2000 Interim Results Briefing to Analysts & Investors

Transforming to
World-Class
Interim 2000 Results Briefing

July 2000

Transforming to World-Class

 Interim results reflect broad-based improvement in operations

 Regional asset quality continues to improve

 Well-positioned for expansion and growth

2

Transforming to World-Class

 Interim results reflect broad-based improvement in operations

 Regional asset quality continues to improve


 Well-positioned for expansion and growth

3

Broad-based improvement in operations
(S$ million)

1H00

1H99

Increase/
(Decrease)

Net interest income
Fee and commission income
Dividends and rental income
Other income


1,046
260
43
139

989
185
33
254

5.8
41.1
28.4
(45.2)

Income before operating expenses
Excluding SPC profits

1,489


1,460
1,343

1.9
10.8

Operating expenses

594

456

30.3

Operating profit
Excluding SPC profits

895

1,004

887

(10.9)
0.8

Specific provisions
General provisions

80
(17)

333
3

(75.7)
(674.0)

NPAM
Excluding SPC profits


704

655
538

7.5
30.9

4

Net interest income increased due to higher
margins
(S$ million)
Net interest income

2800

Growth :
+ S$58m (5.8%)


2400

2,035

2000
1600
1200

1,430
1,046

1,002

800

1H99:
989

400
0

1997

1998

1999

1H00

5

Net interest income increased due to higher
margins
(%)
Net interest income
Net interest margin

2800
2400
1.73


1.77

2000

2.02

2.07

(1H99 : 2.00)

2.0

2,035

1.5

1600
1200

2.5


1,430
1,046

1,002

800

1H99:
989

400

1.0

0.5

0

0.0


1997

1998

1999

1H00

6

Fee and commission income rose strongly
(S$ million)
Stock broking
Investment banking
Trade related
Loan related
Service charges
Guarantees
Credit card

Fund management
Others

1H99
54
31
28
14
15
13
11
7
11
184

1H00
47
42
38
24
23
14
15
31
26
260

Growth :
+ S$76m (41.1%)

7

Fee and commission income rose strongly
(S$ million)
Stock broking
Investment banking
Trade related
Loan related
Service charges
Guarantees
Credit card
Fund management
Others

Fee to Income Ratio (%)

1998

1999

1H99

1H00

49
42
51
29
20
27
22
10
23

102
85
63
38
32
28
25
20
29

54
31
28
14
15
13
11
7
11

47
42
38
24
23
14
15
31
26

274

423

184

260

14.6

14.0

13.7 *

17.5

* Income excludes SPC profits.

8

“Other” income declined due to sale of SPC
shares in 1H99
(S$ million)

1H99

1H00

FX trading

41

52

Sale of trading securities
& derivatives trading

88

55

-

3

117

-

-

5

Disposal of fixed assets

2

4

Other

6

20

Disposal of investment securities:
- Sale of DBS Land shares
- Sale of SPC shares
- Others

254

139

Growth :
- S$115m (45.2%)

9

Operating expenses rose 30% due to
investments in staff and IT
DKOB’s expenses
IT expenses
Staff cost
1,064

(S$ million)
1200

71

1000
800
600
400

Growth :
+ S$138m (30.3%)

754

529
334
87

594
456

134

200

18
233
49

56
281
64

0
Cost to
Income Ratio

1998

1999

1H99

1H00

40.2%

35.1%

31.2%

39.9%

1

Operating profit declined 10.9% due to SPC
profits in 1H1999
(S$ million)
Growth : - 10.9%
(Excl SPC : + 0.8%)

1,964

2000
1600
1200

1,121

1,004
117

972

894

800

Singapore
Petroleum
Company

887

400
0
1997

1998

1999

1H99

1H00

1

Provisions declined substantially
Increase/
(Decrease)

1H99

1H00

114

11

(103)

5 Regional Countries

54

24

(30)

Singapore

54

(9)

(63)

3

11

8

(1)

27

28

(S$ million)
DTDB

Other Countries
Non-loan provisions
Specific Provisions

224

64

(160)

General Provisions

3

(17)

(20)

Total DBSH Group's share

227

47

(180)

Minority interests' share

109

17

(92)

Total Group Provisions

336

64

(272)

1

After-tax profits grew 7.5% to S$704 million
(S$ million)
1200

1,072

Growth : + 7.5%
(Excl SPC : + 30.9%)

1000
800

655

600

704

117

436

Singapore
Petroleum
Company

400
538
200

112

0
1997

1998

1999

1H99

1H00

1

ROA recovered to pre-crisis level
(%)
1.4

1.31

1.28
1.13

1.2
1.04
1.0
0.8

0.72

0.6
0.4
0.14

0.2
0.0
1996

1997

1998

1999

1H99

1H00

1

ROE on track toward 15%+ target
(%)
15
13.13
11.80
10.35

10.30
10

5.72
5

1.29
0
1996

1997

1998

1999

1H99

1H00

1

Balance sheet shrank due to soft loan demand
and shedding of low-yielding assets
(S$ billion)

Total Assets

140
120

Customer
Loans

Customer
Deposits

107.6
111.4 (-3.4%)
80.4
83.1 (-3.3%)

100
80
57.8

60

52.4
(-9.2%)

40
20
0
Jun 99 Jun 00

Jun 99 Jun 00

Jun 99 Jun 00

1

Dividend rate increased
Targeting to align payout ratio more with international banks
Total
1998
Ordinary dividend rate
Amount (S$ million)
Payout rate

Total
1999

Interim
1999

Interim
2000

18%

25%

9%

14%

140.8

241.9

80.6

139.2

128.9%

22.3%

19.8%

1

Transforming to World-Class

 Interim results reflect broad-based improvement in operations

 Regional asset quality continues to improve

 Well-positioned for expansion and growth

1

NPLs have peaked
(S$ million)
DTDB

8,121

DKOB
Others

8,149
7,666

7,086

Singapore
NBk NPL/NBk Loans (%)

13.1

11.8

NBk NPL/NBk Loans
(ex-DTDB) (%)

13.0

12.7

3,207

3,018

3,000

2,874
543

8.5

9.0

7.7

3,907

2.7

1,112
463
649

Dec 97

@

2,172

8.2

1,800
@

4.9
923

637

8.4

1,736

1,506

1,735

717

@

4,211

4,560

2,705

4,029

4,225

@

@

1,577

2,824

2,425

2,452

Dec 99

Jun 00

1,249

Jun 98

Dec 98

Jun 99

@ Group NPLs excluding DTDB and DKOB.

1

Note: Loans and NPLs include POSBank’s loans since Nov 98 and DKOB’s
loans since May 99.

Most NPLs are classified substandard; some
are still current
NPLs (30 Jun 00)
Substandard
Doubtful
Total
(ex-DTDB)

Loss

483 475 4,666

3,708

79%
96
DTDB

1,235

41%

Total
(Incl-DTDB)

4,943

2,000

3%

579

64%
0

1,669

4,000

56%

2,144

8%

3,000

7,666

28%
6,000

8,000

(S$ million)

2

DBS NPL classification more conservative
than SEC Reporting
NPLs (30 Jun 00)

(S$ million)

MAS 612
Standard

SEC
Reporting

Singapore

2,452

1,888

5 Regional Countries

4,144

3,953

Other Countries

1,071

702

Total Group

7,666

6,543

Non bank NPLs / Non bank loans

12.7%

11.1%

Provisions / NPLs

51.9%

60.8%

Difference :
S$ 1.12 bn
(14.8%)

2

Most NPLs are classified substandard; some
are still current
NPLs (30 Jun 00)
Substandard
Doubtful
Total
(ex-DTDB)

Loss

483 475 4,666

3,708

79%
96

Approx. S$1.1 bn
current, or 22.7%
of Substandard

DTDB

Total
(Incl-DTDB)

1,235

41%

4,943

2,000

3%

579

64%
0

1,669

4,000

56%

2,144

8%

3,000

7,666

28%
6,000

8,000

(S$ million)

2

Provision coverage at 52% of NPLs or 61% on
SEC basis
(S$ million)
General Provisions (GP)

4,286

Specific Provisions (SP)

SP+GP/NPLs (%)

1,191

SP+GP/NPLs (SEC) (%)
SP+GP/Unsec NPLs (%)

164.6

3,147

1,174

1,294

1,115

1,894
102.7

119.6

110.6

118.4
3,095

88.1

2,558

946
2,032

980
801

3,978

3,852

48.5
948

55.3

44.4

47.4

Dec 98

Jun 99

114.8
2,804

63.0

60.8

52.6

51.9

179

Dec 97

Jun 98

Dec 99

Jun 00

2

DBS Thai Danu Bank : Crossed over to
operating breakeven
by
Sep 99

Dec 99

Mar 2000

IT systems upgraded
Rigorous Credit & Risk Management in place
Specialized NPL units
Regional Integration Center in Bangkok
Scrubbed loan book
Reclassified NPLs
60% reserves in DBS’ books
Branch network cut by 1/3, headcount by 40%
Restructured more than 1/2 of NPLs
Raised Bt 13.5 bn through rights issue

Jun 2000

CAR

increased to 26.1%

Flexibility

to sell or write off NPLs

Sell and/or write down NPLs

2

Raised Bt 13.5 billion through rights / private
placement
(48.3%) minority &
outside investor
subscription

(51.7%) DBS
subscription

Bt 2.5 bn private placement

Bt 0.94 bn

Bt 0.96 bn

Bt 11.0 bn rights offering

Bt 1.96 bn

Bt 2.14 bn

Convertible preference shares
(MCAPs)
Total

Bt 2.9 bn
(43%)

Bt 7.5 bn
Bt 10.6 bn
(57%)

DBS’ ownership is 51.8%, or 73.4% on fully-diluted basis.

2

Selling DTDB NPLs

 DTDB to sell Bt 30.6 billion (or 77%) of total NPLs, including most
difficult NPLs

 Aggregate sale price is 28.8%, resulting in total proceeds to DTDB
of Bt 8.4 billion

 Approximately 86% of the Bt 13.5 billion recapitalization will be
applied against the expected loss from the DTDB NPL sale

 Closing expected by summer for the corporate and non-legal retail
tranches. 3-4 months’ time period required for the legal retail
tranche, due to the need for DTDB to establish an AMC

2

Sale of NPLs will reduce DTDB NPLs to 14%
DTDB Books

30 Jun 00

Pro Forma
on Sale of NPLs

BOT Standards
NPLs
Loan Loss Reserve
CAR - Tier I
CAR - Total

Bt 39.8 bn (41.5%)
Bt 15.0 bn (37.6%)
21.8%
26.1%

Bt 9.2 bn (14.1%)
Bt 3.8 bn (41.3%)
11.0%
16.0%

MAS Standards
NPLs

Bt 68.1 bn (68.6%)

Bt 37.5 bn (54.6%)

Loan Loss Reserve

Bt 41.6 bn (61.1%)

Bt 18.8 bn (50.1%)

2

DBS’ group NPLs will decline to 10.6%
DBSH Group Books

30 Jun 00

Pro Forma
on Sale of NPLs

NPLs

S$ 7.7 bn (12.7%)

S$ 6.3 bn (10.6%)

Loan Loss Reserve

S$ 4.0 bn (51.9%)

S$ 3.0 bn (47.1%)

2

DBS’ group NPLs will decline to 10.6%
(S$ million)
DTDB

8,121

DKOB
Others

7,666
7,086

Singapore
NBk NPL/
NBk Loans (%)
11.8
Pro forma DTDB NPL sale
NBk NPL/NBk Loans
(ex-DTDB) (%)

13.1
3,018

463
649

3,000

10.6
717

9.0

7.7
1,506

637

8.4

1,736

8.2

1,800
@

4.9

1,112

12.7

3,207

543

1,735

923

13.0

2,874

8.5
3,907

2.7

8,149

@

4,211

2,705

4,560

4,029

4,225

@

@

1,577

DBS
DBSNPLs
NPLs
headed
headeddown
down
with
DTDB
with DTDB
resolution
resolution

2,824

@

2,425

2,452

Dec 99

Jun 00

2,172 1,249

Dec 97

Jun 98

Dec 98

Jun 99

@ Group NPLs excluding DTDB and DKOB.

2

Note: Loans and NPLs include POSBank’s loans since Nov 98 and DKOB’s
loans since May 99.

DBS Thai Danu Bank well-positioned to
compete
Other Thai banks paralyzed: NPLs, capital-starved, legacy IT

 Focus on developing treasury, institutional banking
Rebuild
Revenues





and retail banking capabilities
Grow fee-based income through retail banking
initiatives
Target large Thai corporates
Leverage DBS customer relationships, expertise

 Regional Integration Center in Bangkok to accelerate
Continued
Integration
Efforts




integration of regional operations, including DBS
Kwong On Bank and DTDB
IT platform to reach 70% of DBS’ standards by year
end
Migrating DBS products and capabilities into Thailand

3

Transforming to World-Class

 Interim results reflect broad-based improvement in operations

 Regional asset quality continues to improve

 Well-positioned for expansion and growth

3

Right-sizing branch network

Singapore

Number of
branches

Post POSBank merger (Nov 1998)

173

31 Dec 1999

155

30 Jun 2000

120

Estimated 31 Dec 2000

Approx. 100

3

New branch design will focus on sales
Pre-Branch Improvement
Program

Post-Branch Improvement
Program (by October 2000)

Sales
14%

Service
86%

Sales
33%

Service
67%

 Moving from a ratio of 1 sales staff : 6 service staff



to 1 sales staff : 2 service staff
Convert deposit collection branch to point of sales
Sales in 3 pilot branches increased by up to 700%

3

Centralizing processing and servicing
functions
 Formed Processing and Servicing division last year transform back
office into efficient, cost-accountable business

 Centralizing processing capabilities and platforms across the firm:


Eliminating duplication



Aggregating for scale economies and quality control



Accelerating push for straight-through processing



Exploring opportunities for outsourcing and strategic procurement

3

Leveraging IT, improving efficiency
IT supports cross selling, targeted marketing and multi-channel
delivery
IT:
Ensuring a
robust, integrated
IT platform

Activity Based
Costing:
Will enable measurement
of profitability & hit rates
by product, channel
& customer

Data warehousing
& mining:
Developing capabilities
since 1997 to track cross
selling effectiveness

Robust CRM system
to be developed over
18-24 month period

3

Linking Bricks and Mortar, Call Centers and Ebusiness
DBS’ integrated delivery model

E-business
ATM
Phone Banking
Mobile Banking
Internet Banking

Brand
Products &
Services
Bricks &
Mortar

Fulfilment

Direct Marketing
(Call Center)

3

DBS website leads Asian banks
 Internet user base more than tripled in the last year to 130,000
 Only Asian Bank with top-rated internet banking web-site
 Scored a perfect 10 out of 10 for quality web-site design
Top Internet Banking Websites
(Asian/Middle East)
Commonwealth Bank of Australia
DBS
ANZ Bank Australia
National Australia Bank
Citibank Hong Kong
Emirates Bank International, UAE
Overseas Union Bank Singapore
Westpac Australia
St George Bank Australia
ANZ Bank New Zealand
Source: Lafferty Internet Ratings

1
2
2
2
5
5
7
7
7
10

Average Time
Spent Per
Access
(minutes)

Rank

Website

1
2
3
4
5

MSN
AsiaOne
Yahoo!
eCircle
DBS

42:08
42:00
38:45
25:24
24:35

6
7
8
9
10

Go Network
IRAS
Pacific Internet
Catcha
SingTel

24:35
20:07
19:48
18:07
16:40

Source: AC Nielsen report, April 2000

3

Early mover in building leading E-business
capabilities
Using IT, e-business to expand our channels

 Integrating web-based initiatives with advanced ATMs,
mobile phone / hand-held device technology, call centers
B2C

 Actively exploring WAP technology applications throughout
emerging Asia

 Phone banking
 24-hour Autophone service
 State-of-the-art call center
 Mobile phone banking
 Internet banking
 Pioneer since 1997
 On-line securities trading will enhance customer
stickiness

 ATM
 Pioneered use of ATM for IPOs and Unit Trust


applications
Linking almost 2,000 DBS, BPI ATMs in the region

3

Early mover in building leading E-business
capabilities
Using IT, e-business to expand our channels

 Enhancing web-based cash management services
B2B

platform to deliver treasury, other services through the
Internet and mobile phones

 Developing partnerships, alliances, with DBS serving as
payment gateway

 DBS C2Pay - Online payment solution to handle
corporates' credit, debit card transactions
DBS c2Pay

 IDEAL - Integrated web-based cash management
gateway: services include account information, online
payments, trade finance, securities settlement/portfolio
management

 IBEX - Global business exchange that allows
corporates to source, market, place sales orders, fulfil
orders, invoice and make payment

3

We aspire to be a top-five Asian bank
Target markets

Japan and Korea
Greater China

Southeast Asia
and Hong Kong
Australia and
India

We have the capital resources and
commitment to achieve this goal

4

Strong capital position for strategic growth,
M&A
Capital Adequacy Ratio
(%)

Tier 2

30

Tier 1

25
20
15

20.1

15.6
2.0

15.8
1.2

3.5

4.6

13.6

14.6

15.7

15.5

Dec 97

Dec 98

Dec 99

Jun 00

10
5

19.2

Raised
US$500M Tier II
capital through
subordinated
note issue in
April 2000

0

4

Managing our capital base
 Optimizing the mix of capital, e.g., raised US$500 million Tier 2 capital
in April 2000

 Flexibility to dispose remaining non-core assets
 Utilizing excess capital for organic growth and acquisitions
 Flexibility to redeem non-voting shares and buy back ordinary shares

4

More-seasoned, deeper management team
Transforming DBS into a world-class competitor

 New Corporate Office leadership since 1998
 New hires : 2 SMDs, 23 MDs and 65 VPs since 1999
 About half of all MDs and VPs have international working experience
 Average 23 years’ working experience for MDs and 17 for VPs
 29% of MDs and 15% of VPs are non-Singaporean

4

Transforming to World-Class

 Interim results reflect broad-based improvement in operations

 Regional asset quality continues to improve

 Well-positioned for expansion and growth

4

Transforming to
World-Class
Interim 2000 Results Briefing

July 2000