Completing the regional and
wealth management platform
First Half 2001 Results Briefing
July 23, 2001
Completing the regional and wealth
management platform

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
2
Completing the regional and wealth
management platform

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
3
Net revenue increased by 2.7%, net profit
down 10.6%
1H01 / 1H00
(%)
1H01 / 2H00
(%)
962
(8.1)
(3.1)
249
251
(3.7)
0.8
42
73
40
(3.7)
(45.2)
139
129
275
97.6
113.2
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
704
685
629
(10.6)
(8.2)
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%
(S$ million)
1H00
2H00
1H01
Net interest income
1,046
993
260
Fees & commissions
Dividend & rental income
Other income
Income before
operating expenses
Net profit attributable to
shareholders
4
Modest decline in net interest income
despite sharp fall in net interest margins
(S$ million)
Net interest income
1200
Net interest margin
(gross basis)
1,046
2.5
1,046
989
800
2.00%
993
2.04%
962
2.07%
2
1.97%
1.78%
400
1.5
1H99
2H99
1H00
2H00
1H01
5
Excess liquidity dampens margins, but
strengthens ability to fund lending growth
Loan / Deposit
Net Interbank Placement / Asset
(%)
(%)
140
30
115.9
120
100
80
23.7
25
97.5
20.2
20
73.3
17.8
15
66.1 64.4 63.4
60
10
5
8.1
3.2
40
0
20
(5)
0
(10)
1996 1997 1998 1999 2000 1H01
(7.2)
1996 1997 1998 1999 2000 1H01
6
Loan growth has turned around
(S$ million)
18000
15000
12000
9000
6000
3000
0
-3000
Change in Gross Loans
35
13,791
30.4%
30
25
20
15
4,373
10.7%
2,209
1,917
3.7%
3.5%
(2,966) (2,219) (2,053)
-4.8% -3.8% -3.7%
10
5
0
-5
-10
Jun 98
Dec 98 Jun 99 Dec 99 Jun 00 Dec 00 Jun 01
Outstanding Gross Loans
90000
72,503
60000
30000
59,195
61,404
58,438
56,219
54,166
Dao Heng
16,420
45,404
56,083
0
Jun 98 Dec 98 Jun 99 Dec 99 Jun 00 Dec 00 Jun 01
7
Completing the regional and wealth
management platform

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
8
Strong fee income despite stockbroking
liberalisation and weak markets
1H00
2H00
1H01
1H01 / 1H00
(%)
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
260
249
251
(3.7)
0.8
(S$ million)
Total fee income
Fee to income
ratio (%)
17.5
17.3
16.4
1H01 / 2H00
(%)
1998 – 2000
Fee Income CAGR: 36.2%
9
Other income : FX & securities trading
doubled
1H00
2H00
1H01
1H01 / 1H00
(%)
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
20
24
19
(5.0)
(20.8)
139
129
275
97.6
113.2
(S$ million)
Other income
Total
1H01 / 2H00
(%)
10
Emphasis on non-interest income yields
strong returns
(%)
Non-interest income to Operating Income *
37.1
28.7
30.4
29.7
Dec 00
Jun 00
23.8
Dec 98
Dec 99
Jun 01
* Excluding gains on disposal of non-core assets
11
Record growth in wealth management
products
Sales Volume
(S$ million)
900
Insurance
800
Investment products
791
700
180
573
600
15
500
222
400
611
558
300
200
544
322
314
100
0
2H99

1H00
2H00
1H01
Investment products include Horizon, Ei8ht, Up and other
DBSAM programs
12
Deposit base provides platform for cross
selling wealth management products
(S$ b)
Customer Deposits
Jun
2000
Dec
2000
Jun
2001
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
80.4
80.7
90.3
9.9
-
-
24.6
24.6
80.4
80.7
114.9
34.5
31.8%
32.3%
150
114.9
100
24.6
80.4
80.7
90.3 *
50
Sub-total
Dao Heng
Total
YoY
Difference
0
Jun 00
Dec 00
Jun 01
Market share of
S$ deposits
32.8%
* Include a once off short-term deposit of $5.0b
13
Completing the regional and wealth
management platform

Top line earnings impacted by weaker economic conditions
and adverse competitive environment

Focus on other non-interest income bolsters results

Expenses peaked amidst repositioning activities

Improved asset quality and strong capital position

Completing the regional and wealth management platform
14
Operating costs increased 26% due to timing
and non-recurring items
(S$ million)
1H00
2H00
1H01
1H01 / 1H00
(%)
1H01 / 2H00
(%)
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
15
Focused investment in people, technology
and products
(S$ million)
Cost-to-Income
Ratio:
Cost-to-Asset
Ratio(a):
+10
Others
Staff costs
1H2000
Computerisation
594
+13
Advertising
+108
+24
749 (+26.1%)
1H2001
39.90%
49.01%
1.10%
1.30%
(a) Annualized without Dao Heng Bank
16
Use of consultants winding down
Most significant investments completed between January 1, 2000 and June 30, 2001
Consultants now limited to implementation of specific, technical projects
Technology Procurement









Phone Banking
DBS Securities’ Projects
Customer Relationship Mgt
Treasury & Mkts System
E-Commerce/Payments
Risk Mgt System
Datawarehouse
Call Centre Automation
E-banking initiative
Measurement
 Cost & Profitability Mgt System
Re-engineering Processing & Services



Institutional Banking Group Reorganisation
Process Improvement
Procurement
Customer Service

Branch Reconfiguration
Integration

POSBank, DTDB & DKOB
Strategy Development


Retail Strategy
Improving Profitability (DTDB NPL,
Recapitalisation of DTDB, Sale of DBSL shares,
acquisition of BPI)
1998
1H99
1999
9M00
2000 1H01
2001
17
Performance enhancement program to
optimise efficiency
Improve processes for greater efficiency
Cost
management
measures
initiated to
contain increase
to 2000 growth
rate
Reduce focus on non-performing
businesses
Defer low revenue yielding projects
18
Low cost/income ratio by international
standards
Cost/Income for International Peers (a)
(%)
58.4
57.4
56.3
55.3
53.5
51.0
49.2
6.7
42.5
Stanchart
NAB
CBA
HSBC
Westpac
ANZ
DBS
1H2001
(a) Based on Dec 2000 cost/income ratios
19
Completing the regional and wealth
management platform

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
20
Asset quality continues to improve
(S$ million)
13.1%
13.0%
Dao Heng Bank
DBS Thai Danu Bank
5 Regional Countries
Others
Singapore
NBk NPL/NBk
Loans (%)
12.7%
11.8%
8,121
8,149
3,018
3,207
7,666
7,085
8.5%
3,000
2,874
7.6%
4,834
1,408
3,907
4,411
1,365
1,143
871
267
2.7%
1152
1070
772
1,112
366
97
649
151
2,705
6.2%
1,238
1,239
1,735
815
1,144
2,824
2,425
667
624
770
642
1,735
1,610
2,452
1,249
Dec 97 Jun 98 Dec 98 Jun 99 Dec 99 Jun 00 Dec 00 Jun 01
21
73% of NPLs are graded “Substandard”
8
S'pore
1,369
232
Substandard
111
85%
5RC
1,610
450
63
624
Loss
14
72%
Others
Doubtful
60 318
125
244
DKOB
193
5
323
170
Dao Heng
353
292
815
7
DTDB
Total
0
1,000
943
193
82%
1% 17%
3,554
435
844
73%
9%
18%
2,000
3,000
4,000
1,143
4,834
(S$’M )
5,000
22
Cumulative provisions covered 146.5% of
unsecured NPLs and 54.7% of total NPLs
General Provisions (GP)
Specific Provisions (SP)
(S$ million)
4,286
SP+GP/Unsec NPLs (%)
SP+GP/NPLs (SEC) (%)
SP+GP/NPLS (%)
3,978
3,852
1,191
1,174
3,147
1,294
1,115
2,804
2,558
119.6%
946
2,286
129.9%
1,894
88.1%
2,643
3,095
164.6%
102.7%
110.6% 118.4%
114.8%
1,049
60.8%
61.4%
146.5%
1,180
2,032
980
55.3%
63.0%
59.9%
1,463
801
48.5%
948
44.4%
47.4%
52.6%
51.9%
51.8%
1,237
54.7%
179
Dec 97 Jun 98 Dec 98 Jun 99 Dec 99 Jun 00 Dec 00 Jun 01
23
Further diversification post acquisition of
Dao Heng Bank
DBS + Dao Heng
DBS
13%
Hong Kong
12%
Others
36%
Hong Kong
75%
Singapore
Total Assets: S$116 bn
9%
Others
55%
Singapore
(June 2001)
Total Assets: S$156 bn
24
Efficient capital management
DBS Group Holdings Consolidated Capital Adequacy
(%)
35
30
25
1.7%
0.7%
1.2%
6.5%
20
18.9%
15
Tier II
4.5%
5.5%
Tier 1
14.4%
12.0%
1.5%
17.5%
10
5
0
Dec
2000
Hybrid
Tier 1
Preference Tier 2
Sub-debt
Shares
(a
)
(b)
1H01 Adjustments
for
Net
Income Dao Heng/
Others
Jun
2001
(a) Includes goodwill, minority interest and capital required against asset base.
25
DBS capital position post Dao Heng
DBS will maintain a healthy buffer above the regulatory Tier I requirement of 8%
(%)
12
10.0
9.2
8.4
8
7.7
7.5
7.3
7.2
7.0
6.0
4
0
* Source : Annual reports of respective banks
26
Completing the regional and wealth
management platform

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
27
Putting the strategy together – positioning
for the future
Consumer
Banking
Brokerage
Services

Focused
areas
Bancassurance
Wholesale Banking: Capital Markets, Advisory, Treasury,
FX and Trade Financing
Vickers Ballas
Frank Russell
TD Waterhouse
CGNU
DBS / OUB
Dao Heng
Kwong On
Thai Danu
BPI
Optimal Organisation
Policies, Processes
and Systems
Leading IT Capabilities
Balanced
Channel Mix
Efficient Capital
Structure
 Business units
 Aligned internal
 On-line, real-time systems
 Comprehensive,
 Usage of
reorganised
 Built seasoned
management team
 Enhanced training
 Redesigned incentive
systems
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
 Data warehouse application
complementary
channel mix
sophisticated
capital
instruments
with data mining capabilities
(CRM)
 Reconfigured
 Maximise nonbranches
 E-commerce infrastructure
dilutive capital
 Integrated on-line
 E-payment gateway
 Sale of non-core
services
assets





Scale / Scope
Regionalisation /
diversification
Growth / market
share
Pricing flexibility
Infrastructure
building and
reorganisation
substantially
completed
28
Strategic roadmap
Infrastru
Infrastructure
 Vickers Ballas
cture
Products
 TD Waterhouse
 Frank Russell
 CGNU
Significant
infrastructure
investment to
create world class
back office and STP
initiatives
Geography
 Dao Heng / Kwong On
 OUB
29
Strategic roadmap: Geography

Establish critical mass, presence and scale in twin
pillars (Singapore, Hong Kong)
Infrastructure
Products
Infr
astr
uct
ure
Geography

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
30
Dao Heng harmonization ahead of schedule
Dao Heng Bank became a DBS subsidiary on
June 29, 2001
 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
(a) Assumes 100% of outstanding options exercised
31
Strategic roadmap: Infrastructure

Leverage infrastructure across business units
Infrastructure
Products

Create Regional Processing Centres for appropriate
processes

Centralize remaining branch back-office processes

Pursue selected out-sourcing, in-sourcing and cosourcing

Focus on quality (ISO certification of process
factories, 6 sigma initiative)
Infr
astr
uct
ure
Geography
Continue trend of significant unit cost reductions and
increase of straight-through processing rates
32
Strategic roadmap: Products


Asset
Accumulation

Enterprise
and
Consumer
Lending
Corporate &
Investment
Banking
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
Infrastructure
Products
Infr
astr
uct
ure
Geography
33
Bancassurance alliance accelerates wealth
management business
DBS has concluded a bancassurance alliance with CGNU
Transaction Highlights
 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
Strategic Rationale
 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
34
Only bank whose non-core asset disposals
largely completed
 Focusing on core banking and financial businesses
 Divested non-core assets ahead of MAS guidelines
What needs to be done
What we have done

Singapore Petroleum Company

DBS Land

DBS Tampines Centre

POSBank Centre

DBS Securities Building

Insurance Corporation of
Singapore (ICS)

4 listed companies (Keppel
Capital, NatSteel, Intraco,
CWT)
Insignificant
35
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
36
Completing the regional and wealth
management platform

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
37
Completing the regional and
wealth management platform
First Half 2001 Results Briefing
July 23, 2001