Interim 2000 Results Briefing

1
Interim 2000 Results Briefing
Transforming toWorld-Class
July 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
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
Broad-based improvement in operations
5
Net interest income increased due to higher
margins
(S million)
Net interest income
Growth S58m (5.8)
2,035
6
Net interest income increased due to higher
margins
()
Net interest income
Net interest margin
(1H99 2.00)
2,035
7
Fee and commission income rose strongly
Growth S76m (41.1)
8
Fee and commission income rose strongly
9
Other income declined due to sale of SPC shares
in 1H99
Growth - S115m (45.2)
10
Operating expenses rose 30 due to investments in
staff and IT
DKOBs expenses
IT expenses
(S million)
Growth S138m (30.3)
Staff cost
1,064
754
594
456
Cost to 40.2 35.1 31.2
39.9 Income Ratio
11
Operating profit declined 10.9 due to SPC
profits in 1H1999
(S million)
Growth - 10.9 (Excl SPC 0.8)
1,004
Singapore Petroleum Company
12
Provisions declined substantially
13
After-tax profits grew 7.5 to S704 million
(S million)
Growth 7.5 (Excl SPC 30.9)
655
Singapore Petroleum Company
14
ROA recovered to pre-crisis level
()
15
ROE on track toward 15 target
()
16
Balance sheet shrank due to soft loan demand and
shedding of low-yielding assets
(S billion)
Total Assets Customer Customer
Loans Deposits
Jun 99 Jun 00 Jun 99 Jun 00
Jun 99 Jun 00
17
Dividend rate increased
Targeting to align payout ratio more with
international banks
Interim 1999
Interim 2000
Total 1999
Total 1998
Ordinary dividend rate
9
14
25
18
Amount (S million)
80.6
139.2
241.9
140.8
Payout rate
19.8
22.3
128.9
18
Transforming to World-Class

• Interim results reflect broad-based improvement
  in operations
• Regional asset quality continues to improve
• Well-positioned for expansion and growth

19
NPLs have peaked
(S million)
DTDB
8,121
8,149
7,666
DKOB
Others
7,086
Singapore
NBk NPL/NBk Loans ()
NBk NPL/NBk Loans
(ex-DTDB) ()
3,907
1,112
Dec 97 Jun 98 Dec 98
Jun 99 Dec 99
Jun 00
_at_ Group NPLs excluding DTDB and DKOB. Note
Loans and NPLs include POSBanks loans since Nov
98 and DKOBs loans since May 99.
20
Most NPLs are classified substandard some are
still current
NPLs (30 Jun 00)
Substandard
Doubtful
Loss
Total (ex-DTDB)
4,666
79
3,000
56
3
41
Total (Incl-DTDB)
7,666
64
8
28
(S million)
21
DBS NPL classification more conservative than SEC
Reporting
NPLs (30 Jun 00)
MAS 612 Standard
SEC Reporting
(S million)
Singapore
2,452
1,888
5 Regional Countries
4,144
3,953
Other Countries
1,071
702
Difference S 1.12 bn (14.8)
Total Group
7,666
6,543
Non bank NPLs / Non bank loans
12.7
11.1
Provisions / NPLs
51.9
60.8
22
Most NPLs are classified substandard some are
still current
NPLs (30 Jun 00)
Substandard
Doubtful
Loss
Total (ex-DTDB)
4,666
79
Approx. S1.1 bn current, or 22.7 of
Substandard
3,000
56
3
41
Total (Incl-DTDB)
7,666
64
8
28
(S million)
23
Provision coverage at 52 of NPLs or 61 on SEC
basis
(S million)
4,286
General Provisions (GP)
Specific Provisions (SP)
3,978
3,852
3,147
1,894
980
Dec 97 Jun 98 Dec 98
Jun 99 Dec 99 Jun 00
24
DBS Thai Danu Bank Crossed over to operating
breakeven
by

• IT systems upgraded
• Rigorous Credit Risk Management in place
• Specialized NPL units

Sep 99

• Raised Bt 13.5 bn through rights issue
• CAR increased to 26.1
• Flexibility to sell or write off NPLs

Jun 2000

• Sell and/or write down NPLs

25
Raised Bt 13.5 billion through rights / private
placement
(48.3) minority outside investor subscription
(51.7) DBS subscription
Bt 0.96 bn
Bt 2.5 bn private placement
Bt 0.94 bn
Bt 1.96 bn
Bt 2.14 bn
Bt 11.0 bn rights offering
Convertible preference shares (MCAPs)
-
Bt 7.5 bn
Bt 2.9 bn
Bt 10.6 bn
Total
(43)
(57)
DBS ownership is 51.8, or 73.4 on
fully-diluted basis.
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
DTDB Books
BOT Standards
NPLs
Bt 39.8 bn
(41.5)
Loan Loss Reserve
Bt 15.0 bn
(37.6)
CAR - Tier I
21.8
26.1
CAR - Total
28

DBS group NPLs will decline to 10.6
30 Jun 00
DBSH Group Books
NPLs
S 7.7 bn
(12.7)
Loan Loss Reserve
S 4.0 bn
(51.9)
29
DBS group NPLs will decline to 10.6
(S million)
DTDB
8,121
8,149
7,666
DKOB
Others
7,086
Singapore
13.1
13.0
12.7
NBk NPL/ NBk Loans ()
11.8
Pro forma DTDB NPL sale
DBS NPLs headed down with DTDB resolution
10.6
NBk NPL/NBk Loans
(ex-DTDB) ()
8.5
3,907
_at_
_at_
4,029
4,225
_at_
_at_
4,560
4,211
2.7
1,112
_at_
2,172
Dec 97 Jun 98 Dec 98
Jun 99 Dec 99 Jun 00
_at_ Group NPLs excluding DTDB and DKOB. Note
Loans and NPLs include POSBanks loans since Nov
98 and DKOBs loans since May 99.
30
DBS Thai Danu Bank well-positioned to compete
Other Thai banks paralyzed NPLs,
capital-starved, legacy IT

• 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

Rebuild Revenues
Continued Integration Efforts

• 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

31
Transforming to World-Class

• Interim results reflect broad-based improvement
  in operations
• Regional asset quality continues to improve
• Well-positioned for expansion and growth

32
Right-sizing branch network
33
New branch design will focus on sales
Pre-Branch Improvement Program
Post-Branch Improvement Program (by October 2000)

• 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

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
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
36
Linking Bricks and Mortar, Call Centers and
E-business
DBS integrated delivery model
E-business
Brand
Products Services
Fulfilment
Bricks Mortar
Direct Marketing (Call Center)
37
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
1
DBS
2
ANZ Bank Australia
2
National Australia Bank
2
Citibank Hong Kong
5
Emirates Bank International, UAE
5
Overseas Union Bank Singapore
7
Westpac Australia
7
St George Bank Australia
7
ANZ Bank New Zealand
10
Source Lafferty Internet Ratings
38
Early mover in building leading E-business
capabilities
Using IT, e-business to expand our channels
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

39
Early mover in building leading E-business
capabilities
Using IT, e-business to expand our channels
B2B

• 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

40
We aspire to be a top-five Asian bank
Target markets
We have the capital resources and commitment to
achieve this goal
41
Strong capital position for strategic growth, MA
Capital Adequacy Ratio
()
Tier 2
Raised US500M Tier II capital through subordinate
d note issue in April 2000
Tier 1
20.1
19.2
15.6
15.8
42
Managing our capital base

• Optimizing the mix of capital, e.g., raised
  US500 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
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

44
Transforming to World-Class

• Interim results reflect broad-based improvement
  in operations
• Regional asset quality continues to improve
• Well-positioned for expansion and growth

45
Interim 2000 Results Briefing
Transforming toWorld-Class
July 2000