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Interim 2000 Results Briefing

Interim 2000 Results Briefing. Transforming to World-Class. July 2000. Transforming to World-Class. Interim results reflect broad-based improvement in operations Regional asset quality continues to improve Well-positioned for expansion and growth. Transforming to World-Class.

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Interim 2000 Results Briefing

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  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 : + S$58m (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 : + S$76m (41.1%)

  8. Fee and commission income rose strongly

  9. “Other” income declined due to sale of SPC shares in 1H99 Growth : - S$115m (45.2%)

  10. Operating expenses rose 30% due to investments in staff and IT DKOB’s expenses IT expenses (S$ million) Growth : + S$138m (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 S$704 million (S$ 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 Total 1998 Total 1999 Interim 1999 Interim 2000 Ordinary dividend rate 18% 25% 9% 14% Amount (S$ million) 140.8 241.9 80.6 139.2 Payout rate 128.9% 22.3% 19.8%

  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. 13.1 13.0 12.7 11.8 8.5 9.0 7.7 8.4 8.2 @ 4.9 @ 4,029 4,225 @ @ 4,560 4,211 2.7 @ 2,172 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 @ Group NPLs excluding DTDB and DKOB. Note: Loans and NPLs include POSBank’s loans since Nov 98 and DKOB’s 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 3% 56% 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. S$1.1 bn current, or 22.7% of Substandard 3,000 3% 56% 41% Total (Incl-DTDB) 7,666 64% 8% 28% (S$ million)

  23. SP+GP/NPLs (%) SP+GP/NPLs (SEC) (%) SP+GP/Unsec NPLs (%) 164.6 114.8 118.4 110.6 102.7 119.6 88.1 63.0 60.8 55.3 52.6 51.9 48.5 47.4 44.4 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. Regional Integration Center in Bangkok • Scrubbed loan book • Reclassified NPLs Dec 99 • 60% reserves in DBS’ books • Branch network cut by 1/3, headcount by 40% • Restructured more than 1/2 of NPLs Mar 2000 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 0.94 bn Bt 2.5 bn private placement Bt 2.14 bn Bt 1.96 bn Bt 11.0 bn rights offering Convertible preference shares (MCAPs) - Bt 7.5 bn Bt 10.6 bn Bt 2.9 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. Pro Forma on Sale of NPLs Bt 9.2 bn (14.1%) Bt 3.8 bn (41.3%) 11.0% 16.0% MAS Standards NPLs (68.6%) Bt 37.5 bn (54.6%) Bt 68.1 bn Loan Loss Reserve Bt 41.6 bn (61.1%) Bt 18.8 bn (50.1%) 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% CAR - Total 26.1%

  28. Pro Forma on Sale of NPLs S$ 6.3 bn (10.6%) S$ 3.0 bn (47.1%) DBS’ group NPLs will decline to 10.6% DBSH Group Books 30 Jun 00 NPLs S$ 7.7 bn (12.7%) Loan Loss Reserve S$ 4.0 bn (51.9%)

  29. 9.0 7.7 8.4 8.2 4.9 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 @ @ 4,029 4,225 @ @ 4,560 4,211 2.7 1,112 @ 2,172 Dec 97 Jun 98 Dec 98 Jun 99 Dec 99 Jun 00 @ Group NPLs excluding DTDB and DKOB. Note: Loans and NPLs include POSBank’s loans since Nov 98 and DKOB’s 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 Data warehousing & mining: Developing capabilities since 1997 to track cross selling effectiveness Activity Based Costing: Will enable measurement of profitability & hit rates by product, channel & customer Robust CRM system to be developed over 18-24 month period

  36. ATM Phone Banking Mobile Banking Internet Banking 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. DBS c2Pay Early mover in building leading E-business capabilities Using IT, e-business to expand our channels • 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 B2B

  40. Japan and Korea Greater China Southeast Asia and Hong Kong Australia and India 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, M&A Capital Adequacy Ratio (%) Tier 2 Raised US$500M Tier II capital through subordinated 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 US$500 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

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