Primed For Growth, Well-Positioned Against Downside Risks FY2000 Results Briefing March 5, 2001
Dec 30, 2015
2
S. Dhanabalan Chairman
Philippe Paillart Chief Executive Officer
Jackson Tai Chief Operating Officer
Kee Choe Ng Vice Chairman
Frank Wong Senior Managing Director
Panelists
Also available for questions
Chong Kie Cheong Finance Director
Ong Siew Mooi Head, Group Finance
Lim Lay Hong Financial Reporting
Tony Raza Investor Relations
DBS Corporate Office
3
Primed for growth, well-positioned against downside risks
Progress in our financial performance
Significant turnaround in asset quality
Migrating toward optimal capital structure
Maintaining a disciplined expansion plan
Protected on the downside, ready for a breakout
4
(S$ million) 1999 2000 Change (%)
Net Profits increased by 30%
Net interest income 2,035 2,039 0.2Fee and commission income 423 508 20.2Dividends and rental income 62 115 85.3Other income 509 268 (47.3)
Income before operating expenses 3,029 2,931 (3.2)Excluding exceptionals 2,854 2,881 0.9
Operating expenses 1,065 1,246 17.0
Operating profit 1,964 1,685 (14.2)
Excluding exceptionals 1,790 1,636 (8.6)
Provisions (1,064) (54) (94.9)
Associated companies 140 43 (69.3)
Taxes (379) (315) (16.9)Minority interest (410) (29) (92.9)
NPAM 1,072 1,389 29.6Excluding exceptionals 897 1,351 50.5
5
Core profits up 51%
Excluding exceptionals, growth was
50.5%
1,351
897
112
436
175
38
0
200
400
600
800
1,000
1,200
1,400
1997 1998 1999 2000
(S$ million)
1,072
1,389
6
Net interest income and margins were maintained
(S$ million)
Excluding the funding costs for BPI, interest margins for 2000 would have been 2.09%
Net interest income
1,002
1,430
2,035 2,039
0
500
1000
1500
2000
2500
1997 1998 1999 2000
2.022.02
1.771.73
1.5
2.0
2.5
(%)
Net interest margin (gross)
7
Fee income rose 20%
Fee to Income Ratio (%) 14.6 14.0 17.3
Proforma for FY00 the Vickers
merger raises DBS’s fee to income ratio
to 21.6%
Investment banking 42 85 98
Stockbroking 48 102 77
Trade-related 51 63 75
Fund management 10 20 62
Deposit-related 20 33 60
Loan-related 29 38 51
Credit card 22 25 33
Guarantees 27 28 26
Others 29 29 26
Total fee income 274 423 508
(S$ million) 1998 1999 2000
8
(S$'million) 1999 2000 Change (%)
Net Gains on Trading in Foreign Exchange 90 119 32.0
Net Gains on Sale of Trading Securities & Derivatives 186 55 (70.1)
Net Gains on Disposal of Investment Securities: Sale of SPC shares 117 - (100.0)
Others 26 41 57.7
Net Gains Arising from Divestment of DBS Tampines 58 - (100.0) Net Gains on Disposal of Fixed Assets 1 9 726.6
Others 31 44 39.2
Total Other Income 509 268 (47.3)
Other Income: Treasury FX improved 32%
9
Operating costs increased within budget
Excluding the variance from DKOB, which was consolidated from May 1999, the expense increase would have been 12%
Staff costs 529.3 613.2 15.9
Occupancy expenses 138.5 147.4 6.3
Technology-related expenses 108.6 132.4 21.9
Professional & consultancy fees 62.8 72.5 15.5
Others 225.5 280.2 24.2
Total 1,064.7 1,245.7 17.0
Cost-to-income (%) 35.2 42.5
(S$ million) 1999 2000 Change (%)
10
1,246
1,065
+12+16
+18+26+10
-10-76+57
+67
+61
(S$ million)
DBS Bank (+182m)
1999 2000
Staff co
sts
(+17.0%)Co
nsu
ltancy
Co
mp
uterisatio
n
Ad
vertising
Oth
ers
DB
S S
ecurities
DB
S C
hin
a Sq
uare
DB
S T
hai D
anu
Oth
er sub
sidiaries
DK
OB
At the Bank level, staff costs, technology expenses and advertising expenses accounted for 58% of the increase in operating expenses
Most costs tied to specific investments
11
Consultants now limited to implementation of specific, technical projects
1998 1999 2000 20011H99 9M00 1H01
• Phone Banking• Procurement• DBS Securities’ Projects• Customer Relationship Mgt• Treasury & Mkts System• E-Commerce• Risk Mgt System• Datawarehouse• Call Centre Automation• Business Intelligence• Achieve
Technology Procurement
• Cost & Profitability Mgt SystemMeasurement
• Institutional Banking Group ReorganisationRe-engineering Processing & Services
• Process Improvement
• Branch ReconfigurationCustomer Service
• POSBank, DTDB & DKOBIntegration
Strategy Development• Retail Strategy• Improving Profitability (DTDB NPL, Recapitalisation of DTDB, Sale of DBSL shares, acquisition of BPI)
12
Provisions declined by S$1 billion
DBS Thai Danu Bank 395.3 12.4 (382.9)
5 regional countries 117.1 49.1 (68.0)
Singapore 131.4 (49.8) (181.2)
Other countries 60.2 18.0 (42.2)
Non-loan provisions 34.5 51.9 17.4
Specific provisions 738.5 81.6 (656.9)
General provisions (48.3) (57.4) (9.1)
Total DBSH share 690.2 24.2 (666.0)
Minority interests’ share 373.0 29.4 (343.6)
Total group provisions 1,063.2 53.6 (1,009.6)
(S$ million) 1999 2000 Change
13
Profitability surpassing pre-crisis levels
ROA has returned to pre-crisis levels
ROE has surpassed pre-crisis levels even though CAR has returned to similar levels.
1.28
1.04
0.14
0.72
1.28
0.0
0.5
1.0
1.5
1996 1997 1998 1999 2000
12.89
10.35
1.29
5.72
10.30
02468
101214
1996 1997 1998 1999 2000
ROA (%)
ROE (%)
14
Assets are mostly from Singapore
Singapore81%
Rest of World5%Other Asia-Pacific
10%
Other ASEAN4%
Assets as of December 1999 were 81% from Singapore, 5% from Other ASEAN, 9% from Other Asia-Pacific, and 5% from the Rest of World
15
Singapore82%
Rest of World2%Other Asia-Pacific
12%
Other ASEAN4%
Revenues as of December 1999 were 86% from Singapore, 5% from Other ASEAN, 8% from Other Asia-Pacific, and 2% from the Rest of World
Overseas revenues are starting to contribute more
16
Balance sheet shrank due to soft loan demand and shedding of low-yielding assets
Dec 97 Jun 98 Dec 98 Jun 99 Dec 99 Jun 00 Dec 00
40.143.6
73.9
83.1 82.3 80.4 80.7
52.052.454.457.856.2
33.6
41.8
0
10
20
30
40
50
60
70
80
90
(S$ billion) Customer loans
Customer deposits
104.5
119.6
76.169.5
66.1 65.2 64.5
0
20
40
60
80
100
120
140L/D ratio
(%)
17
Decline in gross loans tapers off
-4000
-2000
0
2000
4000
6000
8000
10000
12000
14000
16000
-10
-5
0
5
10
15
20
25
30
35
Excluding the S$1.2 billion DTDB NPL sale, the loan contraction would have only been S$0.8 billion or down -1.5%(HoH) for 2H00.
Jun 98 Dec 98 Jun 99 Dec 99 Jun 00 Dec 00
(S$ million)
10.4%
3.4%-4.8% -3.8% -3.7%
30.7%
4,290
13,959
2,041
(2,965)(2,220) (2,053)
Change in Loans (Half on Half)
18
Decline in deposits offset by other products
(S$ million) Change in balance (Half on Half)
-2000
-1500
-1000
-500
0
500
1000
(847)
314
(1,866)
526320 347
Dec 99 Jun 00 Dec 00
Other products include the Horizon, Eight, and Up programs
Deposits
Other products
19
Primed for growth, well-positioned against downside risks
Progress in our financial performance
Significant turnaround in asset quality
Migrating toward optimal capital structure
Maintaining a disciplined expansion plan
Protected on the downside, ready for a breakout
20
Significant decline in NPLs in second half 2000
2,705 2,824 2,425 2,4521,735
772
1,2391,408
1,365 1,1441,735
2,874
3,018 3,2073,000
1,238
1,249649
358
433435328267
15197366
667412
637717543
0
2,000
4,000
6,000
8,000
10,000
Dec 97 Jun 98 Dec 98 Jun 99 Dec 99 Jun 00 Dec 00
7.6%
12.7%
8.5%
13.0%13.1%
11.8%
2.7%
DBS Thai Danu Bank
DBS Kwong On Bank
5 Regional CountriesOthers
Singapore
NBk NPL/NBk Loans (%)
(S$ million)
1,112
3,907
7,085
8,121 8,1497,666
4,411
21
Most NPLs are classified substandard; some are still current
NPLs (2000)
3,508 358 546
250
295
956
2,552 325
32
0 500 1,000
1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000
DTDB
3,172
4,411
80%
80%
1,238
77%
Total (ex-DTDB)
Total (Incl-DTDB) 8% 12%
20%
(S$ million)
3%
Substandard
Doubtful
Loss
Approx. S$0.7 bn current, or 20% of Substandard
22
Provision coverage at 52% of NPLs or 61% on SEC basis
179948801
946
1,115
1,294
1,1911,174
1,049
1,237
3,095
2,032
2,8042,558
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Dec 97 Jun 98 Dec 98 Jun 99 Dec 99 Jun 00 Dec 00
164.6%
119.6% 102.7% 110.6%118.4% 114.8%
130.2%
51.8%51.9%52.6%47.4%44.4%48.5%
88.1%
55.3% 63.0% 60.8% 61.4%
General Provisions (GP)
Specific Provisions (SP)
SP+GP/NPLs (SEC) (%)
SP+GP/Unsec NPLs (%)
SP+GP/NPLS (%)
980
1,894
3,147
3,852
4,2863,978
2,286
(S$ million)
23
NPLs much lower under SEC reporting and after adjusting for restructured loans
Under SEC reporting NPL rate drops from 7.5% to 6.8%.
Assuming restructured loans are upgraded, NPLs under SEC reporting falls to 3.7%
1999 2000Singapore
Non accrual loans 1859 1403
Non-restructured 1471 897 Restructured 388 506
Regional countries
Non accrual loans 4,173 1,784
Non-restructured 3,666 698 Restructured 507 1,087
Other countries
Non accrual loans 770 537
Non-restructured 695 417 Restructured 74 120
Total non accrual loans 6,801 3,724Total restructured loans 969 1,712
Restructured / non accrual 14.3% 46.0%NPL under SEC reporting 11.6% 6.8%Non-restructured NPLs / total loans 10.0% 3.7%
24
Overseas NPLs fell by S$3 billion or 53%
Malaysia 412 62.2 304 47.1
Indonesia 566 97.9 176 58.5
Thailand excluding DTDB 234 49.3 49 16.2
Korea 76 17.4 51 13.2
The Philippines 77 20.1 87 17.0
DTDB 3,207 70.4 1,238 42.7
Total regional NPLs 4,571 65.3 1,905 38.9
Hong Kong 852 15.5 541 8.7
China 124 12.3 153 15.9
Total 5,547 41.1 2,599 21.5
(S$ million) NPLs NPL (%) NPLs NPL (%)
December 1999 December 2000
25
Progress in our financial performance
Significant turnaround in asset quality
Migrating toward optimal capital structure
Maintaining a disciplined expansion plan
Protected on the downside, ready for a breakout
Primed for growth, well-positioned against downside risks
26
Strong capital continues to provide a cushion against possible global economic slowdown
(S$ million) 1998 1999 2000
Tier 1 9,621 10,463 10,200
Tier 2 793 2,379 3,211
Total Capital 10,414 12,842 13,411
Risk Weighted Assets 65,989 66,790 70,963
Capital Adequacy Ratio (%)
Tier 1 14.6 15.7 14.4
Total (Tier 1 + Tier 2) 15.8 19.2 18.9
(BIS)
27
Capital further supported by valuation surplus
1,916
807 692 589 498
1,204
1,164729 827
677
0
500
1,000
1,500
2,000
2,500
3,000
3,500
1996 1997 1998 1999 2000
(S$ million)
3,210
1,971
1,421 1,4161,175
PropertiesQuoted investments
Few remaining non-core assets to dispose
28
Pro-active management of capital base
Raised US$1.25 billion of Tier II Capital Divested non-core assets, generated S$1.3 billion in proceeds Redeemed S$600 million NVPS S$5.0 billion excess capital for growth, and contingencies Expecting to raise S$1.4 billion through a issue of Hybrid Tier I Migrating toward optimal capital structure
13.6 14.6 15.7 14.4
3.5 4.51.22.0
(%)
0
5
10
15
20
25
Dec-97 Dec-98 Dec-99 Dec-00
(*) Not to scale
OptimalStructure*
Tier 2
Hybrid Tier 1
Tier 1
15.6 15.8
19.2 18.9
CAR (BIS)
29
Increasing the returns on capital
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
1994 1995 1996 1997 1998 1999 2000
0
5
10
15
20
25CAR
ROE The improvement in ROE is not a gimmick of equity reductions as the CAR is back to pre-crisis levels.
Absolute capital has been increasing substantially as well.
2,000
4,000
6,000
8,000
10,000
12,000
1994 1995 1996 1997 1998 1999 2000
2.00
4.00
6.00
8.00
10.00
12.00
14.00Capital
ROE
0 0
Even with excess capital,ROE has been improving
30
Dividend rate hiked 80%
2530
15
1818
1616161616
5
128%
31%22%
23%13%14%15%22%18%
0
10
20
30
40
50
1992 1993 1994 1995 1996 1997 1998 1999 2000
-10%
30%
70%
110%
150%Special dividend
Dividend rate
Dividend payout
(Cents)
31
Progress in our financial performance
Significant turnaround in asset quality
Migrating toward optimal capital structure
Maintaining a disciplined expansion plan
Protected on the downside, ready for a breakout
Primed for growth, well-positioned against downside risks
32
DBS’s expansion strategy remains unchanged
DBS has a disciplined expansion strategy Acquisition plans are not as haphazard as reported Management moves are being carefully planned
Recent Reports about DBS: DBS increasing its stake in BPI to 40%
DBS to purchase a stake in PCI Equitable (Philippines)
DBS acquires a 20% investment in Far Eastern Bank (Taiwan)
DBS looking to purchase Korean credit card business for US$1.6bn
Standard Chartered Bank and DBS to merge
DBS to issue more Tier II capital
DBS to increase stake in Wing Lung Bank
33
Building Asia’s best bank
Japan and Korea
Focus on ASEAN and Hong Kong
We have the capital resources and commitment to achieve this goal
Greater China
Australia and India
Southeast Asia and Hong
Kong
34
Progress in Hong Kong
Integrated DBS IT systems, treasury operations and product platforms
35 Customer Contact Points: Closed unprofitable branches and opened two new branches in Central, (one of which was best performer for 2000)
Pre-provision profits up 10% to HK$450m: achieved significant deposit (15.2%) and loan (17.5%) growth
NPLs fell by 57%, to 5.6% rate (under HKMA standards)
Refining skills to eventually take on a larger market share
Issued over 40,000 credit cards since the end of December 2000, easily on track for 100,000 target in 2001 (Note: at Chase deal values, 40,000 DBS cards would have cost US$60 million, more than our entire overhead for all of DBS Kwong On Bank)
35
DBS Vickers extends our cross-selling to clients
— DBS Vickers Branding
— Products & Services
Fulfillment
Regional IT/OP Platform
Treasury & Markets - FX - Derivative
DBS Bank - Asset Management - Financial Planning - On-line servicesResearch
Origination- Leading IPO, Debt market share- Securitisation capability
Distribution- 368 remisers & dealers- 11% market share- Singapore, HK, Thailand
36
Progress in our financial performance
Significant turnaround in asset quality
Migrating toward optimal capital structure
Maintaining a disciplined expansion plan
Protected on the downside, ready for a breakout
Primed for growth, well-positioned against downside risks
37
A stronger bank, better protected against downside risks
Enhanced, regionally integrated credit and risk management systems
Sharp improvement in asset quality, and ability to resolve problem loans
Much stronger management depth, implementing best global practices
Continue to offer high CAR support even as we optimise capital, improve our returns on capital
Enhancing MIS, Costing systems to provide better analysis of businesses, exposures
No longer paralyzed overseas, cleaned up problems in Thailand
Investment in IT, operations will raise service quality, lower costs
38
Positioned for a breakout
Consumer Banking
Ideally positioned in mass affluent wealth management with dynamic asset management programs (Horizon, Eight, Up, Moneyplus).
Regionally integrating product and channel strategies; launching new products; credit cards and mortgage applications up
Treasury and Markets
Largest Singapore Dollar treasury player
FX and derivatives growing rapidly, based increasingly on sustainable customer related transactions
Investment Banking
Leadership in equity capital markets will be enhanced by Vickers’ distribution and research
Leader in debt capital markets
39
Progress in our financial performance
Significant turnaround in asset quality
Migrating toward optimal capital structure
Maintaining a disciplined expansion plan
Protected on the downside, ready for a breakout
Primed for growth, well-positioned against downside risks