Interim 2000 Results Briefing

Interim 2000 Results Briefing Interim 2000 Results Briefing

Transforming toTransforming toWorld-ClassWorld-Class

July 2000July 2000

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





4

Broad-based improvement in operations

(S$ million)

Net interest income 1,046 989 5.8 Fee and commission income 260 185 41.1 Dividends and rental income 43 33 28.4 Other income 139 254 (45.2)

Income before operating expenses 1,489 1,460 1.9

Excluding SPC profits 1,343 10.8

Operating expenses 594 456 30.3

Operating profit 895 1,004 (10.9) Excluding SPC profits 887 0.8

Specific provisions 80 333 (75.7) General provisions (17) 3 (674.0)

NPAM 704 655 7.5 Excluding SPC profits 538 30.9

Increase/(Decrease)1H00 1H99

5

1,046

1,430

1,002

1H99:989

0

400

800

1200

1600

2000

2400

2800

1997 1998 1999 1H00

Net interest income increased due to higher margins

Growth :+ S$58m (5.8%)

(S$ million)

Net interest income

2,035

6

1,046

1,430

1,002

1H99:989

0

400

800

1200

1600

2000

2400

2800

1997 1998 1999 1H00

Net interest income increased due to higher margins

(%)

2.072.02

1.771.73

0.0

0.5

1.0

1.5

2.0

2.5

(1H99 : 2.00)

Net interest marginNet interest income

2,035

7

Fee and commission income rose strongly

Growth :+ S$76m (41.1%)

(S$ million)

Stock broking 54 47

Investment banking 31 42

Trade related 28 38

Loan related 14 24

Service charges 15 23

Guarantees 13 14

Credit card 11 15

Fund management 7 31

Others 11 26

184 260

1H99 1H00

8

Fee and commission income rose strongly

(S$ million) 1998 1999

Stock broking 49 102 54 47

Investment banking 42 85 31 42

Trade related 51 63 28 38

Loan related 29 38 14 24

Service charges 20 32 15 23

Guarantees 27 28 13 14

Credit card 22 25 11 15

Fund management 10 20 7 31

Others 23 29 11 26

274 423 184 260

Fee to Income Ratio (%) 14.6 14.0 13.7 * 17.5

* Income excludes SPC profits.

1H99 1H00

9

“Other” income declined due to sale of SPC shares in 1H99

(S$ million)

FX trading 41 52

Sale of trading securities & derivatives trading 88 55

Disposal of investment securities:

- Sale of DBS Land shares - 3

- Sale of SPC shares 117 -

- Others - 5

Disposal of fixed assets 2 4

Other 6 20

254 139

1H99 1H00

Growth :- S$115m (45.2%)

10

334

529

23328187 134

49 64

71

5618

0

200

400

600

800

1000

1200

1998 1999 1H99 1H00

(S$ million)

456

594

Staff cost

DKOB’s expenses

Operating expenses rose 30% due to investments in staff and IT

Growth :+ S$138m (30.3%)

IT expenses

Cost to 40.2% 35.1% 31.2% 39.9% Income Ratio

754

1,064

11

894

887

1,964

1,121972

117

0

400

800

1200

1600

2000

1997 1998 1999 1H99 1H00

(S$ million)

1,004

Operating profit declined 10.9% due to SPC profits in 1H1999

Growth : - 10.9%(Excl SPC : + 0.8%)

Singapore PetroleumCompany

12

Provisions declined substantially

(S$ million)

DTDB 114 11 (103)

5 Regional Countries 54 24 (30)

Singapore 54 (9) (63)

Other Countries 3 11 8

Non-loan provisions (1) 27 28

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)

1H99 1H00 (Decrease)Increase/

13

704

538

1,072

112

436117

0

200

400

600

800

1000

1200

1997 1998 1999 1H99 1H00

(S$ million)

655

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

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

Singapore PetroleumCompany

14

(%)

ROA recovered to pre-crisis level

1.04

0.14

0.72

1.28

1.13

1.31

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1996 1997 1998 1999 1H99 1H00

15

10.35

1.29

5.72

10.30

11.80

13.13

0

5

10

15

1996 1997 1998 1999 1H99 1H00

(%)

ROE on track toward 15%+ target

16

Balance sheet shrank due to soft loan demand and shedding of low-yielding assets

83.1

57.8

111.4

80.4

52.4

107.6

0

20

40

60

80

100

120

140

(-3.4%)

(-9.2%)

(-3.3%)

Total Assets Customer Customer Loans Deposits

(S$ billion)

Jun 99 Jun 00 Jun 99 Jun 00 Jun 99 Jun 00

17

Ordinary dividend rate 9% 14%

Amount (S$ million) 80.6 139.2

Payout rate 19.8%

Interim1999

Interim2000

25%

241.9

22.3%

Total1999

18%

140.8

128.9%

Total1998

Dividend rate increased

Targeting to align payout ratio more with international banks

18





19

649

2,425 2,452

1,249

2,705 2,824

1,5771,800

463

923

1,5061,736

543717 637

1,735

2,874

3,0183,207

3,000

1,112

3,907

7,086

@ Group NPLs excluding DTDB and DKOB.

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

8,121

Others

Singapore

DTDB

DKOB8,149

NBk NPL/NBk Loans (%)

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

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

7,666

8.2

4.9

8.49.07.7

2,172

4,211 4,5604,225@

@

@

@@

4,029

NPLs have peaked

(S$ million)

12.7 13.013.1

11.8

8.5

2.7

20

4,943 579 2,144

1,669

475

1,235

3,708 483

96

0 2,000 4,000 6,000 8,000

DTDB

4,666

7,666

79%

64%

3,000

41%

Total (ex-DTDB)

Total (Incl-DTDB)

8% 28%

56%

(S$ million)

3%

Most NPLs are classified substandard; some are still current

NPLs (30 Jun 00)

Substandard

Doubtful

Loss

21

DBS NPL classification more conservative than SEC Reporting

NPLs (30 Jun 00)

MAS 612Standard

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%

(S$ million)SEC

Reporting

Difference :S$ 1.12 bn

(14.8%)

22

4,943 579 2,144

1,669

475

1,235

3,708 483

96

0 2,000 4,000 6,000 8,000

DTDB

4,666

7,666

79%

64%

3,000

41%

Total (ex-DTDB)

Total (Incl-DTDB)

8% 28%

56%

(S$ million)

3%

Most NPLs are classified substandard; some are still current

NPLs (30 Jun 00)

Substandard

Doubtful

Loss

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

23

801

1,191

1,174

2,558

948

2,032

3,0952,804

179

946

1,115

1,294

980

3,852

3,147

1,894

4,286


3,978SP+GP/NPLs (%)

51.952.647.444.448.5

88.1

SP+GP/Unsec NPLs (%)

164.6

114.8 102.7 110.6119.6

118.4

Provision coverage at 52% of NPLs or 61% on SEC basis

(S$ million)

General Provisions (GP)

Specific Provisions (SP)

60.863.055.3

SP+GP/NPLs (SEC) (%)

24

Sep 99

Jun 2000

IT systems upgraded

Rigorous Credit & Risk Management in place

Specialized NPL units

Dec 99

Regional Integration Center in Bangkok

Scrubbed loan book

Reclassified NPLs

Mar 2000

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 CAR increased to 26.1%Flexibility to sell or write off NPLs

Sell and/or write down NPLs

by

DBS Thai Danu Bank : Crossed over to operating breakeven

25

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 11.0 bn rights offering

Convertible preference shares (MCAPs)

Total

Bt 0.94 bn

Bt 1.96 bn

-

Bt 2.9 bn

Bt 0.96 bn

Bt 2.14 bn

Bt 7.5 bn

Bt 10.6 bn

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

(43%) (57%)

26

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

27

Sale of NPLs will reduce DTDB NPLs to 14%

30 Jun 00

NPLs

Loan Loss Reserve

CAR - Tier I

DTDB Books

Bt 39.8 bn

Bt 15.0 bn

21.8%

26.1%

BOT Standards

CAR - Total

(41.5%)

(37.6%)

Pro Formaon Sale of NPLs

Bt 9.2 bn

Bt 3.8 bn

11.0%

16.0%

(14.1%)

(41.3%)

Bt 37.5 bn

Bt 18.8 bn

(54.6%)

(50.1%)

NPLs

Loan Loss Reserve

Bt 68.1 bn

Bt 41.6 bn

MAS Standards

(68.6%)

(61.1%)

28

DBS’ group NPLs will decline to 10.6%

30 Jun 00DBSH Group Books

NPLs

Loan Loss Reserve

S$ 7.7 bn

S$ 4.0 bn

(12.7%)

(51.9%)

Pro Formaon Sale of NPLs

S$ 6.3 bn

S$ 3.0 bn

(10.6%)

(47.1%)

29

649

2,425 2,452

1,249

2,705 2,824

1,5771,800

463

923

1,5061,736

543717

637

1,735

2,874

3,0183,207

3,000

1,112

3,907

7,086

@ Group NPLs excluding DTDB and DKOB.

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

8,121

Others

Singapore

DTDB

DKOB8,149

NBk NPL/NBk Loans (%)

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


7,666

12.7 13.013.1

11.8

8.5

2.7

2,172

4,211 4,5604,225@

@

@

@@

4,029

DBS’ group NPLs will decline to 10.6%

(S$ million)

DBS NPLs headed down

with DTDB resolution

DBS NPLs headed down

with DTDB resolution

10.6Pro forma DTDB NPL sale

8.2

4.9

8.49.07.7

30

DBS Thai Danu Bank well-positioned to compete

RebuildRevenues

Focus on developing treasury, institutional banking 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 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

ContinuedIntegration

Efforts

Other Thai banks paralyzed: NPLs, capital-starved, legacy IT

31





32

Right-sizing branch network

SingaporeNumber of

branches

Post POSBank merger (Nov 1998) 173

31 Dec 1999 155

30 Jun 2000 120

Estimated 31 Dec 2000 Approx. 100

33

Pre-Branch Improvement Program

Post-Branch Improvement Program (by October 2000)

New branch design will focus on sales

Sales14%

Service86%

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%

Sales33%

Service67%

34

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

35

Leveraging IT, improving efficiency

IT supports cross selling, targeted marketing and multi-channel delivery

IT: Ensuring a

robust, integrated IT platform

Robust CRM systemto be developed over18-24 month period

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

36

E-business

Bricks & Mortar

Direct Marketing (Call Center)

Linking Bricks and Mortar, Call Centers and E-business DBS’ integrated delivery model

Brand

Products & Services

ATMPhone BankingMobile BankingInternet Banking

Fulfilment

37

DBS website leads Asian banks

Commonwealth Bank of Australia

ANZ Bank Australia

DBS

National Australia Bank

Citibank Hong Kong

Emirates Bank International, UAE

Overseas Union Bank Singapore

Westpac Australia

St George Bank Australia

ANZ Bank New Zealand

1

2

2

2

5

5

7

7

7

10

Top Internet Banking Websites (Asian/Middle East)

Source: Lafferty Internet Ratings

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

Rank Website

Average TimeSpent Per

Access(minutes)

1 MSN 42:08

2 AsiaOne 42:00

3 Yahoo! 38:45

4 eCircle 25:24

5 DBS 24:35

6 Go Network 24:35

7 IRAS 20:07

8 Pacific Internet 19:48

9 Catcha 18:07

10 SingTel 16:40

Source: AC Nielsen report, April 2000

38

Early mover in building leading E-business capabilities

B2C

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

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

Using IT, e-business to expand our channels

39

B2B

Using IT, e-business to expand our channels

DBS c2Pay

Enhancing web-based cash management services 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

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

Early mover in building leading E-business capabilities

40

Japan and Korea

We aspire to be a top-five Asian bank

Target markets

We have the capital resources and commitment to achieve this goal

Greater China

Australia and India

Southeast Asia and Hong Kong

41

Capital Adequacy Ratio

Strong capital position for strategic growth, M&A

15.7 15.514.613.6

2.0

4.63.51.2

0

5

10

15

20

25

30

Dec 97 Dec 98 Dec 99 Jun 00

Tier 1Raised

US$500M Tier IIcapital throughsubordinatednote issue in

April 2000

Tier 2

19.2 20.1

(%)

15.6 15.8

42

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

43

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

More-seasoned, deeper management team

44





Interim 2000 Results Briefing Interim 2000 Results Briefing

Transforming toTransforming toWorld-ClassWorld-Class

July 2000July 2000

Documents

Interim 2000 Results Briefing