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Primed For Growth, Well-Positioned Against Downside Risks

Primed For Growth, Well-Positioned Against Downside Risks. FY2000 Results Briefing. March 5, 2001. Panelists. DBS Corporate Office. S. Dhanabalan Chairman Philippe Paillart Chief Executive Officer Jackson Tai Chief Operating Officer Kee Choe Ng Vice Chairman

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Primed For Growth, Well-Positioned Against Downside Risks

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  1. Primed For Growth, Well-Positioned Against Downside Risks FY2000 Results Briefing March 5, 2001

  2. Panelists DBS Corporate Office S. Dhanabalan Chairman Philippe Paillart Chief Executive Officer Jackson Tai Chief Operating Officer Kee Choe Ng Vice Chairman Frank Wong Senior Managing Director Also available for questions Chong Kie Cheong Finance Director Ong Siew Mooi Head, Group Finance Lim Lay Hong Financial Reporting Tony Raza Investor Relations

  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. Net Profits increased by 30% (S$ million) 1999 2000 Change (%) Net interest income 2,035 2,039 0.2 Fee and commission income 423 508 20.2 Dividends and rental income 62 115 85.3 Other 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 29.6 Excluding exceptionals 897 1,351 50.5

  5. (S$ million) 1,389 1,072 Core profits up 51% Excluding exceptionals, growth was 50.5%

  6. (%) 2.5 Net interest margin (gross) 2.02 2.02 2.0 1.77 1.73 1.5 Net interest income and margins were maintained (S$ million) 2500 Net interest income 2,039 2,035 2000 1,430 1500 1,002 1000 500 0 1997 1998 1999 2000 • Excluding the funding costs for BPI, interest margins for 2000 would have been 2.09%

  7. Fee to Income Ratio (%) 14.6 14.0 17.3 Fee income rose 20% (S$ million) 1998 1999 2000 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 Proforma for FY00 the Vickers merger raises DBS’s fee to income ratio to 21.6%

  8. Other Income: Treasury FX improved 32%

  9. Excluding the variance from DKOB, which was consolidated from May 1999, the expense increase would have been 12% Operating costs increased within budget (S$ million) 1999 2000 Change (%) 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

  10. Most costs tied to specific investments (S$ million) (+17.0%) DKOB Others DBS Securities DBS China Square DBS Thai Danu Advertising Consultancy Other subsidiaries Computerisation Staff costs DBS Bank (+182m) 1999 2000 • At the Bank level, staff costs, technology expenses and advertising expenses accounted for 58% of the increase in operating expenses

  11. Consultants now limited to implementation of specific, technical projects Technology Procurement • Phone Banking • Procurement • DBS Securities’ Projects • Customer Relationship Mgt • Treasury & Mkts System • E-Commerce • Risk Mgt System • Datawarehouse • Call Centre Automation • Business Intelligence • Achieve Measurement • Cost & Profitability Mgt System Re-engineering Processing & Services • Institutional Banking Group Reorganisation • Process Improvement 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 2000 1H01 2001 9M00

  12. Provisions declined by S$1 billion (S$ million) 1999 2000 Change 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)

  13. Profitability surpassing pre-crisis levels ROA (%) • ROA has returned to pre-crisis levels • ROE has surpassed pre-crisis levels even though CAR has returned to similar levels. ROE (%)

  14. Assets are mostly from Singapore Rest of World 5% Other Asia-Pacific 10% Other ASEAN 4% Singapore 81% • 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. Overseas revenues are starting to contribute more Rest of World 2% Other Asia-Pacific 12% Other ASEAN 4% Singapore 82% • 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

  16. Customer loans (S$ billion) (%) Customer deposits L/D ratio Balance sheet shrank due to soft loan demand and shedding of low-yielding assets Dec 99 Jun 98 Dec 00 Jun 99 Dec 97 Jun 00 Dec 98

  17. Decline in gross loans tapers off (S$ million) Change in Loans (Half on Half) 13,959 30.7% 4,290 10.4% 2,041 3.4% -4.8% -3.7% -3.8% (2,053) (2,220) (2,965) Dec 98 Dec 00 Dec 99 Jun 98 Jun 99 Jun 00 • 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.

  18. Decline in deposits offset by other products (S$ million) Change in balance (Half on Half) Deposits Other products 526 347 320 314 (847) (1,866) Dec 99 Jun 00 Dec 00 • Other products include the Horizon, Eight, and Up programs

  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. DBS Thai Danu Bank (S$ million) DBS Kwong On Bank 5 Regional Countries Others 8,121 Singapore 8,149 7,666 NBk NPL/NBk Loans (%) 7,085 4,411 3,907 1,112 Significant decline in NPLs in second half 2000

  21. Most NPLs are classified substandard; some are still current NPLs (2000) Substandard Doubtful 3,172 Loss 325 295 Total (ex-DTDB) 2,552 80% 32 Approx. S$0.7 bn current, or 20% of Substandard 1,238 DTDB 956 250 77% 20% 3% 4,411 3,508 358 546 Total (Incl-DTDB) 80% 12% 8% 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 0 500 1,000 (S$ million)

  22. General Provisions (GP) (S$ million) Specific Provisions (SP) SP+GP/Unsec NPLs (%) 4,286 SP+GP/NPLs (SEC) (%) 3,978 3,852 SP+GP/NPLS (%) 3,147 2,286 1,894 980 Provision coverage at 52% of NPLs or 61% on SEC basis

  23. NPLs much lower under SEC reporting and after adjusting for restructured loans 1999 2000 Singapore 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 3,724 Total 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% • 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%

  24. Overseas NPLs fell by S$3 billion or 53% December 1999 December 2000 (S$ million) NPLs NPL (%) NPLs NPL (%) 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

  25. 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

  26. Strong capital continues to provide a cushion against possible global economic slowdown (BIS)

  27. Few remaining non-core assets to dispose Capital further supported by valuation surplus (S$ million) 3,210 Properties Quoted investments 1,971 1,421 1,416 1,175

  28. Tier 2 Hybrid Tier 1 Tier 1 Optimal Structure* (*) Not to scale 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 (%) CAR (BIS) 25 18.9 19.2 20 15.6 15.8 3.5 4.5 15 1.2 2.0 10 15.7 14.6 14.4 13.6 5 0 Dec-97 Dec-98 Dec-99 Dec-00

  29. Even with excess capital, ROE has been improving Increasing the returns on capital CAR • 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. 14.0 25 ROE 12.0 20 10.0 15 8.0 6.0 10 4.0 5 2.0 0.0 0 1994 1995 1996 1997 1998 1999 2000 Capital 12,000 14.00 ROE 12.00 10,000 10.00 8,000 8.00 6,000 6.00 4,000 4.00 2,000 2.00 0 0 1994 1995 1996 1997 1998 1999 2000

  30. Dividend rate hiked 80% (Cents)

  31. 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

  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. Japan and Korea Greater China Southeast Asia and Hong Kong Australia and India Building Asia’s best bank Focus on ASEAN and Hong Kong We have the capital resources and commitment to achieve this goal

  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 Bank - Asset Management - Financial Planning - On-line services Treasury & Markets - FX - Derivative Research — DBS Vickers Branding — Products & Services Distribution - 368 remisers & dealers - 11% market share - Singapore, HK, Thailand Origination - Leading IPO, Debt market share - Securitisation capability Fulfillment Regional IT/OP Platform

  36. 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

  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. 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

  40. Primed For Growth, Well-Positioned Against Downside Risks FY2000 Results Briefing March 5, 2001

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