DBS Group Holdings First Half 2002 Financial Results

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  • 1. July 22, 2002 Better execution despite weak markets DBS Group Holdings 1H 2002 Financial Results Presentation to Media and Analysts This presentation is available at www.dbs.com Disclaimer: The material that follows is a presentation of general background information about the Bank’s activities current at the date of the presentation. 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.
  • 2. Better execution despite weak markets  Delivering more disciplined financial results  Strategy intact, focus is now on execution 2
  • 3. 1st Half 2nd Half 1st Half YoY operating profit up 41% 2Q 1Q 2002 4Q 3Q 2001 2Q 1Q 2001 % % (S$ million) 1H 2002 2H 2001 Change 1H 2001 Change 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 3
  • 4. 1st Half 2nd Half 1st Half 2Q 1Q 4Q 3Q 2Q 1Q 2002 2001 2001 Comparison of 1H 2002 vs. 1H 2001 Net interest income $1,321m $962m 37% Fee income $403m $251m 61% Non-interest income $698m $567m 23% ` Total operating income $2,020m $1,528m 32% Operating expenses $920m $749m 23% Operating profit (a) $1,100m $779m 41% Cash net profit (b) $668m $629m 6% (a) Excludes goodwill (b) Net profit before goodwill amortization 4
  • 5. 1st Half 2nd Half 1st Half 2Q 1Q 4Q 3Q 2Q 1Q 2002 2001 2001 Comparison of 1H 2002 vs. 1H 2001 Net interest margin 1.99% 1.78% Cost-to-income (a) 45.5% 49.0% Non-interest inc. / operating inc. 34.6% 37.1% Cash ROA (b) 0.88% 1.08% Cash ROE (b) 9.71% 11.36% NPLs 5.9% 6.2% Loan-to-deposit 62.7% 60.6% Cash EPS ($) (c) 0.91 1.02 (a) Excludes goodwill (b) Annualized 5 (c) Earnings per share before goodwill amortization, annualized
  • 6. 1st Half 2nd Half 1st Half HoH operating profit up 7% 2Q 1Q 2002 4Q 3Q 2001 2Q 1Q 2001 % % (S$ million) 1H 2002 2H 2001 Change 1H2001 Change 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 6
  • 7. 1st Half 2nd Half 1st Half Quarterly operating profit up 51% 2Q 1Q 2002 4Q 3Q 2001 2Q 1Q 2001 % % (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 Non-interest income 344 354 (3) 248 39 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 (a) Net profit before goodwill amortization 7
  • 8. 1st Half 2nd Half 1st Half 2Q 1Q 4Q 3Q 2Q 1Q 2002 2001 2001 Comparison of 2Q 2002 vs. 1Q 2002 Net interest income $651m $670m 3% Fee income $210m $193m 9% Non-interest income $344m $354m 3% ` Total operating income $995m $1,024m 3% Operating expenses $460m $459m no change Operating profit (a) $535m $565m 5% Cash net profit (b) $322m $346m 7% (a) Excludes goodwill (b) Net profit before goodwill amortization 8
  • 9. 1st Half 2nd Half 1st Half 2Q 1Q 4Q 3Q 2Q 1Q 2002 2001 2001 Comparison of 2Q 2002 vs. 1Q 2002 Net interest margin 1.96% 2.02% Cost-to-income (a) 46.3% 44.8% Non-interest inc. / operating inc. 34.5% 34.6% Cash ROA (b) 0.84% 0.91% Cash ROE (b) 9.22% 10.12% NPLs 5.9% 5.9% Loan-to-deposit 62.7% 60.5% Cash EPS ($) (c) 0.88 0.94 (a) Excludes goodwill (b) Annualized 9 (c) Earnings per share before goodwill amortization, annualized
  • 10. Interest margins improving (S$ million) Net interest income Net interest margin 1,321 1,295 1,046 1,046 989 993 962 2.04% 2.07% 1.94% 1.99% 2.00% 1.97% 1.78% 1H 1999 2H 1999 1H 2000 2H 2000 1H 2001 2H 2001 1H 2002 10
  • 11. Non-interest income holding well at mid 30% range (%) Non-interest income to Operating income (a) 36 35 29 30 24 1998 1999 2000 2001 1H 2002 (a) Excludes extraordinary items 11
  • 12. Fee income now 20% of revenues 1H 2002 2H 2001 % % 1H 2001 Change (S$ million) Change 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 12
  • 13. Core expenses tracking well below previous target 2H 2001 % % (S$ million) 1H 2002 Change 1H 2001 Change 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”) 13
  • 14. Managing our costs and investments with discipline (S$ million) 1H 2002 2H 2001 1% Staff costs 335 339 Occupancy 74 20% expenses 93 IT-related 83 8% expenses 90 Total operating 645 5% expenses (excl. DHB & DBSV) 680 0 400 800 14
  • 15. Focusing on cost containment (S$ million) Period expenses (a) 712 680 645 1H 2001 2H 2001 1H 2002 (a) Normalized expenses excludes goodwill, restructuring costs and impact of acquisitions 15
  • 16. Singapore, Hong Kong are our twin hubs Assets Operating income 1H 2002 1H 2002 Regional Regional countries countries 3.1% 3.9% Hong Kong Rest of Hong Kong Rest of 31.5% the world 28.2% the world 3.6% 1.8% Singapore Singapore 61.8% 66.1% Total assets Total operating income S$152 billion S$2,020 million 16
  • 17. Dao Heng Bank operating profit up DHB DHB % (S$ million) (a) 1H 2002 2H 2001 Change 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) (a) Based on Singapore GAAP 17
  • 18. Synergies achieved - focus now on revenue opportunities in Greater China Achieved Distribution 2002 Target 1H 2002 (%) Key Revenue Initiatives:  Launch of new funds (knowledge sharing) 48 16%  ALCO Liquidity Management 16 5%  Cross-selling opportunities 84 28% (eg, T&M, Private banking, Equipment finance, Credit cards and other existing products) 147 50% 60% Revenue synergies Select Cost Initiatives: 15 5%  Accelerated implementation of branch closures 123 41%  Active capacity management largely through vacancies and attrition 11 4%  Back office and IT centralization 149 50% 40% Cost synergies HK$296 m 100% HK$450 m (a) Total synergies (a) 60% of synergy target is expected for 2002 of a total of HK$750 million 18
  • 19. DBS Thai Danu Bank operating profit up 1H 2002 2H 2001 % % 1H 2001 Change (S$ million) Change 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$0.042. Based on Thai GAAP 19
  • 20. Deepening DBS franchise in three core businesses (S$ million) Operating income Operating income 1H 2001 1H 2002 Consumer Investment Consumer Investment banking banking banking banking 846 420 1,230 345 27% 17% Treasury 375 Treasury 55% 25% 61% 21% 424 Central 1% Central operations operations (113) 20 Total operating income Total operating income S$1,528 million S$2,020 million 20
  • 21. Wealth management continues to grow (S$ million) Insurance / asset plan Sales Volume Unit trusts / Treasury investment products (a) 2500 1,952 2000 235 1500 1,127 1000 795 189 573 1,717 544 180 15 500 314 938 222 558 615 314 322 0 2H 1999 1H 2000 2H 2000 1H 2001 2H 2001 1H 2002 (a) Unit trusts include Horizon, Ei8ht, Up! and other DBSAM programmes while treasury investment products include Growth, Surf and structured notes 21
  • 22. Expanding credit card franchise in twin hubs 1H 2002 2001 2000 Singapore Cards in issue (‘000) 501 450 359 Receivables outstanding 466 424 326 (S$ million) Market position #2 #2 #3 Hong Kong Cards in issue (‘000) 914 850 - Receivables outstanding 1,187 1,300 - (S$ million) Market position #3 #3 - 22
  • 23. delivers impressive results in 8 months Launch to 1H 2002 1H 2001 Singapore - launched in 4Q 2001 Customers (‘000) 85 0 Receivables outstanding 191 0 (S$ million) Market share 18% 0 23
  • 24. Seizing opportunities in Investment Banking Fee income % Change (S$ million) 1H 2002 vs 2H 2001 Equity capital markets 11.8 37% Debt capital markets 5.3 7% Syndicated loans 16.3 105% Mergers & acquisitions 5.6 113% 24
  • 25. Improving Treasury & Markets’ depth, geographic diversity 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 Treasury revenues better diversified Operating income Operating income 1H 2001 1H 2002 Hong Kong (a) Hong Kong Singapore 8% Singapore 28% 89% 70% Others 3% Others 2% (a) Excludes Dao Heng 25
  • 26. Quantum of NPLs continues to decline Dao Heng Bank (S$ million) DBS Thai Danu Bank 13.0% Regional 5 Countries 11.8% 8,149 Others Singapore 7,086 7.6% 7.3% NBk NPLs / NBk Loans (%) 6.2% 6.0% 3,207 5.7% 5.9% 5.9% 2,874 4,834 4,577 4,411 4,305 4,512 4,503 4,360 2.7% 1,365 815 777 744 699 580 1,238 1,191 1,239 1,143 1,101 1,004 995 972 267 1,152 667 661 624 606 632 738 768 770 723 642 607 605 552 563 1,112 2,705 2,425 366 1,735 1,730 1,610 1,486 1,528 1,518 1,478 649 Dec 97 Dec 98 Dec 99 Dec 00 Mar 01 Jun 01 Sep 01 Dec 01 Mar 02 Jun 02 26
  • 27. NPLs improving at major subsidiaries (a) (S$ million) DBS Hong Kong DBS Thai Danu 8.3% 42.7% 7.1% 40.3% 38.0% 35.2% 5.2% 29.8% 28.7% 4.9% 27.8% 4.3% 4.1% 3.7% 1,238 1,238 1,191 1,150 1,143 1,085 1,101 1,011 1,004 995 972 879 541 494 Dec 00 Mar 01 Jun 01 Sep 01 Dec 01 Mar 02 Jun 02 Dec 00 Mar 01 Jun 01 Sep 01 Dec 01 Mar 02 Jun 02 (a) Based on MAS guidelines 27
  • 28. Provision coverage remains healthy (S$ million) General Provisions (GP) Specific Provisions (SP) SP+GP / Unsec NPLs (%) 4,286 SP+GP / NPLs (%) 1,191 3,147 2,643 2,719 2,633 1,115 2,286 3,095 1,179 1,061 1,031 1,048 146.5 142.5 2,032 129.9 129.2 118.4 102.7 1,464 1,658 1,602 1,237 44.4 52.6 51.8 54.7 60.3 60.4 Dec 98 Dec 99 Dec 00 Jun 01 Dec 01 Jun 02 28
  • 29. Percentage of doubtful and loss NPLs stable (S$ million) Substandard Doubtful Loss 8,149 8200 NPLs / Loans (%) 7200 13.0% 6200 4,952 5200 (61%) 4,411 4,512 4,503 4,360 4200 7.6% 5.7% 5.9% 5.9% 3200 621 3,086 3,094 (8%) 3,508 3,003 2200 (80%) (68%) (69%) (69%) 358 520 488 415 1200 2,576 (8%) (12%) (11%) (9%) (32%) 546 906 921 942 200 (12%) (20%) (20%) (22%) -800 Dec 99 Dec 00 Dec 01 Mar 02 Jun 02 29
  • 30. Proforma Tier 1 approaching target cushion (%) DBS Group Holdings Consolidated Capital Adequacy Ratio 24 20 19.2 18.9 17.4 17.6 3.5 16 4.5 14.1 4.9 14.4 5.2 12 5.6 5.2 8 15.7 14.4 12.2 12.6 4 8.5 9.2 0 Dec 99 Dec 00 Dec 01 Dec 01 Jun 02 Jun 02 Proforma for Proforma for Dao Heng Dao Heng 2nd tranche 2nd tranche 30
  • 31. Maintaining dividend rate for shareholders (Cents) (%) 50 40 33% 32% 31% 40 15 30 22% 20 16 16 20 16 10 14 14 14 9 0 0 1999 2000 2001 1H 2002 Interim dividends Final dividends Special dividends Payout rate (%) 31
  • 32. Better execution despite weak markets  Delivering more disciplined financial results  Strategy intact, focus is now on execution 32
  • 33. New DBS management team S Dhanabalan : Chairman Corporate Office Jackson Tai : Vice Chairman & CEO Ng Kee Choe : Vice Chairman, DBS Bank Frank Wong : Chairman, DBS Hong Kong Jackson Tai Ng Kee Choe Frank Wong Oon Kum Loon (CFO) Geography  Overall  Singapore  Hong Kong  Greater China Products &  Consumer  Risk  Treasury &  Finance Services Banking Group Management Markets  Shared Services  Enterprise  Credit  Investment Banking Management Banking  Support units  Information  DBS Vickers Technology  Processing & Servicing 33
  • 34. 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 conditions 34
  • 35. Focused on delivery Jun 2002 Dec 2000 % change Branches – Singapore 93 114 18% – Hong Kong 81 101 20% (a) Group head count 12,337 >14,200 13% (a) Approximate combined head count number because Dao Heng was only consolidated starting June 29, 2001 35
  • 36. Management depth for the next phase Management Area of focus Experience 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 Rajan Raju Processing & servicing > 12 years Seck Wai Kwong Wealth management > 20 years Greg Seow Securities > 25 years Randy Sullivan Hong Kong > 31 years Pornsanong Tuchinda Thailand > 16 years Wong Ban Suan Central treasury > 20 years 36
  • 37. July 22, 2002 Better execution despite weak markets DBS Group Holdings 1H 2002 Financial Results Presentation to Media and Analysts This presentation is available at www.dbs.com Disclaimer: The material that follows is a presentation of general background information about the Bank’s activities current at the date of the presentation. 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.