Presentation: Completing the regional and wealth management platform

(1)

Completing the regional and

wealth management platform

July 23, 2001

(2)

2

 _{Top line earnings impacted by weaker economic conditions}

and adverse competitive environment

 _{Focus on other non-interest income bolsters results}

 _{Expenses peaked amidst repositioning activities}

 _{Improved asset quality and strong capital position}

 _{Completing the regional and wealth management platform}

Completing the regional and wealth

management platform

(3)

3

 _{Top line earnings impacted by weaker economic conditions}

and adverse competitive environment

 _{Focus on other non-interest income bolsters results}

 _{Expenses peaked amidst repositioning activities}

 _{Improved asset quality and strong capital position}

 _{Completing the regional and wealth management platform}

Completing the regional and wealth

management platform

(4)

4

Net interest margin 2.07% 1.97% 1.78%

Cost-to-income ratio 39.9% 45.4% 49.0%

Return on assets 1.31% 1.25% 1.08%

Return on equity 13.1% 12.7% 11.4%

Net interest margin 2.07% 1.97% 1.78%

Cost-to-income ratio 39.9% 45.4% 49.0%

Return on assets 1.31% 1.25% 1.08%

Return on equity 13.1% 12.7% 11.4%

Net interest income 1,046 993 962 (8.1) (3.1)

Fees & commissions 260 249 251 (3.7) 0.8

Dividend & rental income 42 73 40 (3.7) (45.2)

Other income 139 129 275 97.6 113.2

Income before

operating expenses 1,488 1,443 1,528 2.7 5.9

Staff costs 281 332 389 38.5 17.2

Other operating expenses 313 320 360 14.9 12.4

Operating expenses 594 652 749 26.1 14.9

Operating profit 894 791 779 (12.9) (1.5)

Specific provisions 81 30 110 36.3 266.7

General provisions (17) (40) (64) 284.5 60.0

Net profit attributable to

shareholders 704 685 629 (10.6) (8.2)

Net interest income 1,046 993 962 (8.1) (3.1)

Fees & commissions 260 249 251 (3.7) 0.8

Dividend & rental income 42 73 40 (3.7) (45.2)

Other income 139 129 275 97.6 113.2

Income before

operating expenses 1,488 1,443 1,528 2.7 5.9

Staff costs 281 332 389 38.5 17.2

Other operating expenses 313 320 360 14.9 12.4

Operating expenses 594 652 749 26.1 14.9

Operating profit 894 791 779 (12.9) (1.5)

Specific provisions 81 30 110 36.3 266.7

General provisions (17) (40) (64) 284.5 60.0

Net profit attributable to

shareholders 704 685 629 (10.6) (8.2)

(S$ million)

(S$ million) 1H00 2H00 1H01 1H01 / 1H00_(%) 1H01 / 2H00_(%)

Net revenue increased by 2.7%, net profit

down 10.6%

(5)

5

400 800 1200

1.5 2 2.5

(S$ million)

Modest decline in net interest income

despite sharp fall in net interest margins

Net interest income Net interest margin (gross basis)

2.00% 2.04%

989

1,046 1,046

2.07%

1.97%

993

1H99 2H99 1H00 2H00 1H01

962

(6)

6 Excess liquidity dampens margins, but

strengthens ability to fund lending growth

23.7 20.2 17.8 8.1 (7.2) 3.2 (10) (5) 0 5 10 15 20 25 30 63.4 64.4 66.1 73.3 115.9 97.5 0 20 40 60 80 100 120 140 1996

1996 1997₁₉₉₇ 19981998 19991999 20002000 1H011H01 (%)

(%)

Net Interbank Placement / Asset

1996

1996 19971997 19981998 19991999 20002000 1H011H01 (%)

(%)

Loan / Deposit

(7)

7

(S$ million) _{Change in Gross Loans}

56,083 54,166 56,219 58,438 61,404 59,195 45,404 16,420 0 30000 60000 90000 -3000 0 3000 6000 9000 12000 15000 18000 -10 -5 0 5 10 15 20 25 30 35 10.7% 30.4% 4,373 13,791 3.7% 2,209 -4.8% (2,966) -3.8% (2,219) -3.7% (2,053) 3.5% 1,917 Jun 98

Jun 98 Dec 98Dec 98 Jun 99Jun 99 Dec 99Dec 99 Jun 00 Jun 00 Dec 00Dec 00 Jun 01Jun 01

Dao Heng

Jun 98

Jun 98 Dec 98Dec 98 Jun 99Jun 99 Dec 99Dec 99 Jun 00 Jun 00 Dec 00Dec 00 Jun 01Jun 01

Outstanding Gross Loans

72,503

(8)

8

 _{Top line earnings impacted by weaker economic conditions}

and adverse competitive environment

 _{Focus on other non-interest income bolsters results}

 _{Expenses peaked amidst repositioning activities}

 _{Improved asset quality and strong capital position}

 _{Completing the regional and wealth management platform}

Completing the regional and wealth

management platform

(9)

9 Strong fee income despite stockbroking

liberalisation and weak markets

(S$ million)

Investment banking 42 56 39 (7.1) (30.2)

Stockbroking 47 31 24 (48.9) (22.6)

Trade-related 38 37 40 5.3 7.8

Fund management 37 25 35 (5.4) 40.0

Deposit-related 23 37 43 87.0 15.3

Loan-related 24 27 28 16.7 4.5

Others 49 36 42 (14.3) 16.3

Total fee income 260 249 251 (3.7) 0.8

Fee to income

ratio (%) 17.5 17.3 16.4 1998 – 2000Fee Income CAGR: 36.2%

(10)

10 Other income : FX & securities trading

doubled

(S$ million)

Foreign exchange 52 67 112 115.4 67.2

Gains on securities

& derivatives trading 55 - 102 85.5

-Gains on investment

securities 8 33 16 100.0

-Gains on fixed assets 4 5 26 550.0 420.0

Other income 20 24 19 (5.0) (20.8)

Total 139 129 275 97.6 113.2

(11)

11 Emphasis on non-interest income yields

strong returns

Dec 98

Dec 98 Dec 99Dec 99 Dec 00Dec 00 Jun 00Jun 00

(%)

(%) _{Non-interest income to Operating Income *}_{Non-interest income to Operating Income *}

* Excluding gains on disposal of non-core assets

37.1 29.7

30.4 28.7

23.8

Jun 01

(12)

12

(S$ million) Sales Volume

0 100 200 300 400 500 600 700 800 900

314

558

322

2H99 1H00 2H00

 _{Investment products include Horizon, Ei8ht, Up and other DBSAM}

programs

Investment products

Record growth in wealth management

products

1H01 611 Insurance

222

180 573

573 ₅₄₄₅₄₄

791

(13)

13

(S$ b)

S$ Current accounts 5.6 5.8 6.0 0.5

S$ Autosave deposits 5.5 5.4 5.7 0.2

S$ Savings deposits 30.5 31.0 31.1 0.6

S$ Fixed deposits 14.3 13.2 12.3 (2.0)

ACU Fixed deposits 9.4 11.1 12.0 2.6

DBS Kwong On 5.1 5.7 6.3 1.2

DBS Thai Danu 3.3 2.9 3.1 (0.2)

Others* 6.7 5.6 13.7 7.0

Sub-total 80.4 80.7 90.3 9.9

Dao Heng - - 24.6 24.6

Total 80.4 80.7 114.9 34.5

Market share of

S$ deposits 31.8% 32.3% 32.8%

Dec 2000 Jun

2000

Jun 2001

YoY Difference

90.3 80.7

80.4 24.6

0 50 100 150

Jun 00 Dec 00 Jun 01

Customer Deposits

Deposit base provides platform for cross

selling wealth management products

* Include a once off short-term deposit of $5.0b

(14)

14

 _{Top line earnings impacted by weaker economic conditions}

and adverse competitive environment

 _{Focus on other non-interest income bolsters results}

 _{Expenses peaked amidst repositioning activities}

 _{Improved asset quality and strong capital position}

 _{Completing the regional and wealth management platform}

Completing the regional and wealth

management platform

(15)

15

(S$ million)

Staff costs 281 332 389 38.5 17.2

Occupancy

expenses 73 75 77 5.5 2.7

Technology-related

expenses 63 69 87 38.1 26.1

Professional &

consultancy fees 38 35 33 (13.2) (5.7)

Others 139 141 163 17.3 15.6

Total 594 652 749 26.1 14.9

1H00 2H00 1H01 1H01 / 1H00_(%) 1H01 / 2H00_(%)

Operating costs increased 26% due to timing

and non-recurring items

(16)

16

594 749 +10 +13 +24 +108 (S$ million) 1H2000 1H2001 C o m p u te ris at io n O th er s S ta ff co st s A d ve rti sin g (+26.1%) Cost-to-Income

Ratio: 39.90% 49.01%

Cost-to-Asset

Ratio(a)_: _1.10% _1.30%

Focused investment in people, technology

and products

(17)

17

 _{Phone Banking}

Technology Procurement

Most significant investments completed between January 1, 2000 and June 30, 2001 Consultants now limited to implementation of specific, technical projects

Use of consultants winding down

 _{DBS Securities’ Projects}  _{Customer Relationship Mgt}  _{Treasury & Mkts System}  _{E-Commerce/Payments}  _{Risk Mgt System}

 _{Datawarehouse}

 Call Centre Automation

1998 1H99 1999 9M00 2000 1H01 2001

 _{Branch Reconfiguration}

Customer Service

 POSBank, DTDB & DKOB

Integration

Strategy Development

 _{Retail Strategy}

 _{Improving Profitability (DTDB NPL,}

Recapitalisation of DTDB, Sale of DBSL shares, acquisition of BPI)

 _{Institutional Banking Group Reorganisation}

Re-engineering Processing & Services

 _{Process Improvement}  Procurement

 E-banking initiative

 _{Cost & Profitability Mgt System}

(18)

18 Cost

management

measures

initiated to

contain increase

to 2000 growth

rate

Improve processes for greater efficiency

Reduce focus on non-performing businesses

Defer low revenue yielding projects

Performance enhancement program to

optimise efficiency

(19)

19 Low cost/income ratio by international

standards

6.7

58.4 _57.4

56.3 _55.3

53.5

51.0

42.5

Stanchart NAB CBA HSBC Westpac ANZ DBS

(a) Based on Dec 2000 cost/income ratios

1H2001

Cost/Income for International Peers (a)

(%)

49.2

(20)

20

 _{Top line earnings impacted by weaker economic conditions}

and adverse competitive environment

 _{Focus on other non-interest income bolsters results}

 _{Expenses peaked amidst repositioning activities}

 _{Improved asset quality and strong capital position}

 _{Completing the regional and wealth management platform}

Completing the regional and wealth

management platform

(21)

21

2,705 2,824 _2,425 _2,452

1,735 _1,610 642 772 1,239 1,408 _1,365 1,144 624 1,735 2,874 3,018 3,207 3,000 1,238 1,143 1,249 649 770 1070 1152 871 267 151 97 366 667 815

Dec 97 Jun 98 Dec 98 Jun 99 Dec 99 Jun 00 Dec 00 Jun 01 7.6% 12.7% 8.5% 13.0% 13.1% 11.8% 2.7%

Dao Heng Bank

DBS Thai Danu Bank 5 Regional Countries Others Singapore NBk NPL/NBk Loans (%) (S$ million) 1,112 3,907 7,085 8,121 8,149 7,666 4,411 4,834 6.2%

(22)

22 73% of NPLs are graded “Substandard”

3,554 1,369 844 292 450 353 244 193 943 170 8 111 7 125 14 435 5 60 232 63 193

0 1,000 2,000 3,000 4,000 5,000

DTDB Dao Heng DKOB Others 5RC S'pore 1,610 624 323 4,834 85% 72% 73% 1,143 815 82% Total

9% 18%

17% (S$’M ) 1% 318 Substandard Doubtful Loss

(23)

23

948 1,463 801 946 1,115 1,294 1,191 1,174 1,049 1,180 179 1,237 3,095 2,032 2,804 2,558

Dec 97 Jun 98 Dec 98 Jun 99 Dec 99 Jun 00 Dec 00 Jun 01

146.5% 164.6%

119.6% 102.7% 110.6% 118.4%

114.8% 129.9% 54.7% 51.8% 51.9% 52.6% 47.4% 44.4% 48.5% 88.1% 59.9% 55.3% 63.0% 60.8% 61.4%

General Provisions (GP) Specific Provisions (SP) SP+GP/NPLs (SEC) (%) SP+GP/Unsec NPLs (%) SP+GP/NPLS (%) 980 1,894 3,147 3,852 4,286 3,978 2,286 (S$ million)

Cumulative provisions covered 146.5% of

unsecured NPLs and 54.7% of total NPLs

(24)

24 Further diversification post acquisition of

Dao Heng Bank

55% Singapore

9% Others 36%

Hong Kong

Total Assets: S$156 bn

DBS + Dao Heng

75% Singapore

12% Others 13%

Hong Kong

Total Assets: S$116 bn

DBS

(25)

25 Efficient capital management

(a) Includes goodwill, minority interest and capital required against asset base.

DBS Group Holdings Consolidated Capital Adequacy

(a) (b) (%) (%) Dec 2000 Dec

2000 HybridHybridTier 1_{Tier 1} PreferencePreferenceShares_Shares Sub-debtSub-debtTier 2Tier 2 1H01Net Income 1H01 Net Income Adjustments for Dao Heng/ Others Adjustments for Dao Heng/ Others Jun 2001 Jun 2001 5.5% 17.5% 12.0% Tier 1 14.4% 18.9% 0.7% 1.7% 1.2% 1.5% Tier II 4.5% 0 5 10 15 20 25 30 35 6.5% 6.5%

(26)

26

10.0

9.2

8.4

7.7 _7.5 _7.3

7.2 _7.0

6.0

0 4 8 12

DBS will maintain a healthy buffer above the regulatory Tier I requirement of 8%

DBS capital position post Dao Heng

* Source : Annual reports of respective banks

DBS

(%)

HSBC

CitiGr oup

StanC

hart _BNP _ANZ

Westp ac

Fortis

Dresdn er

(27)

27

 _{Top line earnings impacted by weaker economic conditions}

and adverse competitive environment

 _{Focus on other non-interest income bolsters results}

 _{Expenses peaked amidst repositioning activities}

 _{Improved asset quality and strong capital position}

 _{Completing the regional and wealth management platform}

Completing the regional and wealth

management platform

(28)

28 Putting the strategy together – positioning

for the future

Optimal Organisation

 _{Business units reorganised}  _{Built seasoned}

management team

 _{Enhanced training}  _{Redesigned incentive}

systems

Wholesale Banking: Capital Markets, Advisory, Treasury, FX and Trade Financing

Man age men_t Man age men_t Wealth Wealth Brokerage Services Brokerage

Services BancassuranceBancassurance

Consumer Banking

DBS / OUB

Vickers Ballas Frank Russell TD Waterhouse CGNU Dao Heng Kwong On Thai Danu BPI

 Aligned internal practices to global standards

 Strengthened risk management and credit approval policies

 Prudent management of off-balance sheet exposures and liquidity, forex, interest rate and investment risks

Leading IT Capabilities

 _{On-line, real-time systems}  Data warehouse application

with data mining capabilities (CRM)

 _{E-commerce infrastructure}  E-payment gateway

 Comprehensive, complementary channel mix

 Reconfigured branches

 Integrated on-line services

 Usage of sophisticated capital instruments

 Maximise non-dilutive capital

 Sale of non-core assets

 Scale / Scope  Regionalisation /

diversification  Growth / market share  Pricing flexibility

Policies, Processes and Systems

Policies, Processes

and Systems Balanced Channel Mix

Balanced

Channel Mix Efficient Capital Structure

Efficient Capital Structure  Infrastructure building and reorganisation substantially completed  _Focused areas

(29)

29

Infrastruc Infrastruc ture

ture

Infrastructure

Geography

Products _{infrastructure}Significant

investment to create world class back office

and STP initiatives

 _{Vickers Ballas}  _{TD Waterhouse}  _{Frank Russell}  _CGNU

 _{Dao Heng / Kwong On}  _OUB

(30)

30

 _{Establish critical mass, presence and scale in twin}

pillars (Singapore, Hong Kong)

 _{Selectively strengthen presence in certain markets}

(e.g. Thailand, Malaysia after OUB)

 _{Monitor increased Greater China presence post WTO}

liberalization

 _{No plans for Australia, North Asia (Korea and Japan),}

but carefully watching opportunities

Infr Infr astr astr uct uct ure ure Infrastructure

Geography

Products

(31)

31

 _{As of first close on July 20, DBS’ effective ownership in}

Dao Heng Bank is 71%

 _{98% of Dao Heng shareholders have tendered their shares}  _{Dao Heng Bank governance and management in place}

 _{Harmonization objectives and implementation plan defined}  _{Harmonization infrastructure up and running}

 _{Key milestones defined with good progress to date}

Dao Heng Bank became a DBS subsidiary on

June 29, 2001

Dao Heng harmonization ahead of schedule

(a) Assumes 100% of outstanding options exercised

(32)

32

 _{Leverage infrastructure across business units}

 _{Create Regional Processing Centres for appropriate processes}

 _{Centralize remaining branch back-office processes}

 _{Pursue selected out-sourcing, in-sourcing and co-sourcing}

 _{Focus on quality (ISO certification of process factories, 6 sigma}

initiative)

Continue trend of significant unit cost reductions and increase of straight-through processing rates

Infr Infr astr astr uct uct ure ure

Infrastructure

Geography Products

(33)

33

 _{Retail brokerage – Vickers Ballas, TD} Waterhouse

 _{Wealth management – leverage distribution for} best-in-breed products, capitalize on MPF / CPF deregulation and excess liquidity

 _{Bancassurance – provide insurance related} savings products. Life and general insurance partnership with CGNU

 _{Unsecured consumer lending}  _{Credit cards}

 _{SME lending}

 _{Treasury / FX}  _{Trade finance}

 _{Corporate finance}  _{Leveraged finance}

Asset Asset Accumulation Accumulation Enterprise Enterprise and and Consumer Consumer Lending Lending Infr Infr astr astr uct uct ure ure Infrastructure Geography Products Corporate & Corporate & Investment Investment Banking Banking

(34)

34 Bancassurance alliance accelerates wealth

management business

 _{Sale of 100% of ICS to CGNU}

 _{10-year exclusive bancassurance} strategic alliance for life and

general insurance

 _{Total proceeds to DBS of S$446} million of which:

 _{S$395 million as payment for}

ICS and the bancassurance alliance

 _{S$51 million special dividend}

from ICS

 _{DBS to receive additional}

payments of up to S$20 million on meeting performance targets

 _{DBS will record a net initial gain of} S$139 million

Transaction Highlights

 _{Accelerates revenue growth in DBS’} wealth management business

 _{Expands DBS’ sales channels with the} establishment of a specialist sales force dedicated to insurance, wealth management products

 _{Provides DBS with a dedicated} bancassurance product provider without equity investment

 _{DBS retains ownership of customers,} concentrates on distribution, leaving product manufacturing to CGNU

 _{Allows DBS to rationalize ownership in} ICS and continue policy of monetizing assets

 _{Allows DBS to strengthen capital} position by $139 million

Strategic Rationale DBS has concluded a bancassurance alliance with CGNU

(35)

35 Only bank whose non-core asset disposals

largely completed

 Singapore Petroleum Company

 DBS Land

 DBS Tampines Centre

 POSBank Centre

 DBS Securities Building

 Insurance Corporation of

Singapore (ICS)

What we have done

 4 listed companies (Keppel

Capital, NatSteel, Intraco,

CWT)

What needs to be done

Insignificant



Focusing on core banking and financial businesses

(36)

36 Significant Events Affecting Results and

Outlook

Jan 29  Assets and liabilities of DBS Finance transferred to DBS Bank

Feb 13  Announced proposed acquisition of approximately 60% of Vickers Ballas Mar 25  Issued US$725 million 7.657% Non-cumulative Guaranteed Preference Shares_{(NGPS) and S$100 million 5.35% NGPS}

 Announced intention to make a voluntary conditional offer for Dao Heng. Acquired an effective 56.9% of Dao Heng Bank on June 29

Apr 11 _ _{Consolidated with negligible P&L impact}

 Goodwill of S$4.9 billion to be amortised over 20 years from July 2001 May 10  Issued US$850 million 7.125% Upper Tier II Subordinated Notes due in 2011 May 25  Issued S$1.1 billion 6% Tier I Non-cumulative Preference Shares

Jun 20  Entered into a joint-venture with TD Waterhouse to form a regional online_{financial services company} Jun 22  Announced intention to make a voluntary conditional offer for OUB

(37)

37

 _{Top line earnings impacted by weaker economic conditions}

and adverse competitive environment

 _{Focus on other non-interest income bolsters results}

 _{Expenses peaked amidst repositioning activities}

 _{Improved asset quality and strong capital position}

 _{Completing the regional and wealth management platform}

Completing the regional and wealth

management platform

(38)

Completing the regional and

wealth management platform

July 23, 2001

(1)

33

 _{Retail brokerage – Vickers Ballas, TD}

Waterhouse

 _{Wealth management – leverage distribution for}

best-in-breed products, capitalize on MPF / CPF deregulation and excess liquidity

 _{Bancassurance – provide insurance related}

savings products. Life and general insurance partnership with CGNU

 _{Unsecured consumer lending}  _{Credit cards}

 _{SME lending}

 _{Treasury / FX}  _{Trade finance}

 _{Corporate finance}  _{Leveraged finance}

(2)

34 Bancassurance alliance accelerates wealth

management business

 _{Sale of 100% of ICS to CGNU}

 _{10-year exclusive bancassurance}

strategic alliance for life and general insurance

 _{Total proceeds to DBS of S$446}

million of which:

 _{S$395 million as payment for}

ICS and the bancassurance alliance

 _{S$51 million special dividend}

from ICS

 _{DBS to receive additional}

payments of up to S$20 million on meeting performance targets

 _{DBS will record a net initial gain of}

S$139 million

Transaction Highlights

 _{Accelerates revenue growth in DBS’}

wealth management business

 _{Expands DBS’ sales channels with the}

establishment of a specialist sales force dedicated to insurance, wealth management products

 _{Provides DBS with a dedicated}

bancassurance product provider without equity investment

 _{DBS retains ownership of customers,}

concentrates on distribution, leaving product manufacturing to CGNU

 _{Allows DBS to rationalize ownership in}

ICS and continue policy of monetizing assets

 _{Allows DBS to strengthen capital}

position by $139 million

Strategic Rationale

(3)

35 Only bank whose non-core asset disposals

largely completed



Singapore Petroleum Company



DBS Land



DBS Tampines Centre



POSBank Centre



DBS Securities Building



Insurance Corporation of

Singapore (ICS)

What we have done



4 listed companies (Keppel

Capital, NatSteel, Intraco,

CWT)

What needs to be done

Insignificant



Focusing on core banking and financial businesses



Divested non-core assets ahead of MAS guidelines

(4)

36 Significant Events Affecting Results and

Outlook

Jan 29  Assets and liabilities of DBS Finance transferred to DBS Bank

Feb 13  Announced proposed acquisition of approximately 60% of Vickers Ballas

Mar 25  Issued US$725 million 7.657% Non-cumulative Guaranteed Preference Shares_{(NGPS) and S$100 million 5.35% NGPS}

 Announced intention to make a voluntary conditional offer for Dao Heng. Acquired an effective 56.9% of Dao Heng Bank on June 29

Apr 11 __{Consolidated with negligible P&L impact}

 Goodwill of S$4.9 billion to be amortised over 20 years from July 2001

May 10  Issued US$850 million 7.125% Upper Tier II Subordinated Notes due in 2011

May 25  Issued S$1.1 billion 6% Tier I Non-cumulative Preference Shares

Jun 20  Entered into a joint-venture with TD Waterhouse to form a regional online_{financial services company}