders’ funds
Return o n averag e to tal shareho lders’ funds (excluding g o o dwill amo rtisatio n)
O perating expenses as % o f inco me befo re o perating expenses
Capital adequacy1
Tier 1
To tal
1 ) Ratio s fo r 2 0 0 4 were co mputed based o n the MAS capital framewo rk issued o n May 2 8 2 0 0 4 . Co mparatives were no t restated and were co mputed using
Bank fo r Internatio nal Settlements g uidelines.
2
DBS G roup Holdings Ltd Annual Report 2 0 0 4
Financial Highlights
Group Net Profit Attributable
to Members
Group Income before Operating Expenses
& Ratio of Operating Expenses to Income
before Operating Expenses
($ millio ns)
($ millio ns)
$4,928
Group Net Interest Income and
Non-Interest Income
($ millio ns)
$2,018
$2,645
$4,146
$2,566
$4,198
$2,257
$3,532
$2,362
$2,375
$ 2,039
$1,823
$1,389
$2,931
48.9%
$1,097
$1,025
$997
$1,501
44.6%
42.5%
43.9%
40.7%
$1,275
$892
2000
2001
2002
2003
2004
2 0 0 4 : $ 2 ,0 1 8 millio n (+9 7 %)
2 0 0 3 : $ 1 ,0 2 5 millio n
G ro up net pro fit attributable to
members in 2 0 0 4 included o ne-time
g ains o f $ 3 1 0 millio n fro m dispo sal
o f a subsidiary co mpany DBS Thai
Danu Bank Public Co mpany Limited
and $ 1 8 7 millio n fro m sale o f
equity investment in W ing Lung Bank.
Group Total Shareholders’ Funds
and Return on Average Total
Shareholders’ Funds (ROE)
$16.5
($ billio ns)
2000
2001
2002
2003
2004
2000
2001
2002
Net Interest Income
2 0 0 4 : $ 4 ,9 2 8 millio n (+1 7 %)
2 0 0 3 : $ 4 ,1 9 8 millio n
2 0 0 4 : $ 2 ,5 6 6 millio n (+8 %)
2 0 0 3 : $ 2 ,3 7 5 millio n
Ratio of Operating Expenses to Income
before Operating Expenses*
Non-Interest Income
2 0 0 4 : 4 0 .7 % (-3 .2 percentag e po ints)
2 0 0 3 : 4 3 .9 %
2 0 0 4 : $ 2 ,3 6 2 millio n (+3 0 %)
2 0 0 3 : $ 1 ,8 2 3 millio n
* Excluding g o o dwill amo rtisatio n
Group Total Assets and Return on
Average Total Assets (ROA)
$175.6
($ billio ns)
$159.6
$14.2
$151.5
$13.6
Capital Adequacy Ratio (CAR)1
(%)
18 .9
$149.4
1 7.4
1 5 .5
15.66%
2000
12 .2
1.47%
1.28%
9.99%
2001
9.99%
9.95%
2002
0.86%
2003
2004
2000
1 5 .1
1 5 .8
1 4 .4
$111.2
12.89%
2004
Income before Operating Expenses
$14.9
$10.5
2003
2001
0.91%
2002
11.3
1 0 .3
1 0 .5
2002
2003
0.94%
2003
2004
2000
2001
Total Shareholders’ Funds
Total Assets
Total (Tier 1 & 2)
2 0 0 4 : $ 1 6 .5 billio n (+1 1 %)
2 0 0 3 : $ 1 4 .9 billio n
2 0 0 4 : $ 1 7 5 .6 billio n (+1 0 %)
2 0 0 3 : $ 1 5 9 .6 billio n
2 0 0 4 : 1 5 .8 %
2 0 0 3 : 1 5 .1 %
ROE*
ROA*
Tier 1
2 0 0 4 : 1 5 .6 6 % (+5 .6 7 percentag e po ints)
2 0 0 3 : 9 .9 9 %
2 0 0 4 : 1 .4 7 % (+0 .5 3 percentag e po ints)
2 0 0 3 : 0 .9 4 %
2 0 0 4 : 1 1 .3 %
2 0 0 3 : 1 0 .5 %
* Excluding g o o dwill amo rtisatio n
* Excluding g o o dwill amo rtisatio n
2004
1 ) Ratio s fo r 2 0 0 4 were co mputed based o n the MAS capital framewo rk issued o n May 2 8 2 0 0 4 . Co mparatives were no t restated and were co mputed
using Bank fo r Internatio nal Settlements g uidelines.
DBS G roup Holdings Ltd Annual Report 2 0 0 4
3
Chairman’s Statement 2 0 0 4
was a g o o d year fo r Asian eco no mies.
Ho ng Ko ng and Sing apo re g rew in excess o f 7 %. G ro wth was
underpinned by stro ng expo rts, lo w inflatio n and an upturn in business
and co nsumer spending . Ag ainst this backdro p, DBS perfo rmed well.
S Dhanabalan
Chairman
4
DBS G roup Holdings Ltd Annual Report 2 0 0 4
W ith a business diversified in co nsumer, enterprise and
who lesale banking , we were able to capitalise o n the eco no mic
rebo und to g ro w o ur custo mer franchise, expand o ur existing
o peratio ns, fo rm new ventures and o pen new o verseas o ffices.
W e achieved g reater diversificatio n in o ur inco me with stro ng
g ro wth acro ss all o ur businesses and acro ss different
g eo g raphies.
Financial Review
In 2 0 0 4 , G ro up net pro fits cro ssed the $ 2 billio n mark fo r the
first time. Excluding o ne-time g ains o f $ 4 9 7 millio n fro m the
dispo sal o f no n-co re investments, G ro up net pro fits was 4 8 %
hig her than the year befo re. O perating inco me ro se 1 7 % to
$ 4 .9 3 billio n while o perating expenses increased 8 % to
$ 2 .4 5 billio n. Ag g reg ate net pro fits fo r o ur co nsumer, SME and
co rpo rate secto rs ro se 3 3 % fro m $ 8 8 8 millio n to $1.1 8 billio n.
O ur fee inco me g rew 1 5 % and exceeded $1 billio n.
O ur lo an bo o k expanded by 13 % to $ 6 9 .7 billio n during 2 0 0 4 ,
with new lending to individuals, co rpo rates and SMEs acro ss
the reg io n.
po sitio n to serve o ur custo mers, to capture business o ppo rtunities
and to invest fo r the future.
O verall, it was a g o o d year fo r DBS. W e were able to reap the
fruits o f earlier investments in peo ple, pro cesses and systems.
Regional Franchise
During the year, we co ntinued to g ro w o rg anically in China,
India, Indo nesia and Malaysia. W e hired mo re staff, intro duced
new pro duct lines and expanded to new lo catio ns. O ur effo rts
are starting to sho w results in these co untries, as evident fro m the
fact that g ro wth in revenues fro m the reg io n o utpaced tho se fro m
Sing apo re and Ho ng Ko ng last year.
In Thailand, we merg ed the o peratio ns o f DBS Thai Danu with
that o f Thai Military Bank and The Industrial Finance Co rpo ratio n
o f Thailand, to fo rm TMB Bank, the co untry’s fifth larg est banking
group with combined assets in excess of Bt677 billion ($29 billion).
W e believe that TMB Bank’s big g er scale o ffers a mo re effective
way fo r us to g ro w in a key market where industry co nso lidatio n
is actively enco urag ed by the g o vernment.
O ur asset quality impro ved to pre-Asian crisis levels, helped by
mo re favo urable eco no mic co nditio ns. O ur no n-perfo rming lo an
ratio sto o d at a lo w 2 .5 %, do wn fro m 5 .2 % the year befo re
while o ur pro visio n co verag e ro se to 8 9 % fro m 6 3 % previo usly.
Shareholder Returns
Return o n equity was the hig hest in fo ur years at 1 2 .7 %. O ur
capital adequacy ratio ro se to 1 5 .8 %. W ith a healthy balance
sheet and ro bust capital ratio s, we believe we are in a stro ng
It is the Bo ard’s intentio n to increase the dividend rate in a
sustainable manner in line with underlying earning s g ro wth.
At the same time, we believe that the reg io n’s eno rmo us g ro wth
The Bo ard declared an interim dividend o f $ 0 .1 8 per share and
a final dividend o f $ 0 .2 2 per share. The to tal dividend o f $ 0 .4 0
is a 3 3 % increase o ver the $ 0 .3 0 paid in 2 0 0 3 .
Left: DBS in India
O ur Mumbai branch mo ved to big g er premises
in 2 0 0 4 and expanded its capabilities to include
treasury and markets o peratio ns, institutio nal
banking and trade finance.
Rig ht: DBS in China
DBS o pened a branch in G uang zho u in July and
a representative o ffice in Do ug g uan in December.
W e were also awarded a Do mestic Enterprise
licence in Shenzhen and Shang hai, and a
derivatives licence fo r all branches.
DBS G roup Holdings Ltd Annual Report 2 0 0 4
5
po tential means that the best lo ng -term return fo r shareho lders
will be achieved by using o ur capital to g ro w the business, bo th
o rg anically and thro ug h selective ino rg anic o ppo rtunities that
create value.
Quality of Earnings
Banking and finance are beco ming increasing ly co mplex and
co mpetitive. As DBS seeks to expand its business and balance
risk and return, we will co ntinue to invest in peo ple and systems,
in areas such as risk manag ement, financial co ntro ls, leg al and
reg ulato ry co mpliance, credit assessment and po rtfo lio
manag ement. The imminent implementatio n o f the Basel II capital
acco rd adds further urg ency to the steps that we need to take.
These investments are abso lutely necessary fo r so und banking
and will impro ve the quality o f o ur earning s.
Prospects for 2005
W e remain o ptimistic abo ut eco no mic pro spects in Asia
no twithstanding market expectatio ns o f sho rt-term dislo catio ns in
so me eco no mies that have g ro wn at breakneck speed in recent
years. The challeng e fo r DBS is to sustain o ur g ro wth mo mentum
fro m a hig her revenue base so that we can co ntinue to
streng then o ur fo undatio n as a pro g ressive pan-Asian bank.
W ith o ur stro ng er capital reso urces, we are in a better po sitio n
to embark o n vario us initiatives that will translate into a hig her
level o f service and value fo r o ur custo mers and shareho lders in
the co ming years.
Apology
Tho ugh much was achieved in 2 0 0 4 , o ur perfo rmance was marred
by the safe depo sit bo x incident in the Mei Fo o branch in Ho ng
Ko ng . There is no excuse fo r the series o f erro rs that led to the
accidental destructio n o f 8 3 custo mers’ depo sit bo xes. W e
apo lo g ise to o ur custo mers fo r the lo ss and stress that we caused
them.
Acknowledgements
I wo uld like to thank o ur custo mers, business partners and
shareho lders fo r their unstinting suppo rt o f DBS witho ut which we
wo uld no t have achieved last year’s reco rd earning s.
I am also indebted to my fello w Bo ard members fo r g enero usly
sharing their time and insig hts. Special thanks g o to the fo ur
Bo ard members, namely Bernard Chen Tien Lap, Fo ck Siew
W ah, G ail D Fo sler and LP Thean, who will be retiring at this
year’s Annual G eneral Meeting .
Bernard and Siew W ah, who have been o n the bo ard fo r nine
and seven years respectively (including tenure o n the DBS Bank
Bo ard), had wanted to retire last year and were persuaded by me
to serve ano ther year. I am grateful to them fo r their sterling
co ntributio ns o n the Bo ard and in the Audit and Risk Co mmittees.
Siew W ah has very kindly ag reed to serve as an Adviso r to the
Chairman o n matters relating to the Bank’s plans and business in
China. I will also miss G ail’s challeng ing and incisive questio ns
and her perceptive co mments o n eco no mic issues. I am also
g rateful to LP Thean who is stepping do wn after serving with
The challenge for DBS is to sustain our grow th momentum
from a higher revenue base so that w e can continue to
strengthen our foundation as a progressive pan-Asian bank.
6
DBS G roup Holdings Ltd Annual Report 2 0 0 4
much dedicatio n since 2 0 0 2 . I appreciate his balanced views as
Chairman o f the Co mpensatio n Co mmittee. His leg al experience
and fo cus o n custo mer interests were invaluable in helping the
Bo ard make so und decisio ns.
I welco me two new Bo ard members, G o h G eo k Ling , Chairman
o f Tuas Po wer Ltd, and W o ng N g it Lio ng , Chairman and CEO o f
the Venture G ro up, who jo ined us in May last year.
I am also pleased to have Ang Ko ng Hua, Executive Directo r o f
N atSteel Ltd, as the latest member o f o ur Bo ard effective March
this year.
Last but not least, the management and staff of DBS G roup are to be
co mmended fo r their hard wo rk and dedicatio n. Their co ntributio ns
helped make DBS a leading financial institution in Asia.
S Dhanabalan
Chairman, DBS G ro up Ho lding s
Left: Trade Finance, Ho ng Ko ng
DBS Ho ng Ko ng maintained its number two po sitio n
in trade finance amid a very co mpetitive enviro nment.
Rig ht: DBS Jakarta, Indo nesia
2 0 0 4 was a busy year fo r DBS Indo nesia. It tripled
its assets, expanded its staff strength and pro duct
o fferings, relo cated to a bigger o ffice in Surabaya
and o pened a branch in Medan.
DBS G roup Holdings Ltd Annual Report 2 0 0 4
7
DBS China
DBS made significant inro ads with Chinese-o wned co mpanies last year bo th in investment
and co rpo rate banking. O ur ro le as lead manager fo r Li-Ning Co . Ltd’s IPO in Ho ng
Ko ng illustrates o ur ability to harness o ur financial expertise, kno wledge and co ntacts
acro ss bo rders. W e raised HK$ 6 0 9 millio n fo r China’s highly po pular spo rtswear
co mpany fo unded by its namesake O lympic gymnast and three-time go ld medallist.
Board of Directors
S Dhanabalan, Chairman
Appo inted July 1 19 9 9 , he wo rked in DBS Bank fro m 1 9 6 8 to
1 9 7 8 befo re spending 16 years as a Cabinet Minister in the
Sing apo re g o vernment. He is the current Chairman o f Temasek
Ho lding s (Pte) Ltd and a Directo r o f the G o vernment o f
Sing apo re Investment Co rpo ratio n Pte Ltd. Ag e 6 7 .
Jackson Tai, Vice Chairman & Chief Executive Officer
Appo inted May 13 2 0 0 1 , he has been Chief Executive O fficer
since June 2 0 0 2 . A United States citizen, he jo ined DBS in 1 9 9 9
as Chief Financial O fficer and was made President and Chief
O perating O fficer in January 2 0 0 1 . Prio r to jo ining DBS, Mr Tai
served 2 5 years at J.P. Mo rg an & Co as an investment banker.
He is also a directo r o f Sing apo re Teleco mmunicatio ns Ltd and
CapitaLand Ltd. Ag e 5 4 .
Frank Wong Kwong Shing, Chief Operating Officer
Appo inted September 16 2 0 0 3 , he is Chief O perating O fficer o f
DBS G ro up Ho lding s and DBS Bank, Vice Chairman o f DBS Bank
and Chairman o f DBS Bank (Ho ng Ko ng ). A British citizen, he
bring s o ver 3 0 years o f experience in financial markets, having
wo rked fo r Citibank, J.P. Mo rg an and N atW est Markets, and in
Ho ng Ko ng , Frankfurt, Lo ndo n and Sing apo re. Mr W o ng is also
Directo r o f China Mo bile (HK) Ltd. Ag e 5 7 .
Bernard Chen Tien Lap, Director
Appo inted July 1 19 9 9 , he spent 1 2 years at the Ministries o f
Defence and Finance and as Minister o f State fro m 1 9 7 7 to
1 9 8 1 . He then jo ined Fraser & N eave g ro up, where he served
the last seven years as G eneral Manag er and Directo r. He was
Chief Executive O fficer o f Intraco Ltd fro m 1 9 9 1 to 2 0 0 0 .
Mr Chen is no w Chairman o f The Co mmercial & Industrial
Security Co rpo ratio n. Ag e 6 2 .
Fock Siew Wah, Director
Appo inted July 1 19 9 9 , he began his career with DBS and is
currently Senio r Adviso r o f Nuri Ho ldings (S) Pte Ltd and Chairman
o f Singapo re Airlines Cargo Pte Ltd. He is a Directo r o f Temasek
Ho ldings (Pte) Ltd and Singapo re Airlines Ltd, and was previo usly
Regio nal Treasurer (Asia-Pacific) fo r J.P. Mo rgan, President and CEO
o f O verseas Unio n Bank, Special Adviso r to Singapo re’s Finance
Minister and Deputy Chairman o f Fraser & Neave Limited. Age 6 4 .
Gail D Fosler, Director
Appo inted O cto ber 2 9 1 9 9 9 , she is Executive Vice President and
Chief Eco no mist o f The Co nference Bo ard. Befo re jo ining The
Co nference Bo ard in 1 9 8 9 , she was Chief Eco no mist and Deputy
Staff Directo r o f the US Senate Budget Co mmittee. Ms Fo sler is
currently a Directo r o f Unisys Co rpo ratio n, Baxter Internatio nal,
Caterpillar Inco rpo rated, The Natio nal Bureau o f Eco no mic Research
and The Eco no mic Club o f New Yo rk. She is American. Age 5 7 .
Goh Geok Ling, Director
Appo inted May 3 2 0 0 4 , he is Chairman o f Tuas Po wer Pte Ltd.
Prio r to his retirement in O cto ber 1 9 9 9 , he was in the electro nics
industry fo r 2 9 years. He spent 2 8 years with Texas Instruments
Singapo re Pte Ltd where he last held the po st o f Managing Directo r.
He became Managing Director of Micron Semiconductor Asia Pte Ltd
after the acquisitio n o f Texas Instruments. Mr G o h is also a Co uncil
Member o f Nanyang Techno lo gical University. Age 6 4 .
10
DBS G roup Holdings Ltd Annual Report 2 0 0 4
Kwa Chong Seng, Director
Appo inted July 2 9 2 0 0 3 , he is Chairman and Manag ing Directo r
o f Exxo nMo bil Asia Pacific Pte Ltd and the Lead Co untry Manag er
fo r the Exxo nMo bil co mpanies in Sing apo re. He is also Deputy
Chairman o f Temasek Ho lding s (Pte) Ltd. Mr Kwa also serves o n
the Public Service Co mmissio n and the Leg al Service Co mmissio n
in Sing apo re. Ag e 5 8 .
Leung Chun Ying, Director
Appo inted July 2 2 2 0 0 2 , he is Chairman o f DTZ Debenham Tie
Leung G lo bal. A Chinese citizen, he was extensively invo lved in
establishing Ho ng Ko ng as a Special Administrative Reg io n,
having served as a Vice Chairman o f the Preparato ry Co mmittee
and the Pro visio nal Leg islative Co uncil. A member o f the Ho ng
Ko ng Executive Co uncil, he was its Co nveno r between 1 9 9 9
and 2 0 0 2 . Ag e 5 0 .
Narayana Murthy, Director
Appo inted Aug ust 1 9 2 0 0 3 , he is Chairman o f Info sys
Techno lo g ies Ltd, a co mpany he co -fo unded and in which he had
served as Chief Executive O fficer fo r 2 0 years. An Indian
citizen, he is also a directo r o n the Central Bo ard o f the Reserve
Bank o f India, co -chairman o f the Indo -British Partnership and a
member o f the Indian Prime Minister’s Co uncil o n Trade and
Industry. Ag e 5 8 .
Peter Ong Boon Kwee, Director
Appo inted March 2 6 2 0 0 3 , he is Permanent Secretary o f the
Ministry o f Trade and Industry. Prio r to that, he was Permanent
Secretary o f the Ministry o f Transpo rt and seco nd Permanent
Secretary (Defence) o f the Ministry o f Defence. Fro m 1 9 9 8 to
2 0 0 0 , he was seco nded to Temasek Ho lding s (Pte) Ltd as an
Executive Vice President. He is also the current Chairman o f the
Maritime and Po rt Autho rity. Ag e 4 3 .
John A Ross, Director
Appo inted February 6 2 0 0 3 , he is a retired banker. Prio r to his
retirement in 2 0 0 2 , he was Co rpo rate Chief O perating O fficer
fo r the Deutsche Bank G ro up. Befo re jo ining Deutsche Bank in
1 9 9 2 , he spent 2 1 years at the Bank o f N ew Yo rk. A US citizen,
Mr Ro ss is a Trustee o f the G erman Marshall Fund, the Jewish
Museum, the Metro po litan O pera G uild and Ho bart & W illiam
Smith Co lleg es. Ag e 6 0 .
Thean Lip Ping, Director
Appo inted September 9 2 0 0 2 , he is a co nsultant at the leg al
firm o f KhattarW o ng . He was a Hig h Co urt Judg e fro m
1 9 8 4 –1 9 9 3 and a Judg e o f Appeal o f the Supreme Co urt fro m
1 9 9 3 –2 0 0 2 . Prio r to that, he was a practising lawyer fo r 2 6 years.
Mr Thean is also the Chairman o f the Securities Industry Co uncil
o f Sing apo re. Ag e 7 2 .
Wong Ngit Liong, Director
Appo inted May 3 2 0 0 4 , he has been the Chairman and Chief
Executive O fficer o f Venture G ro up since 1 9 8 6 . Prio r to that,
he spent mo re than 1 2 years with the Hewlett-Packard Co mpany.
Mr W o ng also serves o n the bo ards o f SIA Eng ineering
Co mpany and Internatio nal Enterprise Sing apo re. Ag e 6 4 .
N o te: Ang Kong Hua, Executive Directo r, N atSteel Ltd, was appo inted a directo r in March 2 0 0 5 .
DBS G roup Holdings Ltd Annual Report 2 0 0 4
11
Year in Review
January
DBS Thai Danu Bank and Thai Military Bank
sig ned a Memo randum o f Understanding
to merg e.
April
DBS and AirAsia launched the AirAsia Credit
Card, o ffering cardmembers the fastest way to
redeem free flig hts o n AirAsia.
DBS and Indo nesia’s Bank Mandiri led a
US$ 2 1 5 millio n syndicated lo an to PT Mitra
G lo bal Teleko munikasi Indo nesia, the larg est
syndicated facility fo r an Indo nesian telco m
co mpany since 1 9 9 8 .
February
March
DBS ag reed to sell its entire 1 0 % stake in Ho ng
Ko ng’s W ing Lung Bank Ltd to W u Jieh Yee
Co mpany Limited fo r HK$1 .2 billio n.
PO SB and Cho wiz launched an e-Saving s plan
fo r scho o ls to enco urag e children to save.
DBS Thai Danu Bank, Thai Military Bank and
The Industrial Finance Co rpo ratio n o f Thailand
ag reed to merg e to create the fifth larg est
banking g ro up in Thailand by assets.
DBS Shang hai branch was g ranted a Do mestic
Enterprise licence.
DBS launched a ho me lo an with the lo west firstyear rate and year-lo ng payment ho liday; and a
car lo an cash rebate that cuts interest by 2 0 %.
May
DBS Ho ng Ko ng launched DBS W ealth Acco unt
to tap the emerg ing affluent po pulatio n.
W o ng N g it Lio ng , Chairman and CEO o f
Venture G ro up, and G o h G eo k Ling , Chairman
o f Tuas Po wer Limited, jo ined the G ro up’s bo ard
o f directo rs.
DBS and MasterCard unveiled DBS W o man’s
Card, a new credit card which o ffers wo men
platinum privileg es with free co ncierg e services.
June
DBS Asia Capital raised HK$ 6 0 9 millio n fo r the
IPO o f China’s Li-Ning Co . Ltd.
DBS launched the Pan-Asian Bo nd Index to track
lo cal so vereign and quasi-so vereign bo nds fro m
eight key regio nal markets.
DBS TD W aterho use was renamed DBS Vickers
Securities O nline after DBS Vickers raised its stake
in the o nline jo int venture.
DBS Ho ng Ko ng partnered Standard & Po o r’s
(S&P) to pro vide S&P’s independent and o bjective
investment fund analysis to retail investo rs.
12
DBS G roup Holdings Ltd Annual Report 2 0 0 4
July
DBS o pened its G uang zho u branch.
October
DBS Ho ng Ko ng apo lo g ised fo r the accidental
destructio n o f 8 3 safe depo sit bo xes.
DBS Shenzhen branch was g ranted a Do mestic
Enterprise licence.
November
DBS was g ranted a derivatives licence fo r all
DBS branches in China.
December
DBS was jo int lead arrang er fo r the Suntec REIT,
the larg est IPO in Sing apo re in 2 0 0 4 .
DBS Ho ng Ko ng issued its first millio n
credit cards.
Capital O K, a jo int venture between DBS and
Shin Co rpo ratio n fro m Thailand, made its first
mo ve into Thailand’s co nsumer finance market
with the launch o f “ Life’s O K” , an inno vative
credit plan fo r co nsumers.
DBS Ho ng Ko ng kicked o ff “ Cares Ho ng Ko ng” ,
a co mpany-wide co mmunity service pro gramme
to pro mo te a caring culture amo ng staff.
August
September
DBS was so le arrang er fo r a US$ 5 0 0 millio n
multi-currency debt issuance pro g ramme fo r
Pan Asia Paper.
DBS o pened a Representative O ffice in
Do ngguan, making it the first fo reign bank to
establish a presence in the so uthern city o f China.
DBS Ho ng Ko ng launched the W o man’s Card at
a g lamo ro us party featuring Ho ng Ko ng
celebrity Daniel W u.
DBS G ro up and its staff do nated $ 6 0 0 ,0 0 0
to victims o f tsunami-affected co untries. The
Bank also raised S$ 5 .6 millio n fro m custo mers
thro ug h its Internet banking channel and ATMs.
DBS was cho sen by SPRIN G to manag e
Sing apo re’s first lo an securitisatio n pilo t
pro g ramme fo r SMEs.
DBS launched a new Internet banking platfo rm
– iBanking – to serve mo re o nline custo mers at
faster speed.
DBS Bank successfully clo sed a US$ 7 5 0 millio n
subo rdinated no te issue which qualified as
Upper Tier 2 capital fo r the Bank.
DBS G roup Holdings Ltd Annual Report 2 0 0 4
13
DBS Malaysia
14
DBS G roup Holdings Ltd Annual Report 2 0 0 4
DBS was an ag g ressive new challeng er in the o ffsho re syndicated lo ans
and equities and debt markets in Malaysia last year. O ur branch in Labuan
and representative o ffice in Kuala Lumpur perfo rmed no tably well, and
amo ng the marquee syndicated lo ans was a US$ 2 5 0 millio n term lo an
secured fo r YTL Po wer Internatio nal Bhd.
DBS G roup Holdings Ltd Annual Report 2 0 0 4
15
CEO’s Report At the
start o f 2 0 0 4 , Asian eco no mies surg ed ahead
to ward reco very and favo urable market co nditio ns prevailed.
Jackso n Tai
Vice Chairman & Chief Executive O fficer
DBS in Sing apo re
Sing apo re, as well as Ho ng Ko ng ,
is DBS’ spring bo ard fro m which o ur
successful business mo dels,
expertise and pro cesses will be
expo rted acro ss the reg io n.
16
DBS G roup Holdings Ltd Annual Report 2 0 0 4
As the year pro g ressed, capital-raising activities and investment
sales lang uished in a market rattled by an uncertain o utlo o k fo r
US interest rates, co ncerns o ver China’s o verheated eco no my,
rising o il prices and a demand slo wdo wn fo r techno lo g y-related
pro ducts. Trading vo lumes suffered and co nditio ns became
particularly difficult when bo nd yields fell sharply ag ainst
widespread expectatio ns.
Ag ainst this uneven 2 0 0 4 o perating enviro nment, DBS chalked
up reco rd earning s and delivered the stro ng est bo tto m-line
numbers in its 3 6 -year histo ry. O ur net pro fit ro se 9 7 % to
$ 2 .0 2 billio n, including $ 4 9 7 millio n in o ne-time g ains fro m
sales o f stakes in affiliate banks. Excluding these g ains, net
pro fit o f $1.5 2 billio n was up 4 8 % fro m the year befo re and
surpassed the reco rd o f $1.3 9 billio n set in 2 0 0 0 .
N et interest inco me g rew 8 % last year to $ 2 .5 7 billio n with net
interest marg in arresting previo us year’s decline to stabilise at
1 .7 9 %. N o n interest inco me increased 3 0 % to $ 2 .3 6 billio n but
excluding o ne-time g ains, the increase was 2 % to $ 1 .8 7 billio n.
• O ur success in diversifying o ur inco me streams by g ro wing
recurring inco me acro ss all custo mer seg ments sig nificantly
reduced o ur past reliance o n market-related inco me.
Altho ugh lo an margins have co ntracted in Asia’s o cean o f excess
liquidity, o ur lending o peratio ns generate no t o nly recurring
interest inco me, but also the o ppo rtunity fo r us to garner
franchise-building fee business. Thus, o ur lo an bo o k’s net interest
inco me must be juxtapo sed against o ur fee inco me which has
climbed to 2 2 .9 % o f to tal inco me (excluding o ne-time gains).
Impo rtantly, fee inco me has gro wn at a co mpo und annual gro wth
rate o f 2 4 % o ver six co nsecutive years, fro m $ 2 7 4 millio n in
1 9 9 8 to $1.0 1 3 billio n in 2 0 0 4 .
O ur hig her earning s bo o sted o ur capital reso urces to a 1 5 .8 %
g ro up to tal capital adequacy ratio under the MAS capital
framewo rk. O ur stro ng pro fitability placed us o n a new level o f
o perating streng th and to ug hened o ur reso lve to beco me a
leader amo ng Asian financial institutio ns.
Fundamentally, we o we o ur impro ved perfo rmance to a
custo mer-centric appro ach that puts custo mers at the co re o f o ur
business strateg y.
The stro ng er perfo rmance can be traced to o ur do g g ed
determinatio n o ver the past three years to g ro wing annuity
inco me fro m o ur co re custo mer businesses acro ss seg ments
and g eo g raphy.
In this regard, we failed in o ne spectacular instance last year
when o peratio nal lapses during the reno vatio n o f o ur Mei Fo o
branch in Ho ng Ko ng led to the accidental destructio n o f
8 3 custo mers’ safe depo sit bo xes. W hile o thers might have deftly
side-stepped the blame to co ntracto rs, we cho se to pro mptly
ackno wledge o ur respo nsibility fo r the incident, and to o k steps to
fairly co mpensate o ur custo mers witho ut delay.
• Fo r the year, o ur lo an bo o k g rew 1 3 % to $ 6 9 .7 billio n,
excluding o ur deco nso lidated Thailand o peratio ns.
• But the larg er trend is mo re revealing : o ur lo an bo o k g rew
o ver eig ht co nsecutive quarters. During this perio d, lo an
assets increased 2 0 % o r $11.6 billio n.
Eight Consecutive Quarters of Loan Growth
Six Consecutive Years of Fee Income Growth
($ millio ns)
($ millio ns)
DBS Thai Danu lo ans
Custo mer lo ans
G ro wth rate
(ex-DBS Thai Danu)
1000
1 ,0 1 3
900
20%
7 0 ,0 0 0
884
800
797
6 0 ,0 0 0
700
13%
600
5 0 ,0 0 0
626
500
4 0 ,0 0 0
508
400
423
3 0 ,0 0 0
300
2 0 ,0 0 0
200
1 0 ,0 0 0
274
100
4Q
2002
1Q
2Q
3Q
2003
4Q
1Q
2Q
3Q
4Q
1998
1999
2000
2001
2002
2003
2004
2004
DBS G roup Holdings Ltd Annual Report 2 0 0 4
17
To date we have settled in full with all but seven custo mers. The
incident had no material financial impact o n o ur Ho ng Ko ng
o peratio ns, but no netheless set back o ur effo rts to establish o ur
brand in o ur seco nd biggest market in Asia. W e deeply regret this
incident, have since taken remedial actio n to ensure that such
lapses do no t recur, and pledge to regain the trust o f o ur custo mers.
The unfo rtunate incident was a reminder o f the co ntinuo us need
to impro ve the quality o f o ur business as we expand in scale and
sco pe. Business achievements are o f no co nsequence if we let o ur
custo mers do wn. Arising fro m the incident, all DBS emplo yees
were reminded that pro ducing stro ng financial results alo ne do es
no t make DBS a well-managed bank. Since then, we have taken
steps to reinfo rce a co mpany culture that places custo mers first
and upho lds the highest business standards and practices.
2004 Highlights
W e co mpleted in 2 0 0 4 a rang e o f no table achievements,
a reflectio n o f DBS’ g ro wing diversity and depth o f talent.
• W e wo n stando ut investment banking mandates, including lead
manager fo r the biggest IPO in Singapo re, the $ 8 3 0 .3 millio n
Suntec REIT; the first glo bal bo nd in Asia after the 1 9 9 7 Asian
financial crisis, a US$ 2 7 0 millio n bo nd financing fo r Indo nesia ’ s
PT MG TI; and a HK$ 6 0 9 millio n IPO fo r Li-Ning Co . Ltd, the
co nsumer go o ds co mpany fo unded by the namesake O lympic
gymnast and three-time go ld medalist.
• W e embarked o n a pro g ramme o f o rg anic g ro wth to underpin
o ur co ntinued search fo r appro priate merg ers and acquisitio ns
o ppo rtunities. W e o pened new branches and o ffices in China,
Indo nesia and India, and saw do uble-dig it g ro wth in assets
and revenues in these co untries.
• W e co mpleted the merg er o f DBS Thai Danu, Thai Military
Bank and The Industrial Finance Co rpo ratio n o f Thailand in
September. The new entity no w o perates under the Thai
Military Bank name and is the fifth larg est bank in Thailand
with co mbined assets in excess o f Bt6 7 7 billio n ($ 2 9 billio n).
DBS’ 1 6 .1 % o wnership is seco nd o nly to the 3 1 .2 % stake o f
the Thai Ministry o f Finance.
• During the year, we to o k advantag e o f favo urable market
co nditio ns to raise US$ 7 5 0 millio n o f Upper Tier 2 capital fo r
DBS Bank thro ug h a 1 5 -year, 5 % subo rdinated no tes issue.
The financing supplements maturing subo rdinated no tes, was
in line with o ur po licy o f pro actively manag ing o ur capital
base, and po sitio ns DBS to pursue business and strateg ic
initiatives as suitable o ppo rtunities arise.
• W e maintained o ur wealth manag ement sales despite intense
co mpetitio n and in the face o f slug g ish market co nditio ns in
the seco nd half o f the year. To tal sales o f investment pro ducts
in Sing apo re and Ho ng Ko ng amo unted to $ 8 .8 1 2 billio n.
• W e divested o ur lo ng-held 1 0 % stake in Ho ng Ko ng ’ s W ing
Lung Bank Ltd in April to W ing Lung Bank’ s co ntro lling W u
family. W e also to o k initial steps in No vember to divest o ur
1 2 .7 % stake in Banco D’ O ro to the co ntro lling Sy family o f the
Philippines, which was co mpleted in January this year. Altho ugh
neither stake fits into o ur pro gram fo r highly integrated banking
o peratio ns in the regio n, we value the relatio nship and trust with
the lead shareho lders o f these institutio ns and lo o k fo rward to
co ntinued business co llabo ratio n.
To achieve scale, w e embrace a multi-pronged approach
of pursuing organic growth, acquisitions, and hybrid strategies
of joint-ventures and alliances.
DBS Revenues by Business Segments in 2004
G ro up ’ s distributio n mix: $ millio ns
35%
17%
16%
8%
Consumer Banking
1 ,5 6 6
Enterprise Banking
735
Investment Banking
703
T&M Funding Portfolio
346
Treasury & M arkets
394
Central O perations
687
9%
15%
18
To tal G ro up ’ s revenue
(excludes o ne-time gains) 4 ,4 3 1
DBS G roup Holdings Ltd Annual Report 2 0 0 4
Embracing our Roots as we Build Diversity and Depth
DBS is an Asian bank o f the 2 1 st century. W e live, breathe and
wo rk in the mo st exciting and fastest-g ro wing reg io n o f the
wo rld. O ur pro spects are inextricably tied to the fo rtunes o f
Asia; fo r us, there is no running away when sto rm clo uds
g ather o ver the ho rizo n and returning when blue skies
reappear. W e are firmly ro o ted here to serve o ur Asian clients,
in g o o d times and bad.
O ur Asian o rig in and o rientatio n have endo wed us with the
advantag e o f lo cal kno wledg e and insig ht while o ur
co mmitment to internatio nal best practices have helped us build
pro fitable o perating mo dels and leadership in pro duct and
service quality. W e embrace g o o d g o vernance, transparency,
as well as timely and full disclo sure.
O ur strateg y has been the same reg ardless o f market cycles.
W e strive to build scale, diversity and depth as we expand
further into the reg io n to serve o ur custo mers.
• W e must g ro w the scale o f o ur o peratio ns to harness lo wer
per unit co st fo r o ur custo mers, and to remain relevant to o ur
custo mers and shareho lders.
• W e seek diversity in business mix and pro duct o ffering s to
address o ur custo mers’ g ro wth acro ss Asia, as well as to
achieve better balance in shareho lder returns.
• W e are increasing o ur business depth to ancho r o ur market
penetratio n and do minance, and to capture hig her returns
fro m o ur mo re develo ped pro ducts and services.
Operating Income
6%
To achieve scale, we embrace a multi-pro ng ed appro ach o f
pursuing o rg anic g ro wth, acquisitio ns, and hybrid strateg ies o f
jo int-ventures and alliances. W hat fo rm we ado pt, and ho w
fast, depends very much o n business o ppo rtunities at hand as
well as chang ing lo cal reg ulato ry po licies and fo rbearance.
O utside o f o ur twin hubs o f Sing apo re and Ho ng Ko ng ,
o rg anic g ro wth has driven to p-line numbers in co untries like
China, Indo nesia, India and Malaysia. In the co ming years, we
will be channelling mo re reso urces to sig nificantly reinfo rce o ur
presence in these co untries. Asset g ro wth in these co untries
swelled mo re than 1 4 % last year.
W e will pursue acquisitio ns o nly when the rig ht o ppo rtunities
arise, and o nly if they extend o ur reg io nal reach and add
sig nificant value to o ur existing businesses.
Thus far, o ur reg io nalisatio n effo rts have helped us achieve a
mo re balanced g eo g raphical distributio n o f o ur inco me and
assets in 2 0 0 4 . In 1 9 9 8 , o nly 1 7 % o f o ur assets were so urced
o utside Sing apo re. Last year, that share was 3 2 %. O peratio ns
o utside o f Sing apo re co ntributed 3 7 % in revenues last year,
co mpared to 1 5 % six years ag o when we started to map o ut
o ur pan-Asian ambitio ns.
Total Assets
3%
4%
3%
6%
W e ado pt this strateg y o n to p o f an unwavering co mmitment to
so und risk and credit manag ement, as well as a culture o f
stro ng internal co ntro ls, co mpliance and transparency.
Rest of the world
4%
6%
Rest of the w orld
7%
5%
3%
Rest of the world
Rest of the w orld
24%
30%
O ther Asia-Pacific
Regional countries
O ther Asia-Pacific
Regional countries
(incl. HK, China, India,
Japan, Korea)
(incl. M alaysia,
Indonesia, Thailand,
Korea, Philippines)
(incl. HK, China, India,
Japan, Korea)
(incl. M alaysia,
Indonesia, Thailand,
Korea, Philippines)
85%
83%
O ther ASEAN
63%
Hong Kong
(incl. Indonesia,
Philippines, Thailand)
Singapore
1 9 9 8 : $ 1 .8 7 6 millio n
O ther ASEAN
68%
Hong Kong
(incl. Indonesia,
Philippines, Thailand)
Singapore
2 0 0 4 : $ 4 .4 3 1 millio na
Singapore
1 9 9 8 : $ 1 0 0 billio n
Singapore
2 0 0 4 : $ 1 7 6 billio nb
a) Excludes S$ 4 9 7 millio n o ne-time g ains
b) Includes g o o dwill assets; distributio n o f assets by g eo g raphy excludes g o o dwill assets
DBS G roup Holdings Ltd Annual Report 2 0 0 4
19
Replicating Singapore Strengths in the Region
As we expand o ur o peratio ns, we seek to replicate the
capabilities we have built up o ver three decades in Sing apo re,
and mo re recently in Ho ng Ko ng , in the rest o f Asia.
N o twithstanding reg ulato ry co nstraints that so metimes slo w o ur
ag enda, we made headway last year in markets beyo nd
Sing apo re and Ho ng Ko ng .
Mo mentum is building in o ur o peratio ns in China, Indo nesia,
India, Malaysia, and So uth Ko rea. G ro wth in revenues fro m the
regio n and the rest o f the wo rld o utside Singapo re and Ho ng
Ko ng o utpaced that o f the twin hubs last year, increasing 1 4 %
against 1 0 % and 2 % fo r Singapo re and Ho ng Ko ng respectively.
As we g ro w in these co untries, we will be using Sing apo re and
Ho ng Ko ng as spring bo ards, expo rting fro m these two markets
successful business mo dels, expertise and pro cesses, and
extending a co mmo n techno lo g y and o peratio ns infrastructure
acro ss the reg io n.
Mo st o f the business gro wth o utside o ur two key markets has thus
far been in who lesale banking since lo cal regulatio ns co ntinue to
impo se varying degrees o f restrictio ns o n fo reign banks’ presence
in the retail market. W e have, fo r example, been a new and
aggressive challenger in the syndicated lo ans markets in India,
Malaysia and So uth Ko rea. In Malaysia, where we have an
o ffsho re branch in Labuan and a marketing o ffice in Kuala
Lumpur, we were lead arranger o f numero us high pro file
syndicated lo ans. They included a US$ 2 5 0 millio n term lo an fo r
YTL Po wer Internatio nal Bhd, a US$ 3 0 0 millio n term lo an fo r
Astro , a US$ 7 0 0 millio n flo ating rate facility fo r Titan Capital (L)
Ltd, and a US$ 4 0 0 millio n revo lving credit facility fo r Star Cruises.
In India, we emerg ed as the number two bo o krunner fo r
syndicated lending as ranked by the Tho mso n Financial Leag ue
Tables 2 0 0 4 , capturing 9 .7 % share fro m 1 3 issues to talling
US$ 4 4 4 .4 millio n.
Lo o king fo rward, we are fo cused o n o ppo rtunities to
accelerate client co verag e acro ss g eo g raphies, and to o ffer
the same full suite o f services we already have in o ur twin
hubs o f Sing apo re and Ho ng Ko ng . These include capital
markets and adviso ry, treasury and markets, structured
finance, private banking , sto ckbro king , asset manag ement and
transactio n services. There is no reaso n, fo r example, fo r us
no t to replicate abro ad o ur asset securitisatio n capabilities
which have seen us pio neer and do minate the Real Estate
Investment Trusts (REIT) business in Sing apo re.
W e also lo o k fo r an enhanced presence in the reg io nal
derivatives market, particularly in China where we were
awarded a licence to co nduct derivatives business last year.
This appro val will help us expand the mo dest scale o f wealth
manag ement business we have already develo ped thro ug h o ur
“ white labelling ” co llabo ratio n with Chinese banks.
In mo st o f the markets in g reater China and So uth and
So utheast Asia, we aim to capitalise o n o ur track reco rd in
co rpo rate and SME banking to targ et mid-cap custo mers. W e
will take full advantag e o f o ur o n-site presence, lo cal insig ht,
and Asian co mmitment to build an enduring mid-cap franchise,
o ne that weathers cycles and is no t affected by co mpeting
demands fro m o ther parts o f the wo rld. W e must do so befo re
g lo bal bank co mpetito rs finally demo nstrate a lo ng -term
willing ness to invest in Asian mid-cap custo mers. W e must also
W e w ill take full advantage of our on-site presence, local insight,
and Asian commitment to build an enduring mid-cap franchise,
one that w eathers cycles and is not affected by competing demands
from other parts of the w orld.
Regional Revenues Grow at a Faster Pace
Amo unt ($ m)
2003
2004
Yo Y
change (%)
Revenues
Regio n and rest o f wo rld a
199
227
14
Ho ng Ko ng b
1 ,3 3 7
1 ,3 6 1
2
Sing apo re c
2 ,5 2 0
2 ,7 7 3
10
To tal
4 ,0 5 6
4 ,3 6 1
8
a) Excludes DBS Thai Danu in all perio ds
b) Includes no n-DBS Bank (HK) o peratio ns
c) Excludes o ne-time g ains o f $ 4 9 7 millio n in 2 0 0 4
20
DBS G roup Holdings Ltd Annual Report 2 0 0 4
differentiate o urselves fro m so me g lo bal banks who still find it
mo re co mpelling at their remo te headquarters to bo o k tro phy
transactio ns with larg e hig h-pro file custo mers in their episo dic
view o f Asia.
An Integrated Approach to Serving our Customers
As we extend o ur g eo g raphical reach and pro duct o ffering s,
we will make evo lutio nary o rg anisatio nal adjustments that will
allo w us to o ffer o ur custo mers a seamless experience o f hig h
level o f service and quality o f pro ducts acro ss the reg io n. Early
in 2 0 0 5 , we placed all o f o ur client-facing businesses under
Frank W o ng , who was appo inted Chief O perating O fficer in
reco g nitio n o f his success in fo rg ing the ag endas and prio rities
o f different businesses. He will help ensure that we harness
DBS’ reso urces acro ss functio ns and g eo g raphies to serve o ur
custo mers with integ rated, inno vative and timely so lutio ns.
Ano ther evo lutio nary o rg anisatio n chang e to o k place two years
ag o and is no w beg inning to take ho ld. W e g ro uped six
businesses – Investment Banking , Treasury & Markets, DBS
Vickers Securities, Private Banking , Asset Manag ement as well
as so me o f the functio ns within Central Treasury Unit – into a
new integ rated W ho lesale Banking team. By hard-wiring
pro duct manufacturers, relatio nship manag ers and distributio n
specialists who serve co rpo rates and institutio ns clo ser to g ether,
we were able to leverag e pro duct capabilities and secto r
expertise acro ss the DBS G ro up, facilitating clo ser teamwo rk
and mo re efficient cro ss-selling o f pro ducts and services.
In o ur SMEs business, we have set up a Reg io nal Enterprise
Banking Manag ement Team co mprising senio r manag ers fro m
Sing apo re and Ho ng Ko ng , to co nso lidate and drive reg io nal
8,806
8,812
4,824
5,337
plans and ensure alig nment o f po licies and practices in credit,
pro cesses and systems.
Expanding Distribution to Serve Retail Customers
O ur co nsumer banking franchise in Sing apo re and Ho ng Ko ng
reg istered a 3 7 % increase in earning s in 2 0 0 4 to beco me the
larg est net pro fit co ntributo r within the G ro up. But beyo nd the
bo o kkeeping o f pro fit, o ur reg io nal co nsumer banking franchise
is addressing the challeng e that banking is increasing ly abo ut
access to custo mers and distributio n.
DBS retained its do minant po sitio n as the larg est distributo r o f
investment and insurance pro ducts to the mass market, with the
bulk o f the treasury pro ducts eng ineered in-ho use and insurance
pro ducts so urced fro m Aviva, o ur strateg ic bancassurance
partner.
Sharing a co mmo n wealth manag ement business mo del with
Sing apo re, Ho ng Ko ng repo rted yet ano ther year o f ro bust
sales in investment and bancassurance pro ducts, particularly in
unit trusts where it no w co mmands at least a 5 % market share.
Fees fro m sale o f bancassurance and unit trust pro ducts ro se
4 7 % despite uncertainties in the financial markets.
DBS’ retail distributio n netwo rk is the largest in Singapo re, with
8 6 branches and 7 6 8 ATMs lo cated co nveniently at co nsumer
ho tspo ts acro ss the island. W e o pened a new branch fo r PO SB
in Juro ng East in July. In 2 0 0 4 , o ur ATMs in Singapo re pro cessed
an average o f 1 7 millio n transactio ns a mo nth fro m a to tal o f
abo ut 3 .7 millio n ATM cards in circulatio n.
Retail Wealth
Management Sales
($ millio ns)
Ho ng Ko ng
Sing apo re
Regional Customer Franchise Underpin
Record 2004 Results
4,434
1,396
2004a
2003
$ millio ns
3,982
3,475
3,039
2,005
453
N PAM b
Pro po rtio n N PAM b Pro po rtio n
%g ro wth
Co nsumer Banking
337
23%
462
24%
+3 7 %
Enterprise Banking
231
16%
303
15%
+3 1 %
Investment Banking
320
22%
415
21%
+3 0 %
+ Funding Po rtfo lio
506
35%
436
22%
-1 4 %
Central O peratio ns
61
4%
345
18%
nm
1 ,4 5 5
100%
1 ,9 6 1
18%
+3 5 %
Treasury & Markets
1,552
880
379
To tal
65
1998
1999
2000
Excludes bancassurance
2001
2002
2003
2004
a) Excludes $ 4 9 7 millio n o ne-o ff g ains
b) Cash N PAM; excludes g o o dwill amo rtisatio n
nm: no t meaning ful
DBS G roup Holdings Ltd Annual Report 2 0 0 4
21
DBS Woman’s Card
22
DBS G roup Holdings Ltd Annual Report 2 0 0 4
In May 2 0 0 4 , DBS Bank, in partnership with MasterCard Internatio nal,
unveiled the DBS W o man’ s Card in Sing apo re. Desig ned specially fo r the
busy, discerning wo man, the new card o ffers platinum privileg es and
co ncierg e services at no co st. The success o f the W o man’ s Card led to a
similar launch in Ho ng Ko ng seven mo nths later.
DBS G roup Holdings Ltd Annual Report 2 0 0 4
23
In additio n to being able to access o ur co mbined netwo rk o f
1 5 1 branches and 8 4 8 ATMs in Sing apo re and Ho ng Ko ng ,
DBS custo mers are also able to use their ATM cards at o ver
5 0 0 ,0 0 0 ATMs in 1 2 0 co untries that are part o f the PLUS/ Cirrus
netwo rk. Fro m last year, they co uld also carry o ut transactio ns at
the cash machines o f fo ur partner banks in the reg io n fo llo wing
the sig ning o f ATM alliances with the HDFC Bank in India, Bank
Internasio nal Indo nesia and Bank Danamo n in Indo nesia and
BPI in The Philippines.
The number o f credit cards issued by DBS in Ho ng Ko ng cro ssed
the o ne millio n mark in July, making the bank the fo urth larg est
credit card issuer in the Chinese Special Administrative Reg io n.
The success o f the W o man’ s Card in Sing apo re, which debuted
in May, led to a similar launch in Ho ng Ko ng seven mo nths
later. W e are no w the seco nd larg est issuer o f credit cards in
Sing apo re, with mo re than 7 5 0 ,0 0 0 cards in circulatio n,
including the successful Black Card and the W o man’ s Card.
In Sing apo re, we defended o ur traditio nal stro ng ho lds in
ho using lo ans which g rew 1 3 % year-o n-year, making headway
in the public ho using market with an inno vative HDB Lo yalty
Pro g ramme.
DBS Group Holdings Ltd
Annual Repo rt 2 0 0 4
Corporate Information
Management Committee
DBSH Board of Directors
Registrar
Jackso n Tai – Vice Chairman &
Chief Executive O fficer
S Dhanabalan – Chairman
Jackso n Tai – Vice Chairman &
Chief Executive O fficer
Frank W o ng – Chief O perating O fficer
Ang Ko ng Hua
Bernard Chen
Fo ck Siew W ah
G ail D Fo sler
G o h G eo k Ling
Kwa Cho ng Seng
Leung Chun Ying
N arayana Murthy
Peter O ng
Jo hn A Ro ss
Thean Lip Ping
W o ng N g it Lio ng
Barbinder & Co . Pte Ltd
8 Cro ss Street # 11 -0 0
PW C Building
Sing apo re 0 4 8 4 2 4
Tel: (6 5 ) 6 2 3 6 3 3 3 3
Fax: (6 5 ) 6 2 3 6 4 3 9 9
David Lau – Manag ing Directo r & Jo int
Head, G lo bal Financial Markets
Audit Committee
Registered Office
Rajan Raju – Manag ing Directo r & Head,
So uth and So utheast Asia
Bernard Chen – Chairman
G o h G eo k Ling
Peter O ng
S Dhanabalan – Adviso r
Board Risk Management Committee
6 Shento n W ay
DBS Building To wer O ne
Sing apo re 0 6 8 8 0 9
Tel: (6 5 ) 6 8 7 8 8 8 8 8
Fax: (6 5 ) 6 4 4 5 12 6 7
Email: dbs@ dbs.co m
W ebsite: www.dbs.co m
Frank W o ng – Chief O perating O fficer
Vice Chairman, DBS Bank
Chairman, DBS Bank (Ho ng Ko ng ) Limited
Jeanette W o ng – Chief Financial O fficer
Eric Ang – Manag ing Directo r & Jo int
Head, G lo bal Financial Markets
Steve Ing ram – Manag ing Directo r & Head,
Techno lo g y and O peratio ns
G ro up Chief Info rmatio n O fficer
Susan Ho – Principal Secretary
Fo ck Siew W ah – Chairman
Bernard Chen
Kwa Cho ng Seng
Peter O ng
Jo hn A Ro ss
Compensation Committee
Thean Lip Ping – Chairman
S Dhanabalan
Fo ck Siew W ah
Leung Chun Ying
W o ng N g it Lio ng
Executive Committee
S Dhanabalan – Chairman
Jackso n Tai
Frank W o ng
Bernard Chen
Fo ck Siew W ah
Kwa Cho ng Seng
Nominating Committee
Bernard Chen – Chairman
S Dhanabalan
G ail D Fo sler
Leung Chun Ying
Thean Lip Ping
Group Secretary
Heng Lee Cheng
Auditors
Ernst & Yo ung
Certified Public Acco untants
10 Co llyer Q uay # 21 -0 1
O cean Building
Sing apo re 0 4 9 315
Partner in charg e o f the audit
Fang Ai Lian
Contents
Performance at a Glance
Chairman’s Statement
Board of Directors
Year in Review
CEO’s Report
Corporate Governance Report
Remuneration Report
Awards and Accolades
Risk Exposures and Risk Management Approach
Management Discussion and Analysis
2
4
10
12
16
32
46
49
52
58
By the Numbers
Co nso lidated Pro fit and Lo ss Acco unt – DBS G ro up Ho lding s
Co nso lidated Balance Sheet – DBS G ro up Ho lding s
Co nso lidated Cashflo w Statement – DBS G ro up Ho lding s
Co nso lidated Statement o f Chang es in Shareho lders’ Equity –
DBS G ro up Ho lding s
Balance Sheet – DBS G ro up Ho lding s
N o tes to the Co nso lidated Financial Statements – DBS G ro up Ho lding s
Pro fit and Lo ss Acco unt – DBS Bank
Balance Sheet – DBS Bank
N o tes to the Supplementary Financial Statements – DBS Bank
Directo rs’ Repo rt – DBS G ro up Ho lding s
Statement by the Directo rs – DBS G ro up Ho lding s
Repo rt o f the Audito rs – DBS G ro up Ho lding s
Ten-Year Summary o f O peratio ns o f DBSH G ro up – DBS G ro up Ho lding s
Further Info rmatio n o n Directo rs – DBS G ro up Ho lding s
Shareho lding Statistics – DBS G ro up Ho lding s
71
72
73
74
75
76
143
144
145
148
153
154
155
156
163
DBS Directory
Internatio nal Banking O ffices
Main Subsidiaries & Asso ciated Co mpanies
165
166
Financial Calendar
Notice of Annual General Meeting
Proxy Form
167
168
171
DBS G roup Holdings Ltd Annual Report 2 0 0 4
1
Performance at a Glance
Financial Summary – DBS G ro up Ho lding s Ltd and its Subsidiary Co mpanies
2004
2003
2002
2,435
2,018
2,458
1 ,3 8 6
1 ,0 2 5
1 ,4 5 5
1 ,4 7 3
1 ,0 9 7
1 ,3 7 5
175,553
69,664
113,206
16,502
1 5 9 ,5 9 5
6 4 ,3 3 5
1 0 8 ,0 4 1
1 4 ,8 9 6
1 4 9 ,4 4 5
6 0 ,7 0 9
1 0 1 ,3 1 5
1 4 ,2 3 7
1.34
1.64
0.40
10.76
0 .6 8
0 .9 8
0 .3 0
9 .7 5
0 .7 4
0 .9 3
0 .3 0
9 .3 0
12.85
15.66
40.7
7 .0 4
9 .9 9
4 3 .9
7 .9 4
9 .9 5
4 4 .6
11.3
15.8
1 0 .5
1 5 .1
1 0 .3
1 5 .5
Profit and Loss ($ millions)
O perating pro fit
N et pro fit attributable to members (N PAM)
N PAM excluding g o o dwill amo rtisatio n
Balance Sheet ($ millions)
To tal assets
Custo mer lo ans
Custo mer depo sits
To tal shareho lders’ funds
Per Ordinary Share ($)
Basic earning s
Basic earning s excluding g o o dwill amo rtisatio n
G ro ss dividend
N et assets backing
Selected Ratios (%)
Return o n averag e to tal shareho lders’ funds
Return o n averag e to tal shareho lders’ funds (excluding g o o dwill amo rtisatio n)
O perating expenses as % o f inco me befo re o perating expenses
Capital adequacy1
Tier 1
To tal
1 ) Ratio s fo r 2 0 0 4 were co mputed based o n the MAS capital framewo rk issued o n May 2 8 2 0 0 4 . Co mparatives were no t restated and were co mputed using
Bank fo r Internatio nal Settlements g uidelines.
2
DBS G roup Holdings Ltd Annual Report 2 0 0 4
Financial Highlights
Group Net Profit Attributable
to Members
Group Income before Operating Expenses
& Ratio of Operating Expenses to Income
before Operating Expenses
($ millio ns)
($ millio ns)
$4,928
Group Net Interest Income and
Non-Interest Income
($ millio ns)
$2,018
$2,645
$4,146
$2,566
$4,198
$2,257
$3,532
$2,362
$2,375
$ 2,039
$1,823
$1,389
$2,931
48.9%
$1,097
$1,025
$997
$1,501
44.6%
42.5%
43.9%
40.7%
$1,275
$892
2000
2001
2002
2003
2004
2 0 0 4 : $ 2 ,0 1 8 millio n (+9 7 %)
2 0 0 3 : $ 1 ,0 2 5 millio n
G ro up net pro fit attributable to
members in 2 0 0 4 included o ne-time
g ains o f $ 3 1 0 millio n fro m dispo sal
o f a subsidiary co mpany DBS Thai
Danu Bank Public Co mpany Limited
and $ 1 8 7 millio n fro m sale o f
equity investment in W ing Lung Bank.
Group Total Shareholders’ Funds
and Return on Average Total
Shareholders’ Funds (ROE)
$16.5
($ billio ns)
2000
2001
2002
2003
2004
2000
2001
2002
Net Interest Income
2 0 0 4 : $ 4 ,9 2 8 millio n (+1 7 %)
2 0 0 3 : $ 4 ,1 9 8 millio n
2 0 0 4 : $ 2 ,5 6 6 millio n (+8 %)
2 0 0 3 : $ 2 ,3 7 5 millio n
Ratio of Operating Expenses to Income
before Operating Expenses*
Non-Interest Income
2 0 0 4 : 4 0 .7 % (-3 .2 percentag e po ints)
2 0 0 3 : 4 3 .9 %
2 0 0 4 : $ 2 ,3 6 2 millio n (+3 0 %)
2 0 0 3 : $ 1 ,8 2 3 millio n
* Excluding g o o dwill amo rtisatio n
Group Total Assets and Return on
Average Total Assets (ROA)
$175.6
($ billio ns)
$159.6
$14.2
$151.5
$13.6
Capital Adequacy Ratio (CAR)1
(%)
18 .9
$149.4
1 7.4
1 5 .5
15.66%
2000
12 .2
1.47%
1.28%
9.99%
2001
9.99%
9.95%
2002
0.86%
2003
2004
2000
1 5 .1
1 5 .8
1 4 .4
$111.2
12.89%
2004
Income before Operating Expenses
$14.9
$10.5
2003
2001
0.91%
2002
11.3
1 0 .3
1 0 .5
2002
2003
0.94%
2003
2004
2000
2001
Total Shareholders’ Funds
Total Assets
Total (Tier 1 & 2)
2 0 0 4 : $ 1 6 .5 billio n (+1 1 %)
2 0 0 3 : $ 1 4 .9 billio n
2 0 0 4 : $ 1 7 5 .6 billio n (+1 0 %)
2 0 0 3 : $ 1 5 9 .6 billio n
2 0 0 4 : 1 5 .8 %
2 0 0 3 : 1 5 .1 %
ROE*
ROA*
Tier 1
2 0 0 4 : 1 5 .6 6 % (+5 .6 7 percentag e po ints)
2 0 0 3 : 9 .9 9 %
2 0 0 4 : 1 .4 7 % (+0 .5 3 percentag e po ints)
2 0 0 3 : 0 .9 4 %
2 0 0 4 : 1 1 .3 %
2 0 0 3 : 1 0 .5 %
* Excluding g o o dwill amo rtisatio n
* Excluding g o o dwill amo rtisatio n
2004
1 ) Ratio s fo r 2 0 0 4 were co mputed based o n the MAS capital framewo rk issued o n May 2 8 2 0 0 4 . Co mparatives were no t restated and were co mputed
using Bank fo r Internatio nal Settlements g uidelines.
DBS G roup Holdings Ltd Annual Report 2 0 0 4
3
Chairman’s Statement 2 0 0 4
was a g o o d year fo r Asian eco no mies.
Ho ng Ko ng and Sing apo re g rew in excess o f 7 %. G ro wth was
underpinned by stro ng expo rts, lo w inflatio n and an upturn in business
and co nsumer spending . Ag ainst this backdro p, DBS perfo rmed well.
S Dhanabalan
Chairman
4
DBS G roup Holdings Ltd Annual Report 2 0 0 4
W ith a business diversified in co nsumer, enterprise and
who lesale banking , we were able to capitalise o n the eco no mic
rebo und to g ro w o ur custo mer franchise, expand o ur existing
o peratio ns, fo rm new ventures and o pen new o verseas o ffices.
W e achieved g reater diversificatio n in o ur inco me with stro ng
g ro wth acro ss all o ur businesses and acro ss different
g eo g raphies.
Financial Review
In 2 0 0 4 , G ro up net pro fits cro ssed the $ 2 billio n mark fo r the
first time. Excluding o ne-time g ains o f $ 4 9 7 millio n fro m the
dispo sal o f no n-co re investments, G ro up net pro fits was 4 8 %
hig her than the year befo re. O perating inco me ro se 1 7 % to
$ 4 .9 3 billio n while o perating expenses increased 8 % to
$ 2 .4 5 billio n. Ag g reg ate net pro fits fo r o ur co nsumer, SME and
co rpo rate secto rs ro se 3 3 % fro m $ 8 8 8 millio n to $1.1 8 billio n.
O ur fee inco me g rew 1 5 % and exceeded $1 billio n.
O ur lo an bo o k expanded by 13 % to $ 6 9 .7 billio n during 2 0 0 4 ,
with new lending to individuals, co rpo rates and SMEs acro ss
the reg io n.
po sitio n to serve o ur custo mers, to capture business o ppo rtunities
and to invest fo r the future.
O verall, it was a g o o d year fo r DBS. W e were able to reap the
fruits o f earlier investments in peo ple, pro cesses and systems.
Regional Franchise
During the year, we co ntinued to g ro w o rg anically in China,
India, Indo nesia and Malaysia. W e hired mo re staff, intro duced
new pro duct lines and expanded to new lo catio ns. O ur effo rts
are starting to sho w results in these co untries, as evident fro m the
fact that g ro wth in revenues fro m the reg io n o utpaced tho se fro m
Sing apo re and Ho ng Ko ng last year.
In Thailand, we merg ed the o peratio ns o f DBS Thai Danu with
that o f Thai Military Bank and The Industrial Finance Co rpo ratio n
o f Thailand, to fo rm TMB Bank, the co untry’s fifth larg est banking
group with combined assets in excess of Bt677 billion ($29 billion).
W e believe that TMB Bank’s big g er scale o ffers a mo re effective
way fo r us to g ro w in a key market where industry co nso lidatio n
is actively enco urag ed by the g o vernment.
O ur asset quality impro ved to pre-Asian crisis levels, helped by
mo re favo urable eco no mic co nditio ns. O ur no n-perfo rming lo an
ratio sto o d at a lo w 2 .5 %, do wn fro m 5 .2 % the year befo re
while o ur pro visio n co verag e ro se to 8 9 % fro m 6 3 % previo usly.
Shareholder Returns
Return o n equity was the hig hest in fo ur years at 1 2 .7 %. O ur
capital adequacy ratio ro se to 1 5 .8 %. W ith a healthy balance
sheet and ro bust capital ratio s, we believe we are in a stro ng
It is the Bo ard’s intentio n to increase the dividend rate in a
sustainable manner in line with underlying earning s g ro wth.
At the same time, we believe that the reg io n’s eno rmo us g ro wth
The Bo ard declared an interim dividend o f $ 0 .1 8 per share and
a final dividend o f $ 0 .2 2 per share. The to tal dividend o f $ 0 .4 0
is a 3 3 % increase o ver the $ 0 .3 0 paid in 2 0 0 3 .
Left: DBS in India
O ur Mumbai branch mo ved to big g er premises
in 2 0 0 4 and expanded its capabilities to include
treasury and markets o peratio ns, institutio nal
banking and trade finance.
Rig ht: DBS in China
DBS o pened a branch in G uang zho u in July and
a representative o ffice in Do ug g uan in December.
W e were also awarded a Do mestic Enterprise
licence in Shenzhen and Shang hai, and a
derivatives licence fo r all branches.
DBS G roup Holdings Ltd Annual Report 2 0 0 4
5
po tential means that the best lo ng -term return fo r shareho lders
will be achieved by using o ur capital to g ro w the business, bo th
o rg anically and thro ug h selective ino rg anic o ppo rtunities that
create value.
Quality of Earnings
Banking and finance are beco ming increasing ly co mplex and
co mpetitive. As DBS seeks to expand its business and balance
risk and return, we will co ntinue to invest in peo ple and systems,
in areas such as risk manag ement, financial co ntro ls, leg al and
reg ulato ry co mpliance, credit assessment and po rtfo lio
manag ement. The imminent implementatio n o f the Basel II capital
acco rd adds further urg ency to the steps that we need to take.
These investments are abso lutely necessary fo r so und banking
and will impro ve the quality o f o ur earning s.
Prospects for 2005
W e remain o ptimistic abo ut eco no mic pro spects in Asia
no twithstanding market expectatio ns o f sho rt-term dislo catio ns in
so me eco no mies that have g ro wn at breakneck speed in recent
years. The challeng e fo r DBS is to sustain o ur g ro wth mo mentum
fro m a hig her revenue base so that we can co ntinue to
streng then o ur fo undatio n as a pro g ressive pan-Asian bank.
W ith o ur stro ng er capital reso urces, we are in a better po sitio n
to embark o n vario us initiatives that will translate into a hig her
level o f service and value fo r o ur custo mers and shareho lders in
the co ming years.
Apology
Tho ugh much was achieved in 2 0 0 4 , o ur perfo rmance was marred
by the safe depo sit bo x incident in the Mei Fo o branch in Ho ng
Ko ng . There is no excuse fo r the series o f erro rs that led to the
accidental destructio n o f 8 3 custo mers’ depo sit bo xes. W e
apo lo g ise to o ur custo mers fo r the lo ss and stress that we caused
them.
Acknowledgements
I wo uld like to thank o ur custo mers, business partners and
shareho lders fo r their unstinting suppo rt o f DBS witho ut which we
wo uld no t have achieved last year’s reco rd earning s.
I am also indebted to my fello w Bo ard members fo r g enero usly
sharing their time and insig hts. Special thanks g o to the fo ur
Bo ard members, namely Bernard Chen Tien Lap, Fo ck Siew
W ah, G ail D Fo sler and LP Thean, who will be retiring at this
year’s Annual G eneral Meeting .
Bernard and Siew W ah, who have been o n the bo ard fo r nine
and seven years respectively (including tenure o n the DBS Bank
Bo ard), had wanted to retire last year and were persuaded by me
to serve ano ther year. I am grateful to them fo r their sterling
co ntributio ns o n the Bo ard and in the Audit and Risk Co mmittees.
Siew W ah has very kindly ag reed to serve as an Adviso r to the
Chairman o n matters relating to the Bank’s plans and business in
China. I will also miss G ail’s challeng ing and incisive questio ns
and her perceptive co mments o n eco no mic issues. I am also
g rateful to LP Thean who is stepping do wn after serving with
The challenge for DBS is to sustain our grow th momentum
from a higher revenue base so that w e can continue to
strengthen our foundation as a progressive pan-Asian bank.
6
DBS G roup Holdings Ltd Annual Report 2 0 0 4
much dedicatio n since 2 0 0 2 . I appreciate his balanced views as
Chairman o f the Co mpensatio n Co mmittee. His leg al experience
and fo cus o n custo mer interests were invaluable in helping the
Bo ard make so und decisio ns.
I welco me two new Bo ard members, G o h G eo k Ling , Chairman
o f Tuas Po wer Ltd, and W o ng N g it Lio ng , Chairman and CEO o f
the Venture G ro up, who jo ined us in May last year.
I am also pleased to have Ang Ko ng Hua, Executive Directo r o f
N atSteel Ltd, as the latest member o f o ur Bo ard effective March
this year.
Last but not least, the management and staff of DBS G roup are to be
co mmended fo r their hard wo rk and dedicatio n. Their co ntributio ns
helped make DBS a leading financial institution in Asia.
S Dhanabalan
Chairman, DBS G ro up Ho lding s
Left: Trade Finance, Ho ng Ko ng
DBS Ho ng Ko ng maintained its number two po sitio n
in trade finance amid a very co mpetitive enviro nment.
Rig ht: DBS Jakarta, Indo nesia
2 0 0 4 was a busy year fo r DBS Indo nesia. It tripled
its assets, expanded its staff strength and pro duct
o fferings, relo cated to a bigger o ffice in Surabaya
and o pened a branch in Medan.
DBS G roup Holdings Ltd Annual Report 2 0 0 4
7
DBS China
DBS made significant inro ads with Chinese-o wned co mpanies last year bo th in investment
and co rpo rate banking. O ur ro le as lead manager fo r Li-Ning Co . Ltd’s IPO in Ho ng
Ko ng illustrates o ur ability to harness o ur financial expertise, kno wledge and co ntacts
acro ss bo rders. W e raised HK$ 6 0 9 millio n fo r China’s highly po pular spo rtswear
co mpany fo unded by its namesake O lympic gymnast and three-time go ld medallist.
Board of Directors
S Dhanabalan, Chairman
Appo inted July 1 19 9 9 , he wo rked in DBS Bank fro m 1 9 6 8 to
1 9 7 8 befo re spending 16 years as a Cabinet Minister in the
Sing apo re g o vernment. He is the current Chairman o f Temasek
Ho lding s (Pte) Ltd and a Directo r o f the G o vernment o f
Sing apo re Investment Co rpo ratio n Pte Ltd. Ag e 6 7 .
Jackson Tai, Vice Chairman & Chief Executive Officer
Appo inted May 13 2 0 0 1 , he has been Chief Executive O fficer
since June 2 0 0 2 . A United States citizen, he jo ined DBS in 1 9 9 9
as Chief Financial O fficer and was made President and Chief
O perating O fficer in January 2 0 0 1 . Prio r to jo ining DBS, Mr Tai
served 2 5 years at J.P. Mo rg an & Co as an investment banker.
He is also a directo r o f Sing apo re Teleco mmunicatio ns Ltd and
CapitaLand Ltd. Ag e 5 4 .
Frank Wong Kwong Shing, Chief Operating Officer
Appo inted September 16 2 0 0 3 , he is Chief O perating O fficer o f
DBS G ro up Ho lding s and DBS Bank, Vice Chairman o f DBS Bank
and Chairman o f DBS Bank (Ho ng Ko ng ). A British citizen, he
bring s o ver 3 0 years o f experience in financial markets, having
wo rked fo r Citibank, J.P. Mo rg an and N atW est Markets, and in
Ho ng Ko ng , Frankfurt, Lo ndo n and Sing apo re. Mr W o ng is also
Directo r o f China Mo bile (HK) Ltd. Ag e 5 7 .
Bernard Chen Tien Lap, Director
Appo inted July 1 19 9 9 , he spent 1 2 years at the Ministries o f
Defence and Finance and as Minister o f State fro m 1 9 7 7 to
1 9 8 1 . He then jo ined Fraser & N eave g ro up, where he served
the last seven years as G eneral Manag er and Directo r. He was
Chief Executive O fficer o f Intraco Ltd fro m 1 9 9 1 to 2 0 0 0 .
Mr Chen is no w Chairman o f The Co mmercial & Industrial
Security Co rpo ratio n. Ag e 6 2 .
Fock Siew Wah, Director
Appo inted July 1 19 9 9 , he began his career with DBS and is
currently Senio r Adviso r o f Nuri Ho ldings (S) Pte Ltd and Chairman
o f Singapo re Airlines Cargo Pte Ltd. He is a Directo r o f Temasek
Ho ldings (Pte) Ltd and Singapo re Airlines Ltd, and was previo usly
Regio nal Treasurer (Asia-Pacific) fo r J.P. Mo rgan, President and CEO
o f O verseas Unio n Bank, Special Adviso r to Singapo re’s Finance
Minister and Deputy Chairman o f Fraser & Neave Limited. Age 6 4 .
Gail D Fosler, Director
Appo inted O cto ber 2 9 1 9 9 9 , she is Executive Vice President and
Chief Eco no mist o f The Co nference Bo ard. Befo re jo ining The
Co nference Bo ard in 1 9 8 9 , she was Chief Eco no mist and Deputy
Staff Directo r o f the US Senate Budget Co mmittee. Ms Fo sler is
currently a Directo r o f Unisys Co rpo ratio n, Baxter Internatio nal,
Caterpillar Inco rpo rated, The Natio nal Bureau o f Eco no mic Research
and The Eco no mic Club o f New Yo rk. She is American. Age 5 7 .
Goh Geok Ling, Director
Appo inted May 3 2 0 0 4 , he is Chairman o f Tuas Po wer Pte Ltd.
Prio r to his retirement in O cto ber 1 9 9 9 , he was in the electro nics
industry fo r 2 9 years. He spent 2 8 years with Texas Instruments
Singapo re Pte Ltd where he last held the po st o f Managing Directo r.
He became Managing Director of Micron Semiconductor Asia Pte Ltd
after the acquisitio n o f Texas Instruments. Mr G o h is also a Co uncil
Member o f Nanyang Techno lo gical University. Age 6 4 .
10
DBS G roup Holdings Ltd Annual Report 2 0 0 4
Kwa Chong Seng, Director
Appo inted July 2 9 2 0 0 3 , he is Chairman and Manag ing Directo r
o f Exxo nMo bil Asia Pacific Pte Ltd and the Lead Co untry Manag er
fo r the Exxo nMo bil co mpanies in Sing apo re. He is also Deputy
Chairman o f Temasek Ho lding s (Pte) Ltd. Mr Kwa also serves o n
the Public Service Co mmissio n and the Leg al Service Co mmissio n
in Sing apo re. Ag e 5 8 .
Leung Chun Ying, Director
Appo inted July 2 2 2 0 0 2 , he is Chairman o f DTZ Debenham Tie
Leung G lo bal. A Chinese citizen, he was extensively invo lved in
establishing Ho ng Ko ng as a Special Administrative Reg io n,
having served as a Vice Chairman o f the Preparato ry Co mmittee
and the Pro visio nal Leg islative Co uncil. A member o f the Ho ng
Ko ng Executive Co uncil, he was its Co nveno r between 1 9 9 9
and 2 0 0 2 . Ag e 5 0 .
Narayana Murthy, Director
Appo inted Aug ust 1 9 2 0 0 3 , he is Chairman o f Info sys
Techno lo g ies Ltd, a co mpany he co -fo unded and in which he had
served as Chief Executive O fficer fo r 2 0 years. An Indian
citizen, he is also a directo r o n the Central Bo ard o f the Reserve
Bank o f India, co -chairman o f the Indo -British Partnership and a
member o f the Indian Prime Minister’s Co uncil o n Trade and
Industry. Ag e 5 8 .
Peter Ong Boon Kwee, Director
Appo inted March 2 6 2 0 0 3 , he is Permanent Secretary o f the
Ministry o f Trade and Industry. Prio r to that, he was Permanent
Secretary o f the Ministry o f Transpo rt and seco nd Permanent
Secretary (Defence) o f the Ministry o f Defence. Fro m 1 9 9 8 to
2 0 0 0 , he was seco nded to Temasek Ho lding s (Pte) Ltd as an
Executive Vice President. He is also the current Chairman o f the
Maritime and Po rt Autho rity. Ag e 4 3 .
John A Ross, Director
Appo inted February 6 2 0 0 3 , he is a retired banker. Prio r to his
retirement in 2 0 0 2 , he was Co rpo rate Chief O perating O fficer
fo r the Deutsche Bank G ro up. Befo re jo ining Deutsche Bank in
1 9 9 2 , he spent 2 1 years at the Bank o f N ew Yo rk. A US citizen,
Mr Ro ss is a Trustee o f the G erman Marshall Fund, the Jewish
Museum, the Metro po litan O pera G uild and Ho bart & W illiam
Smith Co lleg es. Ag e 6 0 .
Thean Lip Ping, Director
Appo inted September 9 2 0 0 2 , he is a co nsultant at the leg al
firm o f KhattarW o ng . He was a Hig h Co urt Judg e fro m
1 9 8 4 –1 9 9 3 and a Judg e o f Appeal o f the Supreme Co urt fro m
1 9 9 3 –2 0 0 2 . Prio r to that, he was a practising lawyer fo r 2 6 years.
Mr Thean is also the Chairman o f the Securities Industry Co uncil
o f Sing apo re. Ag e 7 2 .
Wong Ngit Liong, Director
Appo inted May 3 2 0 0 4 , he has been the Chairman and Chief
Executive O fficer o f Venture G ro up since 1 9 8 6 . Prio r to that,
he spent mo re than 1 2 years with the Hewlett-Packard Co mpany.
Mr W o ng also serves o n the bo ards o f SIA Eng ineering
Co mpany and Internatio nal Enterprise Sing apo re. Ag e 6 4 .
N o te: Ang Kong Hua, Executive Directo r, N atSteel Ltd, was appo inted a directo r in March 2 0 0 5 .
DBS G roup Holdings Ltd Annual Report 2 0 0 4
11
Year in Review
January
DBS Thai Danu Bank and Thai Military Bank
sig ned a Memo randum o f Understanding
to merg e.
April
DBS and AirAsia launched the AirAsia Credit
Card, o ffering cardmembers the fastest way to
redeem free flig hts o n AirAsia.
DBS and Indo nesia’s Bank Mandiri led a
US$ 2 1 5 millio n syndicated lo an to PT Mitra
G lo bal Teleko munikasi Indo nesia, the larg est
syndicated facility fo r an Indo nesian telco m
co mpany since 1 9 9 8 .
February
March
DBS ag reed to sell its entire 1 0 % stake in Ho ng
Ko ng’s W ing Lung Bank Ltd to W u Jieh Yee
Co mpany Limited fo r HK$1 .2 billio n.
PO SB and Cho wiz launched an e-Saving s plan
fo r scho o ls to enco urag e children to save.
DBS Thai Danu Bank, Thai Military Bank and
The Industrial Finance Co rpo ratio n o f Thailand
ag reed to merg e to create the fifth larg est
banking g ro up in Thailand by assets.
DBS Shang hai branch was g ranted a Do mestic
Enterprise licence.
DBS launched a ho me lo an with the lo west firstyear rate and year-lo ng payment ho liday; and a
car lo an cash rebate that cuts interest by 2 0 %.
May
DBS Ho ng Ko ng launched DBS W ealth Acco unt
to tap the emerg ing affluent po pulatio n.
W o ng N g it Lio ng , Chairman and CEO o f
Venture G ro up, and G o h G eo k Ling , Chairman
o f Tuas Po wer Limited, jo ined the G ro up’s bo ard
o f directo rs.
DBS and MasterCard unveiled DBS W o man’s
Card, a new credit card which o ffers wo men
platinum privileg es with free co ncierg e services.
June
DBS Asia Capital raised HK$ 6 0 9 millio n fo r the
IPO o f China’s Li-Ning Co . Ltd.
DBS launched the Pan-Asian Bo nd Index to track
lo cal so vereign and quasi-so vereign bo nds fro m
eight key regio nal markets.
DBS TD W aterho use was renamed DBS Vickers
Securities O nline after DBS Vickers raised its stake
in the o nline jo int venture.
DBS Ho ng Ko ng partnered Standard & Po o r’s
(S&P) to pro vide S&P’s independent and o bjective
investment fund analysis to retail investo rs.
12
DBS G roup Holdings Ltd Annual Report 2 0 0 4
July
DBS o pened its G uang zho u branch.
October
DBS Ho ng Ko ng apo lo g ised fo r the accidental
destructio n o f 8 3 safe depo sit bo xes.
DBS Shenzhen branch was g ranted a Do mestic
Enterprise licence.
November
DBS was g ranted a derivatives licence fo r all
DBS branches in China.
December
DBS was jo int lead arrang er fo r the Suntec REIT,
the larg est IPO in Sing apo re in 2 0 0 4 .
DBS Ho ng Ko ng issued its first millio n
credit cards.
Capital O K, a jo int venture between DBS and
Shin Co rpo ratio n fro m Thailand, made its first
mo ve into Thailand’s co nsumer finance market
with the launch o f “ Life’s O K” , an inno vative
credit plan fo r co nsumers.
DBS Ho ng Ko ng kicked o ff “ Cares Ho ng Ko ng” ,
a co mpany-wide co mmunity service pro gramme
to pro mo te a caring culture amo ng staff.
August
September
DBS was so le arrang er fo r a US$ 5 0 0 millio n
multi-currency debt issuance pro g ramme fo r
Pan Asia Paper.
DBS o pened a Representative O ffice in
Do ngguan, making it the first fo reign bank to
establish a presence in the so uthern city o f China.
DBS Ho ng Ko ng launched the W o man’s Card at
a g lamo ro us party featuring Ho ng Ko ng
celebrity Daniel W u.
DBS G ro up and its staff do nated $ 6 0 0 ,0 0 0
to victims o f tsunami-affected co untries. The
Bank also raised S$ 5 .6 millio n fro m custo mers
thro ug h its Internet banking channel and ATMs.
DBS was cho sen by SPRIN G to manag e
Sing apo re’s first lo an securitisatio n pilo t
pro g ramme fo r SMEs.
DBS launched a new Internet banking platfo rm
– iBanking – to serve mo re o nline custo mers at
faster speed.
DBS Bank successfully clo sed a US$ 7 5 0 millio n
subo rdinated no te issue which qualified as
Upper Tier 2 capital fo r the Bank.
DBS G roup Holdings Ltd Annual Report 2 0 0 4
13
DBS Malaysia
14
DBS G roup Holdings Ltd Annual Report 2 0 0 4
DBS was an ag g ressive new challeng er in the o ffsho re syndicated lo ans
and equities and debt markets in Malaysia last year. O ur branch in Labuan
and representative o ffice in Kuala Lumpur perfo rmed no tably well, and
amo ng the marquee syndicated lo ans was a US$ 2 5 0 millio n term lo an
secured fo r YTL Po wer Internatio nal Bhd.
DBS G roup Holdings Ltd Annual Report 2 0 0 4
15
CEO’s Report At the
start o f 2 0 0 4 , Asian eco no mies surg ed ahead
to ward reco very and favo urable market co nditio ns prevailed.
Jackso n Tai
Vice Chairman & Chief Executive O fficer
DBS in Sing apo re
Sing apo re, as well as Ho ng Ko ng ,
is DBS’ spring bo ard fro m which o ur
successful business mo dels,
expertise and pro cesses will be
expo rted acro ss the reg io n.
16
DBS G roup Holdings Ltd Annual Report 2 0 0 4
As the year pro g ressed, capital-raising activities and investment
sales lang uished in a market rattled by an uncertain o utlo o k fo r
US interest rates, co ncerns o ver China’s o verheated eco no my,
rising o il prices and a demand slo wdo wn fo r techno lo g y-related
pro ducts. Trading vo lumes suffered and co nditio ns became
particularly difficult when bo nd yields fell sharply ag ainst
widespread expectatio ns.
Ag ainst this uneven 2 0 0 4 o perating enviro nment, DBS chalked
up reco rd earning s and delivered the stro ng est bo tto m-line
numbers in its 3 6 -year histo ry. O ur net pro fit ro se 9 7 % to
$ 2 .0 2 billio n, including $ 4 9 7 millio n in o ne-time g ains fro m
sales o f stakes in affiliate banks. Excluding these g ains, net
pro fit o f $1.5 2 billio n was up 4 8 % fro m the year befo re and
surpassed the reco rd o f $1.3 9 billio n set in 2 0 0 0 .
N et interest inco me g rew 8 % last year to $ 2 .5 7 billio n with net
interest marg in arresting previo us year’s decline to stabilise at
1 .7 9 %. N o n interest inco me increased 3 0 % to $ 2 .3 6 billio n but
excluding o ne-time g ains, the increase was 2 % to $ 1 .8 7 billio n.
• O ur success in diversifying o ur inco me streams by g ro wing
recurring inco me acro ss all custo mer seg ments sig nificantly
reduced o ur past reliance o n market-related inco me.
Altho ugh lo an margins have co ntracted in Asia’s o cean o f excess
liquidity, o ur lending o peratio ns generate no t o nly recurring
interest inco me, but also the o ppo rtunity fo r us to garner
franchise-building fee business. Thus, o ur lo an bo o k’s net interest
inco me must be juxtapo sed against o ur fee inco me which has
climbed to 2 2 .9 % o f to tal inco me (excluding o ne-time gains).
Impo rtantly, fee inco me has gro wn at a co mpo und annual gro wth
rate o f 2 4 % o ver six co nsecutive years, fro m $ 2 7 4 millio n in
1 9 9 8 to $1.0 1 3 billio n in 2 0 0 4 .
O ur hig her earning s bo o sted o ur capital reso urces to a 1 5 .8 %
g ro up to tal capital adequacy ratio under the MAS capital
framewo rk. O ur stro ng pro fitability placed us o n a new level o f
o perating streng th and to ug hened o ur reso lve to beco me a
leader amo ng Asian financial institutio ns.
Fundamentally, we o we o ur impro ved perfo rmance to a
custo mer-centric appro ach that puts custo mers at the co re o f o ur
business strateg y.
The stro ng er perfo rmance can be traced to o ur do g g ed
determinatio n o ver the past three years to g ro wing annuity
inco me fro m o ur co re custo mer businesses acro ss seg ments
and g eo g raphy.
In this regard, we failed in o ne spectacular instance last year
when o peratio nal lapses during the reno vatio n o f o ur Mei Fo o
branch in Ho ng Ko ng led to the accidental destructio n o f
8 3 custo mers’ safe depo sit bo xes. W hile o thers might have deftly
side-stepped the blame to co ntracto rs, we cho se to pro mptly
ackno wledge o ur respo nsibility fo r the incident, and to o k steps to
fairly co mpensate o ur custo mers witho ut delay.
• Fo r the year, o ur lo an bo o k g rew 1 3 % to $ 6 9 .7 billio n,
excluding o ur deco nso lidated Thailand o peratio ns.
• But the larg er trend is mo re revealing : o ur lo an bo o k g rew
o ver eig ht co nsecutive quarters. During this perio d, lo an
assets increased 2 0 % o r $11.6 billio n.
Eight Consecutive Quarters of Loan Growth
Six Consecutive Years of Fee Income Growth
($ millio ns)
($ millio ns)
DBS Thai Danu lo ans
Custo mer lo ans
G ro wth rate
(ex-DBS Thai Danu)
1000
1 ,0 1 3
900
20%
7 0 ,0 0 0
884
800
797
6 0 ,0 0 0
700
13%
600
5 0 ,0 0 0
626
500
4 0 ,0 0 0
508
400
423
3 0 ,0 0 0
300
2 0 ,0 0 0
200
1 0 ,0 0 0
274
100
4Q
2002
1Q
2Q
3Q
2003
4Q
1Q
2Q
3Q
4Q
1998
1999
2000
2001
2002
2003
2004
2004
DBS G roup Holdings Ltd Annual Report 2 0 0 4
17
To date we have settled in full with all but seven custo mers. The
incident had no material financial impact o n o ur Ho ng Ko ng
o peratio ns, but no netheless set back o ur effo rts to establish o ur
brand in o ur seco nd biggest market in Asia. W e deeply regret this
incident, have since taken remedial actio n to ensure that such
lapses do no t recur, and pledge to regain the trust o f o ur custo mers.
The unfo rtunate incident was a reminder o f the co ntinuo us need
to impro ve the quality o f o ur business as we expand in scale and
sco pe. Business achievements are o f no co nsequence if we let o ur
custo mers do wn. Arising fro m the incident, all DBS emplo yees
were reminded that pro ducing stro ng financial results alo ne do es
no t make DBS a well-managed bank. Since then, we have taken
steps to reinfo rce a co mpany culture that places custo mers first
and upho lds the highest business standards and practices.
2004 Highlights
W e co mpleted in 2 0 0 4 a rang e o f no table achievements,
a reflectio n o f DBS’ g ro wing diversity and depth o f talent.
• W e wo n stando ut investment banking mandates, including lead
manager fo r the biggest IPO in Singapo re, the $ 8 3 0 .3 millio n
Suntec REIT; the first glo bal bo nd in Asia after the 1 9 9 7 Asian
financial crisis, a US$ 2 7 0 millio n bo nd financing fo r Indo nesia ’ s
PT MG TI; and a HK$ 6 0 9 millio n IPO fo r Li-Ning Co . Ltd, the
co nsumer go o ds co mpany fo unded by the namesake O lympic
gymnast and three-time go ld medalist.
• W e embarked o n a pro g ramme o f o rg anic g ro wth to underpin
o ur co ntinued search fo r appro priate merg ers and acquisitio ns
o ppo rtunities. W e o pened new branches and o ffices in China,
Indo nesia and India, and saw do uble-dig it g ro wth in assets
and revenues in these co untries.
• W e co mpleted the merg er o f DBS Thai Danu, Thai Military
Bank and The Industrial Finance Co rpo ratio n o f Thailand in
September. The new entity no w o perates under the Thai
Military Bank name and is the fifth larg est bank in Thailand
with co mbined assets in excess o f Bt6 7 7 billio n ($ 2 9 billio n).
DBS’ 1 6 .1 % o wnership is seco nd o nly to the 3 1 .2 % stake o f
the Thai Ministry o f Finance.
• During the year, we to o k advantag e o f favo urable market
co nditio ns to raise US$ 7 5 0 millio n o f Upper Tier 2 capital fo r
DBS Bank thro ug h a 1 5 -year, 5 % subo rdinated no tes issue.
The financing supplements maturing subo rdinated no tes, was
in line with o ur po licy o f pro actively manag ing o ur capital
base, and po sitio ns DBS to pursue business and strateg ic
initiatives as suitable o ppo rtunities arise.
• W e maintained o ur wealth manag ement sales despite intense
co mpetitio n and in the face o f slug g ish market co nditio ns in
the seco nd half o f the year. To tal sales o f investment pro ducts
in Sing apo re and Ho ng Ko ng amo unted to $ 8 .8 1 2 billio n.
• W e divested o ur lo ng-held 1 0 % stake in Ho ng Ko ng ’ s W ing
Lung Bank Ltd in April to W ing Lung Bank’ s co ntro lling W u
family. W e also to o k initial steps in No vember to divest o ur
1 2 .7 % stake in Banco D’ O ro to the co ntro lling Sy family o f the
Philippines, which was co mpleted in January this year. Altho ugh
neither stake fits into o ur pro gram fo r highly integrated banking
o peratio ns in the regio n, we value the relatio nship and trust with
the lead shareho lders o f these institutio ns and lo o k fo rward to
co ntinued business co llabo ratio n.
To achieve scale, w e embrace a multi-pronged approach
of pursuing organic growth, acquisitions, and hybrid strategies
of joint-ventures and alliances.
DBS Revenues by Business Segments in 2004
G ro up ’ s distributio n mix: $ millio ns
35%
17%
16%
8%
Consumer Banking
1 ,5 6 6
Enterprise Banking
735
Investment Banking
703
T&M Funding Portfolio
346
Treasury & M arkets
394
Central O perations
687
9%
15%
18
To tal G ro up ’ s revenue
(excludes o ne-time gains) 4 ,4 3 1
DBS G roup Holdings Ltd Annual Report 2 0 0 4
Embracing our Roots as we Build Diversity and Depth
DBS is an Asian bank o f the 2 1 st century. W e live, breathe and
wo rk in the mo st exciting and fastest-g ro wing reg io n o f the
wo rld. O ur pro spects are inextricably tied to the fo rtunes o f
Asia; fo r us, there is no running away when sto rm clo uds
g ather o ver the ho rizo n and returning when blue skies
reappear. W e are firmly ro o ted here to serve o ur Asian clients,
in g o o d times and bad.
O ur Asian o rig in and o rientatio n have endo wed us with the
advantag e o f lo cal kno wledg e and insig ht while o ur
co mmitment to internatio nal best practices have helped us build
pro fitable o perating mo dels and leadership in pro duct and
service quality. W e embrace g o o d g o vernance, transparency,
as well as timely and full disclo sure.
O ur strateg y has been the same reg ardless o f market cycles.
W e strive to build scale, diversity and depth as we expand
further into the reg io n to serve o ur custo mers.
• W e must g ro w the scale o f o ur o peratio ns to harness lo wer
per unit co st fo r o ur custo mers, and to remain relevant to o ur
custo mers and shareho lders.
• W e seek diversity in business mix and pro duct o ffering s to
address o ur custo mers’ g ro wth acro ss Asia, as well as to
achieve better balance in shareho lder returns.
• W e are increasing o ur business depth to ancho r o ur market
penetratio n and do minance, and to capture hig her returns
fro m o ur mo re develo ped pro ducts and services.
Operating Income
6%
To achieve scale, we embrace a multi-pro ng ed appro ach o f
pursuing o rg anic g ro wth, acquisitio ns, and hybrid strateg ies o f
jo int-ventures and alliances. W hat fo rm we ado pt, and ho w
fast, depends very much o n business o ppo rtunities at hand as
well as chang ing lo cal reg ulato ry po licies and fo rbearance.
O utside o f o ur twin hubs o f Sing apo re and Ho ng Ko ng ,
o rg anic g ro wth has driven to p-line numbers in co untries like
China, Indo nesia, India and Malaysia. In the co ming years, we
will be channelling mo re reso urces to sig nificantly reinfo rce o ur
presence in these co untries. Asset g ro wth in these co untries
swelled mo re than 1 4 % last year.
W e will pursue acquisitio ns o nly when the rig ht o ppo rtunities
arise, and o nly if they extend o ur reg io nal reach and add
sig nificant value to o ur existing businesses.
Thus far, o ur reg io nalisatio n effo rts have helped us achieve a
mo re balanced g eo g raphical distributio n o f o ur inco me and
assets in 2 0 0 4 . In 1 9 9 8 , o nly 1 7 % o f o ur assets were so urced
o utside Sing apo re. Last year, that share was 3 2 %. O peratio ns
o utside o f Sing apo re co ntributed 3 7 % in revenues last year,
co mpared to 1 5 % six years ag o when we started to map o ut
o ur pan-Asian ambitio ns.
Total Assets
3%
4%
3%
6%
W e ado pt this strateg y o n to p o f an unwavering co mmitment to
so und risk and credit manag ement, as well as a culture o f
stro ng internal co ntro ls, co mpliance and transparency.
Rest of the world
4%
6%
Rest of the w orld
7%
5%
3%
Rest of the world
Rest of the w orld
24%
30%
O ther Asia-Pacific
Regional countries
O ther Asia-Pacific
Regional countries
(incl. HK, China, India,
Japan, Korea)
(incl. M alaysia,
Indonesia, Thailand,
Korea, Philippines)
(incl. HK, China, India,
Japan, Korea)
(incl. M alaysia,
Indonesia, Thailand,
Korea, Philippines)
85%
83%
O ther ASEAN
63%
Hong Kong
(incl. Indonesia,
Philippines, Thailand)
Singapore
1 9 9 8 : $ 1 .8 7 6 millio n
O ther ASEAN
68%
Hong Kong
(incl. Indonesia,
Philippines, Thailand)
Singapore
2 0 0 4 : $ 4 .4 3 1 millio na
Singapore
1 9 9 8 : $ 1 0 0 billio n
Singapore
2 0 0 4 : $ 1 7 6 billio nb
a) Excludes S$ 4 9 7 millio n o ne-time g ains
b) Includes g o o dwill assets; distributio n o f assets by g eo g raphy excludes g o o dwill assets
DBS G roup Holdings Ltd Annual Report 2 0 0 4
19
Replicating Singapore Strengths in the Region
As we expand o ur o peratio ns, we seek to replicate the
capabilities we have built up o ver three decades in Sing apo re,
and mo re recently in Ho ng Ko ng , in the rest o f Asia.
N o twithstanding reg ulato ry co nstraints that so metimes slo w o ur
ag enda, we made headway last year in markets beyo nd
Sing apo re and Ho ng Ko ng .
Mo mentum is building in o ur o peratio ns in China, Indo nesia,
India, Malaysia, and So uth Ko rea. G ro wth in revenues fro m the
regio n and the rest o f the wo rld o utside Singapo re and Ho ng
Ko ng o utpaced that o f the twin hubs last year, increasing 1 4 %
against 1 0 % and 2 % fo r Singapo re and Ho ng Ko ng respectively.
As we g ro w in these co untries, we will be using Sing apo re and
Ho ng Ko ng as spring bo ards, expo rting fro m these two markets
successful business mo dels, expertise and pro cesses, and
extending a co mmo n techno lo g y and o peratio ns infrastructure
acro ss the reg io n.
Mo st o f the business gro wth o utside o ur two key markets has thus
far been in who lesale banking since lo cal regulatio ns co ntinue to
impo se varying degrees o f restrictio ns o n fo reign banks’ presence
in the retail market. W e have, fo r example, been a new and
aggressive challenger in the syndicated lo ans markets in India,
Malaysia and So uth Ko rea. In Malaysia, where we have an
o ffsho re branch in Labuan and a marketing o ffice in Kuala
Lumpur, we were lead arranger o f numero us high pro file
syndicated lo ans. They included a US$ 2 5 0 millio n term lo an fo r
YTL Po wer Internatio nal Bhd, a US$ 3 0 0 millio n term lo an fo r
Astro , a US$ 7 0 0 millio n flo ating rate facility fo r Titan Capital (L)
Ltd, and a US$ 4 0 0 millio n revo lving credit facility fo r Star Cruises.
In India, we emerg ed as the number two bo o krunner fo r
syndicated lending as ranked by the Tho mso n Financial Leag ue
Tables 2 0 0 4 , capturing 9 .7 % share fro m 1 3 issues to talling
US$ 4 4 4 .4 millio n.
Lo o king fo rward, we are fo cused o n o ppo rtunities to
accelerate client co verag e acro ss g eo g raphies, and to o ffer
the same full suite o f services we already have in o ur twin
hubs o f Sing apo re and Ho ng Ko ng . These include capital
markets and adviso ry, treasury and markets, structured
finance, private banking , sto ckbro king , asset manag ement and
transactio n services. There is no reaso n, fo r example, fo r us
no t to replicate abro ad o ur asset securitisatio n capabilities
which have seen us pio neer and do minate the Real Estate
Investment Trusts (REIT) business in Sing apo re.
W e also lo o k fo r an enhanced presence in the reg io nal
derivatives market, particularly in China where we were
awarded a licence to co nduct derivatives business last year.
This appro val will help us expand the mo dest scale o f wealth
manag ement business we have already develo ped thro ug h o ur
“ white labelling ” co llabo ratio n with Chinese banks.
In mo st o f the markets in g reater China and So uth and
So utheast Asia, we aim to capitalise o n o ur track reco rd in
co rpo rate and SME banking to targ et mid-cap custo mers. W e
will take full advantag e o f o ur o n-site presence, lo cal insig ht,
and Asian co mmitment to build an enduring mid-cap franchise,
o ne that weathers cycles and is no t affected by co mpeting
demands fro m o ther parts o f the wo rld. W e must do so befo re
g lo bal bank co mpetito rs finally demo nstrate a lo ng -term
willing ness to invest in Asian mid-cap custo mers. W e must also
W e w ill take full advantage of our on-site presence, local insight,
and Asian commitment to build an enduring mid-cap franchise,
one that w eathers cycles and is not affected by competing demands
from other parts of the w orld.
Regional Revenues Grow at a Faster Pace
Amo unt ($ m)
2003
2004
Yo Y
change (%)
Revenues
Regio n and rest o f wo rld a
199
227
14
Ho ng Ko ng b
1 ,3 3 7
1 ,3 6 1
2
Sing apo re c
2 ,5 2 0
2 ,7 7 3
10
To tal
4 ,0 5 6
4 ,3 6 1
8
a) Excludes DBS Thai Danu in all perio ds
b) Includes no n-DBS Bank (HK) o peratio ns
c) Excludes o ne-time g ains o f $ 4 9 7 millio n in 2 0 0 4
20
DBS G roup Holdings Ltd Annual Report 2 0 0 4
differentiate o urselves fro m so me g lo bal banks who still find it
mo re co mpelling at their remo te headquarters to bo o k tro phy
transactio ns with larg e hig h-pro file custo mers in their episo dic
view o f Asia.
An Integrated Approach to Serving our Customers
As we extend o ur g eo g raphical reach and pro duct o ffering s,
we will make evo lutio nary o rg anisatio nal adjustments that will
allo w us to o ffer o ur custo mers a seamless experience o f hig h
level o f service and quality o f pro ducts acro ss the reg io n. Early
in 2 0 0 5 , we placed all o f o ur client-facing businesses under
Frank W o ng , who was appo inted Chief O perating O fficer in
reco g nitio n o f his success in fo rg ing the ag endas and prio rities
o f different businesses. He will help ensure that we harness
DBS’ reso urces acro ss functio ns and g eo g raphies to serve o ur
custo mers with integ rated, inno vative and timely so lutio ns.
Ano ther evo lutio nary o rg anisatio n chang e to o k place two years
ag o and is no w beg inning to take ho ld. W e g ro uped six
businesses – Investment Banking , Treasury & Markets, DBS
Vickers Securities, Private Banking , Asset Manag ement as well
as so me o f the functio ns within Central Treasury Unit – into a
new integ rated W ho lesale Banking team. By hard-wiring
pro duct manufacturers, relatio nship manag ers and distributio n
specialists who serve co rpo rates and institutio ns clo ser to g ether,
we were able to leverag e pro duct capabilities and secto r
expertise acro ss the DBS G ro up, facilitating clo ser teamwo rk
and mo re efficient cro ss-selling o f pro ducts and services.
In o ur SMEs business, we have set up a Reg io nal Enterprise
Banking Manag ement Team co mprising senio r manag ers fro m
Sing apo re and Ho ng Ko ng , to co nso lidate and drive reg io nal
8,806
8,812
4,824
5,337
plans and ensure alig nment o f po licies and practices in credit,
pro cesses and systems.
Expanding Distribution to Serve Retail Customers
O ur co nsumer banking franchise in Sing apo re and Ho ng Ko ng
reg istered a 3 7 % increase in earning s in 2 0 0 4 to beco me the
larg est net pro fit co ntributo r within the G ro up. But beyo nd the
bo o kkeeping o f pro fit, o ur reg io nal co nsumer banking franchise
is addressing the challeng e that banking is increasing ly abo ut
access to custo mers and distributio n.
DBS retained its do minant po sitio n as the larg est distributo r o f
investment and insurance pro ducts to the mass market, with the
bulk o f the treasury pro ducts eng ineered in-ho use and insurance
pro ducts so urced fro m Aviva, o ur strateg ic bancassurance
partner.
Sharing a co mmo n wealth manag ement business mo del with
Sing apo re, Ho ng Ko ng repo rted yet ano ther year o f ro bust
sales in investment and bancassurance pro ducts, particularly in
unit trusts where it no w co mmands at least a 5 % market share.
Fees fro m sale o f bancassurance and unit trust pro ducts ro se
4 7 % despite uncertainties in the financial markets.
DBS’ retail distributio n netwo rk is the largest in Singapo re, with
8 6 branches and 7 6 8 ATMs lo cated co nveniently at co nsumer
ho tspo ts acro ss the island. W e o pened a new branch fo r PO SB
in Juro ng East in July. In 2 0 0 4 , o ur ATMs in Singapo re pro cessed
an average o f 1 7 millio n transactio ns a mo nth fro m a to tal o f
abo ut 3 .7 millio n ATM cards in circulatio n.
Retail Wealth
Management Sales
($ millio ns)
Ho ng Ko ng
Sing apo re
Regional Customer Franchise Underpin
Record 2004 Results
4,434
1,396
2004a
2003
$ millio ns
3,982
3,475
3,039
2,005
453
N PAM b
Pro po rtio n N PAM b Pro po rtio n
%g ro wth
Co nsumer Banking
337
23%
462
24%
+3 7 %
Enterprise Banking
231
16%
303
15%
+3 1 %
Investment Banking
320
22%
415
21%
+3 0 %
+ Funding Po rtfo lio
506
35%
436
22%
-1 4 %
Central O peratio ns
61
4%
345
18%
nm
1 ,4 5 5
100%
1 ,9 6 1
18%
+3 5 %
Treasury & Markets
1,552
880
379
To tal
65
1998
1999
2000
Excludes bancassurance
2001
2002
2003
2004
a) Excludes $ 4 9 7 millio n o ne-o ff g ains
b) Cash N PAM; excludes g o o dwill amo rtisatio n
nm: no t meaning ful
DBS G roup Holdings Ltd Annual Report 2 0 0 4
21
DBS Woman’s Card
22
DBS G roup Holdings Ltd Annual Report 2 0 0 4
In May 2 0 0 4 , DBS Bank, in partnership with MasterCard Internatio nal,
unveiled the DBS W o man’ s Card in Sing apo re. Desig ned specially fo r the
busy, discerning wo man, the new card o ffers platinum privileg es and
co ncierg e services at no co st. The success o f the W o man’ s Card led to a
similar launch in Ho ng Ko ng seven mo nths later.
DBS G roup Holdings Ltd Annual Report 2 0 0 4
23
In additio n to being able to access o ur co mbined netwo rk o f
1 5 1 branches and 8 4 8 ATMs in Sing apo re and Ho ng Ko ng ,
DBS custo mers are also able to use their ATM cards at o ver
5 0 0 ,0 0 0 ATMs in 1 2 0 co untries that are part o f the PLUS/ Cirrus
netwo rk. Fro m last year, they co uld also carry o ut transactio ns at
the cash machines o f fo ur partner banks in the reg io n fo llo wing
the sig ning o f ATM alliances with the HDFC Bank in India, Bank
Internasio nal Indo nesia and Bank Danamo n in Indo nesia and
BPI in The Philippines.
The number o f credit cards issued by DBS in Ho ng Ko ng cro ssed
the o ne millio n mark in July, making the bank the fo urth larg est
credit card issuer in the Chinese Special Administrative Reg io n.
The success o f the W o man’ s Card in Sing apo re, which debuted
in May, led to a similar launch in Ho ng Ko ng seven mo nths
later. W e are no w the seco nd larg est issuer o f credit cards in
Sing apo re, with mo re than 7 5 0 ,0 0 0 cards in circulatio n,
including the successful Black Card and the W o man’ s Card.
In Sing apo re, we defended o ur traditio nal stro ng ho lds in
ho using lo ans which g rew 1 3 % year-o n-year, making headway
in the public ho using market with an inno vative HDB Lo yalty
Pro g ramme.