Presentation: DBS Group Holdings First Half 2002 Financial Results

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DBS Group Holdings

1H 2002 Financial Results

Presentation to Media and Analysts

This presentation is available at www.dbs.com

Better execution

despite weak markets

Disclaimer: The material that follows is a presentation of general background information about the Bank’s activities current at the date of thepresentation. It is information given in summary form and does not purport to be complete. It is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. These factors should be considered, with or without professional advice, when deciding if an investment is appropriate. DBS accepts no liability whatsoever with respect to the use of this document or its contents.

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

Delivering more disciplined financial results

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YoY operating profit up 41%

Net interest income 1,321 1,295 2 962 37

Fee income 403 388 4 251 61

Non-interest income 698 722 (3) 567 23

Operating income 2,020 2,017 - 1,528 32

Staff costs 462 476 (3) 389 19 Other operating expenses 457 516 (11) 360 27

Operating expenses 920 993 (7) 749 23

Operating profit 1,100 1,024 7 779 41

Goodwill 136 131 4 - nm

Provisions 201 332 (40) 46 332

Net profit 531 370 44 629 (16)

Cash net profit (a) ₆₆₈ ₅₀₁ ₃₃ ₆₂₉ ₆

(a) Net profit before goodwill amortization

(S$ million)

(S$ million) _{1H 2002} _{2H 2001} _{Change 1H 2001}% _Change%

1st Half

2002

2Q 1Q

2nd Half

2001

4Q 3Q

1st Half

2001

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4

(a) Excludes goodwill

(b) Net profit before goodwill amortization

`

Total operating income $2,020m

$1,528m

32%

Non-interest income

$698m

$567m

23%

Net interest income

$1,321m

$962m

37%

Operating expenses

$920m

$749m

23%

Operating profit

(a)

$1,100m

$779m

41%

Fee income

$403m

$251m

61%

Cash net profit

(b)

$668m

$629m

6%

1H 2002

1H 2001

Comparison of

vs.

1st Half

2002

2Q 1Q

2nd Half

2001 4Q 3Q

1st Half

2001

(5)

5

1H 2002

1H 2001

Comparison of

vs.

Cash ROA

(b)

0.88%

1.08%

Net interest margin

1.99%

1.78%

Cash ROE

(b)

9.71%

11.36%

Non-interest inc. / operating inc.

34.6%

37.1%

(a) Excludes goodwill (b) Annualized

(c) Earnings per share before goodwill amortization, annualized

NPLs

5.9%

6.2%

Loan-to-deposit

62.7%

60.6%

Cash EPS ($)

(c)

0.91

1.02

Cost-to-income

(a)

45.5%

49.0%

1st Half

2002

2Q 1Q

2nd Half

2001 4Q 3Q

1st Half

2001

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Net interest income 1,321 1,295 2 962 37

Fee income 403 388 4 251 61

Operating income 2,020 2,017 - 1,528 32

Staff costs 462 476 (3) 389 19 Other operating expenses 457 516 (11) 360 27

Operating expenses 920 993 (7) 749 23

Operating profit 1,100 1,024 7 779 41

Goodwill 136 131 4 - nm

Provisions 201 332 (40) 46 332

Net profit 531 370 44 629 (16)

Cash net profit (a) ₆₆₈ ₅₀₁ ₃₃ ₆₂₉ ₆

(S$ million)

(S$ million) 1H 2002 2H 2001 Change 1H2001% Change %

HoH operating profit up 7%

1st Half

2002

2Q 1Q

2nd Half

2001

4Q 3Q

1st Half

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7

Quarterly operating profit up 51%

(S$ million)

(S$ million) 2Q 2002 1Q 2002 Change 2Q 2001% Change %

Net interest income 651 670 (3) 472 38

Fee income 210 193 9 133 58

Operating income 995 1,024 (3) 720 38

Operating expenses 460 459 - 366 26

Operating profit 535 565 (5) 354 51

Goodwill 69 68 1 - nm

Provisions 105 96 10 9 1088

Net profit 253 278 (9) 308 (18)

Cash net profit (a) ₃₂₂ ₃₄₆ ₍₇₎ ₃₀₈ ₅

1st Half

2002

2Q 1Q

2nd Half

2001 4Q 3Q

1st Half

2001

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`

Total operating income

$995m

$1,024m

3%

Non-interest income

$344m

$354m

3%

Net interest income

$651m

$670m

3%

Operating expenses

$460m

$459m

no change

Operating profit

(a)

$535m

$565m

5%

(a) Excludes goodwill

(b) Net profit before goodwill amortization

Fee income

$210m

$193m

9%

Cash net profit

(b)

$322m

$346m

7%

2Q 2002

1Q 2002

Comparison of

vs.

1st Half

2002

2Q 1Q

2nd Half

2001 4Q 3Q

1st Half

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2Q 2002

1Q 2002

Comparison of

vs.

Cash ROA

(b)

0.84%

0.91%

Net interest margin

1.96%

2.02%

Cash ROE

(b)

9.22%

10.12%

Non-interest inc. / operating inc.

34.5%

34.6%

(a) Excludes goodwill (b) Annualized

(c) Earnings per share before goodwill amortization, annualized

NPLs

5.9%

Loan-to-deposit

62.7%

60.5%

Cash EPS ($)

(c)

0.88

0.94

Cost-to-income

(a)

46.3%

44.8%

1st Half

2002

2Q 1Q

2nd Half

2001 4Q 3Q

1st Half

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(S$ million)

962

1,321

993

1,046

989

1,295

1.99%

1.94%

1.78%

1.97%

2.07%

2.04%

2.00%

1H 1999 2H 1999 1H 2000 2H 2000 1H 2001 2H 2001 1H 2002

Net interest income Net interest margin

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11

Non-interest income holding well at mid 30% range

(%)

Non-interest income to Operating income

(a)(a)

24

29

30

36

35

1998 1999 2000 2001 1H 2002

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Fee income now 20% of revenues

Trade finance 55 61 (11) 35 56

Deposit-related 54 57 (5) 43 24

Credit card 48 53 (8) 16 197

Loan-related 57 67 (15) 43 33

Investment banking 33 33 - 39 (15)

Stockbroking 83 49 68 24 251

Fund management 43 37 16 35 24

Others 30 31 (3) 16 87

Total 403 388 4 251 61

Fee-to-income ratio (%) 20 19 16

(S$ million)

(S$ million) _{1H 2002} _{2H 2001} %

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Core expenses tracking well below previous target

DBSH (exclude DHB & DBSV) (a)

Staff costs 335 339 (1) 374 (10)

Occupancy expenses 74 93 (20) 73 2

Technology-related expenses 83 90 (8) 83

-Revenue-related expenses 31 26 20 21 44

Others (include administration and 123 133 (8) 161 (24) advertising expenses)

Total (exclude DHB & DBSV) 645 680 (5) 712 (9)

DHB 178 218 (18) - nm

DBSV / DBS Securities Group 86 54 61 37 134

Restructuring costs 10 40 (76) - nm

Total 920 993 (7) 749 23

Cost-to-income ratio (%) 45.5 49.2 49.0

(a) Dao Heng Bank (“DHB”), DBS Vickers (“DBSV”)

(S$ million)

(S$ million) _{1H 2002} _{2H 2001} %

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14

680 90

93

339

645 83

74

335

0 400 800

Managing our costs and investments with discipline

Total operating expenses (excl. DHB & DBSV) 5%

Occupancy expenses 20%

Staff costs

1% 2H 2001

1H 2002

(S$ million)

(15)

15

1H 2001 2H 2001 1H 2002

Focusing on cost containment

(a) Normalized expenses excludes goodwill, restructuring costs and impact of acquisitions

Period expenses (a)

(S$ million)

680

712

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Singapore, Hong Kong are our twin hubs

Rest of the world 3.6% Hong Kong

31.5%

Total assets S$152 billion

Assets

1H 2002

Regional countries

3.1%

Singapore 61.8%

Operating income

1H 2002

Rest of the world 1.8% Hong Kong

28.2%

Total operating income S$2,020 million

Regional countries

3.9%

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Net interest income 309 321 (4)

Non-interest income 106 139 (24)

Operating income 414 459 (10)

Operating expenses 182 237 (23)

Operating profit 233 222 5

Provisions 104 22 371

Net profit before tax 132 203 (35)

Net interest income 309 321 (4)

Non-interest income 106 139 (24)

Operating income 414 459 (10)

Operating expenses 182 237 (23)

Operating profit 233 222 5

Provisions 104 22 371

Net profit before tax 132 203 (35)

Dao Heng Bank operating profit up

(S$ million) (a)

(S$ million) (a) 1H 2002DHB 2H 2001DHB Change%

(a) Based on Singapore GAAP

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Achieved

1H 2002 2002 Target

Synergies achieved - focus now on revenue

opportunities in Greater China

Key Revenue Initiatives:

 Launch of new funds (knowledge sharing)  ALCO Liquidity Management

 Cross-selling opportunities (eg, T&M, Private

banking, Equipment finance, Credit cards and other existing products)

Revenue synergies

Select Cost Initiatives:

 _{Accelerated implementation of branch closures}  _{Active capacity management largely through}

vacancies and attrition

 Back office and IT centralization Cost synergies

Total synergies

HK$296 m HK$450 m (a)

60%

(a) 60% of synergy target is expected for 2002 of a total of HK$750 million

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DBS Thai Danu Bank operating profit up

Net interest income 48 45 7 46 5

Fee income 11 6 74 9 21

Non-interest income 18 17 7 15 18

Operating income 66 62 7 61 8

Operating expenses 46 44 5 44 6

Operating profit 20 18 11 17 15

Non-operating expenses 4 5 (11) 4

-Provisions 10 10 4 9 9

Net profit after tax 6 4 35 3 79

Net interest income 48 45 7 46 5

Fee income 11 6 74 9 21

Non-interest income 18 17 7 15 18

Operating income 66 62 7 61 8

Operating expenses 46 44 5 44 6

Operating profit 20 18 11 17 15

Non-operating expenses 4 5 (11) 4

-Provisions 10 10 4 9 9

Net profit after tax 6 4 35 3 79

(a) Assume exchange rate of 1 baht to S$0.042. Based on Thai GAAP

(S$ million)

(S$ million) _{1H 2002} _{2H 2001} %

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Deepening DBS franchise in three core businesses

(S$ million) (S$ million) Investment banking 420 Consumer banking 846 Treasury 375 Central operations (113)

Operating income

1H 2001

Investment banking 345 Consumer banking 1,230 Treasury 424 Central operations 20

Operating income

1H 2002

Total operating income S$1,528 million

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Sales Volume

314 558 322 615

938

1,717

222

180

189

235

15

0 500 1000 1500 2000 2500

2H 1999 1H 2000 2H 2000 1H 2001 2H 2001 1H 2002

314

573 ₅₄₄ 795

1,127 (S$ million)

Wealth management continues to grow

(a) Unit trusts include Horizon, Ei8ht, Up! and other DBSAM programmes while treasury investment products include Growth, Surf and structured notes

1,952

Unit trusts / Treasury investment products (a)

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Expanding credit card franchise in twin hubs

Singapore

Cards in issue (‘000)

Receivables outstanding (S$ million)

Market position

Hong Kong

Cards in issue (‘000)

Market position

501 466

#2

1H 2002 2001 2000

850 1,300

#3 450 424

#2

359 326

#3

914 1,187

#3

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delivers impressive results in 8 months

Singapore - launched in 4Q 2001 Customers (‘000)

Market share

85 191

18%

Launch to

1H 2002 1H 2001

0 0

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Seizing opportunities in Investment Banking

Equity capital markets 11.8 37%

Debt capital markets 5.3 7%

Syndicated loans 16.3 105%

Mergers & acquisitions 5.6 113%

Equity capital markets 11.8 37%

Debt capital markets 5.3 7%

Syndicated loans 16.3 105%

Mergers & acquisitions 5.6 113%

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Improving Treasury & Markets’ depth, geographic

diversity

Hong Kong 8% Singapore

89%

Others 3%

Operating income 1H 2001

Hong Kong 28% Singapore

70%

Others 2%

Operating income 1H 2002

Accolades

 “2nd Place: Top Forex & Derivatives Bank in Singapore” - Asia Money, 2002

 “Best Foreign Exchange Bank in SE Asia (Regional & Singapore)” - Global Finance

Ranking, 2002

 “1st Place: FX Products - Singapore” - Asia Risk, 2001

 “2nd Place: Interest Rate Products - Hong Kong” - Asia Risk, 2001

(a) Excludes Dao Heng

(a)

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649

2,705 _2,425

1,735 1,730 _1,610 _1,486 _1,528 _1,478 _1,518 1,152

770 723 1,239

1,365

667 661 ₆₂₄

606 632 ₇₆₈ 738 2,874

3,207

1,238 _1,191

1,143 _1,101 _1,004 ₉₉₅ ₉₇₂ 815

777 744 699

552 642 ₆₀₇ ₆₀₅ ₅₆₃

267 366 580

5.9%

5.7%

6.0%

6.2%

7.3%

7.6%

13.0%

11.8%

2.7%

Dec 97 Dec 98 Dec 99 Dec 00 Mar 01 Jun 01 Sep 01 Dec 01 Mar 02 Jun 02

Quantum of NPLs continues to decline

Dao Heng Bank

DBS Thai Danu Bank Regional 5 Countries Others

Singapore

NBk NPLs / NBk Loans (%)

1,112 4,503 (S$ million) 7,086 8,149 4,834 4,577

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NPLs improving at major subsidiaries

(a)

(S$ million) 972 995 1,004 1,101 1,143 1,191 1,238 27.8% 28.7% 29.8% 35.2% 38.0% 40.3% 42.7%

Dec 00 Mar 01 Jun 01 Sep 01 Dec 01 Mar 02 Jun 02

(a) Based on MAS guidelines

DBS Thai Danu

DBS Hong Kong

879 1,011 1,085 1,150 1,238 494 541 3.7% 4.1% 4.3% 4.9% 5.2% 7.1% 8.3%

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Provision coverage remains healthy

1,115

1,191

2,032

3,095

1,237 1,464 1,658 1,602

1,048 1,179 1,061 1,031

129.2 142.5

146.5 129.9

118.4 102.7

60.4 60.3

54.7 51.8

52.6 44.4

Dec 98 Dec 99 Dec 00 Jun 01 Dec 01 Jun 02

General Provisions (GP) Specific Provisions (SP)

SP+GP / NPLs (%)

SP+GP / Unsec NPLs (%)

2,286

(S$ million)

2,643

2,719

2,633

4,286

(29)

29

2,576 415

4,952

3,086 3,094 _3,003

942

546 906 921

621

358 520 488

3,508

5.9%

5.7%

7.6%

13.0%

-800 200 1200 2200 3200 4200 5200 6200 7200 8200

Dec 99

Dec 00

Dec 01

Mar 02

Jun 02

Percentage of doubtful and loss NPLs stable

Loss Doubtful

(S$ million) Substandard

8,149

4,411

4,512

NPLs / Loans (%)

(30)

30

15.7

14.4

12.2

8.5

12.6

9.2

4.5

5.2

5.6

4.9

5.2

3.5

0 4 8 12 16 20 24

Dec 99 Dec 00 Dec 01 Jun 02 Jun 02

Proforma for Dao Heng 2nd tranche Jun 02 Proforma for Dao Heng 2nd tranche

Proforma Tier 1 approaching target cushion

DBS Group Holdings Consolidated Capital Adequacy Ratio

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31

Maintaining dividend rate for shareholders

9 14 14 14

16

16 16

15

32%

33%

31%

22%

0 10 20 30 40 50

1999 2000 2001 1H 2002

0 20 40

Interim dividends Final dividends

Special dividends Payout rate (%)

(32)

32



Delivering more disciplined financial results

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New DBS management team

Jackson Tai : Vice Chairman & CEO Ng Kee Choe : Vice Chairman, DBS Bank Frank Wong : Chairman, DBS Hong Kong

Jackson Tai

Corporate Office

S Dhanabalan : Chairman

Ng Kee Choe Frank Wong Oon Kum Loon

(CFO)

 Overall  Singapore  Hong Kong

 Greater China

Geography

Products & Services

 Consumer

Banking Group

 Enterprise

Banking

 Support units

 Risk

Management

 Credit

Management

 Information

Technology

 Processing &

Servicing

 Treasury &

Markets

 Investment

Banking

 DBS Vickers

 Finance

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Strategy intact, now focussed on execution

 Build coherent Pan-Asian financial franchise, with early focus on

Singapore, Hong Kong and Greater China

 Leverage dominant market position and retail distribution in

Singapore and Hong Kong

 Differentiate with Treasury & Markets, Capital Markets, Wealth

Management, Risk Management and Credit Management

 Become lower cost producer through scale, integrated up-to-date

information technology and straight-through processing

 Intermediate regional capital flows between issuers and investors

 Recalibrate investments and resources to changed market

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Focused on delivery

Jun 2002 Dec 2000 % change

Branches

– Singapore 93 114 18%

– Hong Kong 81 101 20%

Group head count 12,337 >14,200 (a) 13%

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Management depth for the next phase

Area of focus Experience

Management

Corporate Office

S. Dhanabalan Chairman > 42 years Jackson Tai Vice Chairman & CEO > 28 years Ng Kee Choe Vice Chairman, DBS Bank > 35 years Frank Wong Chairman, DBS Hong Kong > 36 years

Policy Committee

Eric Ang Investment banking > 23 years Chan Tak Kin Consumer banking, Hong Kong > 30 years Chong Kie Cheong Investment banking - institutional & corporate clients > 30 years Elsie Foh Personal banking & private banking > 30 years Hong Tuck Kun Enterprise banking > 26 years Steve Ingram Information technology > 19 years Edmund Koh Consumer banking, Singapore > 18 years David Lau Treasury & markets > 19 years

Oon Kum Loon Finance > 28 years

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DBS Group Holdings

1H 2002 Financial Results

Presentation to Media and Analysts

This presentation is available at www.dbs.com

Better execution

despite weak markets

Disclaimer: The material that follows is a presentation of general background information about the Bank’s activities current at the date of thepresentation. It is information given in summary form and does not purport to be complete. It is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. These factors should be considered, with or without professional advice, when deciding if an investment is appropriate. DBS accepts no liability whatsoever with respect to the use of this document or its contents.