dbs group holdings fy2001 financial results presentation to media and analysts 2001 - a year of...
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DBS Group HoldingsFY2001 Financial Results
Presentation to Media and Analysts
2001 - A Year of TransformationFebruary 18, 2002
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 should be considered, with or without professional advice when deciding if an investment is appropriate. DBS Bank accepts no liability whatsoever with respect to the use of this document or its contents.
2
Resilient operating profit
Building three core businesses
Improving the geographical balance
Strong asset quality and capitalisation
A Year of Transformation
Implementing the strategy
3
Highlights of 2001 progress
` Total revenue $3,545m (2000 : $2,931m) 21%
Non-interest income $1,288m (2000 : $892m) 45%
Net interest income $2,257m (2000 : $2,039m) 11%
Normalized expenses (a) $1,445m (2000 : $1,246m) 16%
Operating profit (b) $1,804m (2000 : $1,685m) 7%
(a) Exclude acquisitions(b) Exclude goodwill amortisation
Fee income $639m (2000 : $509m) 26%
4
Net interest margin 1.87% (2000 : 2.02% )
NPLs 5.7% (2000 : 6.2%)
Most ratios resilient under challenging economic conditions
Cost-to-income (a) 49.1% (2000 : 42.5%)
Non-interest income / operating income 36.3% (2000 : 30.4%)
Cash ROA 0.9% (2000 : 1.3%)
Cash ROE 10.1% (2000 : 12.9%)
Loan-to-deposit 63.9% (2000 : 64.5%)
Cash EPS 89 cents (2000 : 113 cents)
(a) Exclude goodwill amortisation
5
(S$ million)(S$ million)
Growth in operating profit offset by provisions
Net interest income 2,039 2,257 10.7
Fees and commissions 509 639 25.7Non-interest income 892 1,288 44.5
Total revenue 2,931 3,545 20.9
Staff costs 613 866 41.1Other operating expenses 633 876 38.5Operating expenses 1,246 1,742 39.8
Operating profit 1,685 1,804 7.0
Goodwill amortisation - 131 NMProvisions 54 379 606.2
Net profit attributable to members 1,389 999 (28.1)Cash net profit attributable to members 1,389 1,131 (18.6)
Net interest income 2,039 2,257 10.7
Fees and commissions 509 639 25.7Non-interest income 892 1,288 44.5
Total revenue 2,931 3,545 20.9
Staff costs 613 866 41.1Other operating expenses 633 876 38.5Operating expenses 1,246 1,742 39.8
Operating profit 1,685 1,804 7.0
Goodwill amortisation - 131 NMProvisions 54 379 606.2
Net profit attributable to members 1,389 999 (28.1)Cash net profit attributable to members 1,389 1,131 (18.6)
2000 2001 % Change
6
Other operating expenses 158 291 84.0 226 28.9Operating expenses 311 523 67.8 470 11.2
Operating profit 408 450 10.3 574 (21.6)
Goodwill amortisation - 68 NM 64 6.7Provisions 16 87 438.2 246 (64.6)
Net profit attributable to members 347 169 (51.4) 201 (16.1)
Cash net profit attributable to members 347 237 (31.9) 265 (10.6)
Fees and commissions 117 214 83.2 174 23.0
Positive trends in interest income and fee income(S$ million)(S$ million)
DBS4Q00
DBS4Q01
% Change
DBS3Q01
% Change
Net interest income 480 707 47.3 588 20.2
Non-interest income 239 266 11.1 456 (41.7)
Total revenue 719 973 35.2 1,044 (6.8)
Staff costs 153 232 51.1 244 (5.2)
7
DBS half on half operating profit up 36.6%
Net interest income
Fees and commissionsNon-interest income
Total revenue
Staff costsOther operating expensesOperating expenses
Operating profit
Goodwill amortisation
Provisions
Net profit attributable to membersCash net profit attributable to members
(S$ million)(S$ million)
962
251567
1,529
389360749
780
-
47
630630
1H01 2H01 (%)Change
1,295
388721
2,017
476476952
1,065
131
332
370501
34.7
54.927.2
31.9
22.132.427.1
36.6
NM
606.0
(41.3)(20.4)
8
(S$ million)
9629931,0461,046989
1,295
2.00% 2.04% 2.07% 1.97%1.78%
1.94%
1H99 2H99 1H00 2H00 1H01 2H01
Net interest incomeNet interest margin (gross basis)
Interest margins stabilise in second half
2,039
2,257
2000 2001
2.02%
1.87%
9
Strong fee income growth
Trade finance
Deposit-related
Credit card
Loan-related
Investment banking
Stockbroking
Fund management
Others
Total
Fee-to-income ratio (%)
(S$ million)(S$ million)2000 2001
% Change
75
60
33
51
98
77
62
52
509
17.3
110
94
82
81
78
73
72
50
639
18.0
45.8
55.0
147.0
59.0
(20.0)
(5.9)
16.3
(3.4)
25.7
10
Expense growth on target
DBSH (excluding DHB and DBSV) (a)
Staff costsOccupancy expensesTechnology-related expensesProfessional and consultancy feesOthersTotal (excluding DHB and DBSV)
DHBDBSVRestructuring costsTotal
Cost-to-income ratio (%)
(S$ million)(S$ million)2000 2001
% Change
61314713273
2801,246
---
1,246
42.5
73417218049
3111,445
2183840
1,742
49.1
19.716.336.0
(33.1)11.016.0
NMNMNM
39.8
(a) Dao Heng Bank (“DHB”), DBS Vickers (“DBSV”)(a) Dao Heng Bank (“DHB”), DBS Vickers (“DBSV”)
11
16
345
93
749
33
389
87
696
0 300 600 900
Managing our costs and investments
IT-relatedExpenses
Staff Costs
Professional &Consulting
Total Operating Expenses
(excl. DHB & DBSV)
7%
7%
53%
11%
1st Half 2001
2nd Half 2001
(S$ million)(S$ million)
12
A Year of Transformation
Implementing the strategy
Resilient operating profit
Building three core businesses
Improving the geographical balance
Strong asset quality and capitalisation
13
Building three core businesses
Investment Banking
883
Consumer Banking1,528
Treasury 372
Central Operations
148
Operating Revenue 2000
(S$ million)(S$ million)
Investment Banking
852
Consumer Banking1,983
Treasury 561
Central Operations
149
Operating Revenue 2001
Total Operating Revenue S$2,931 million
Total Operating Revenue S$3,545 million
52%
30%
13%
5%
56%
24%
16%
4%
14
Consumer Banking highlight - Credit cards
Singapore
Cards in issue (‘000)
Receivables outstanding
(S$ million)
Market position
Hong Kong
Cards in issue (‘000)
Receivables outstanding
(S$ million)
Market position
359
326
#3
2000 2001%
Change
850
1,300
#3
450
424
#2
25
30
0
0
-
NM
NM
15
Consumer Banking highlight - Wealth management
Sales Volume
314
558
322
611764
222
180
189
174
15
4
0
200
400
600
800
1000
1200
2H99 1H00 2H00
(a) Treasury investment products include Growth and equity-linked notes(b) Unit trusts include Horizon, Ei8ht, Up! and other DBSAM programmes
1H01
314
573544
795
2H01
1,127
(S$ million)
Unit trusts (b)
Insurance / asset plan
Treasury investment products (a)
16
Bancassurance alliance with CGNU extended to Hong Kong
10 year Bancassurance alliance with CGNU for life and general insurance
Sale of DBS HK’s insurance subsidiaries, DBS Kwong On Insurance and Dao Heng Assurance, to CGNU
Total proceeds of S$112 million of which:– S$71 million return of book value of
subsidiaries– S$30 million book gain on subsidiaries– S$11 million upfront advanced payment for
bancassurance
Accelerates revenue growth in DBS HK’s wealth management business
Expands DBS sales channels in Hong Kong with the establishment of a specialist sales force dedicated to insurance and wealth management products
Provides DBS with a dedicated bancassurance product provider without equity investment
DBS retains ownership of customers and concentrates on distribution, leaving product manufacturing to CGNU
Allows DBS to exit the Hong Kong insurance underwriting business
Transaction Highlights Strategic Rationale
17
Extending Investment Banking capabilities
Equity capital markets 8.9 -83%
Debt capital markets 32.2 36%
Syndicated loans 13.3 75%
Mergers & acquisitions 7.6 7%
Equity capital markets 8.9 -83%
Debt capital markets 32.2 36%
Syndicated loans 13.3 75%
Mergers & acquisitions 7.6 7%
Fee income 2001
(S$ million)
% Change from 2000
18
Treasury highlight - FX & securities activities(S$ million)(S$ million)
2000 2001%
Change
Net gains on
- Foreign exchange
- Securities and derivatives
- Singapore government securities
Net gains on
- Foreign exchange
- Securities and derivatives
- Singapore government securities
119
23
33
119
23
33
230
94
80
230
94
80
93.1
308.7
142.5
93.1
308.7
142.5
19
A Year of Transformation
Implementing the strategy
Resilient operating profit
Building three core businesses
Improving the geographical balance
Strong asset quality and capitalisation
20
Improving the geographical balance
Singapore 80.8%
Rest of the World
4.5%
Hong Kong32.5%
Total Assets S$151.3 billion
Assets 2001
Regional 5 Countries
3.4%
Singapore 59.6%
Rest of the World
5.6%
Hong Kong9.2%
Assets 2000
Total Assets S$111.2 billion
Regional 5 Countries
4.4%
21
Dao Heng’s top line improving
Net interest income 150 171 14.0
Fees and commissions 51 57 10.8
Non-interest income 75 64 (14.6)
Total revenue 225 235 4.5
Staff costs 56 57 2.0Other operating expenses (a) 50 74 46.6
Operating expenses 106 131 22.9
Operating profit 118 104 (12.2)
Provisions 24 (2) NM
Net profit after tax 84 114 36.4
Net interest income 150 171 14.0
Fees and commissions 51 57 10.8
Non-interest income 75 64 (14.6)
Total revenue 225 235 4.5
Staff costs 56 57 2.0Other operating expenses (a) 50 74 46.6
Operating expenses 106 131 22.9
Operating profit 118 104 (12.2)
Provisions 24 (2) NM
Net profit after tax 84 114 36.4
(S$ million)(S$ million) DHB3Q01
DHB4Q01
% Change
(a) Restructuring cost of S$19 million included
22
DBS Kwong On Bank’s operating profit growing(S$ million)(S$ million) DKOB
2000DKOB2001
% Change
(a) Restructuring cost of S$4 million included
Net interest income 184 223 21.2
Fees and commissions 19 32 68.5Non-interest income 43 49 13.9
Total revenue 226 271 19.8
Staff costs 79 96 20.3Other operating expenses (a) 49 73 50.1Operating expenses 128 169 31.6
Operating profit 98 103 4.4
Provisions 0.2 67 NM
Net profit after tax 84 28 (67.4)
Net interest income 184 223 21.2
Fees and commissions 19 32 68.5Non-interest income 43 49 13.9
Total revenue 226 271 19.8
Staff costs 79 96 20.3Other operating expenses (a) 49 73 50.1Operating expenses 128 169 31.6
Operating profit 98 103 4.4
Provisions 0.2 67 NM
Net profit after tax 84 28 (67.4)
23
DBS Thai Danu turns S$7.1m net profit(S$ million)(S$ million) DTDB
2000%
ChangeDTDB 2001
Net interest income 76 90 18.6
Fees and commissions 13 15 21.8Other income 16 16 (2.5)Non-interest income 29 31 8.0
Total revenue 105 121 15.8
Operating expenses (a) 89 86 (2.6)
Operating profit 16 35 118.2
Non-operating expenses 11 9 (21.5)Provisions 23 18.9 (18.2)
Net profit after tax (529) 7.1 NM
Net interest income 76 90 18.6
Fees and commissions 13 15 21.8Other income 16 16 (2.5)Non-interest income 29 31 8.0
Total revenue 105 121 15.8
Operating expenses (a) 89 86 (2.6)
Operating profit 16 35 118.2
Non-operating expenses 11 9 (21.5)Provisions 23 18.9 (18.2)
Net profit after tax (529) 7.1 NM
(a) Standalone statement for DBS Thai Danu
24
A Year of Transformation
Implementing the strategy
Resilient operating profit
Building three core businesses
Improving the geographical balance
Strong asset quality and capitalisation
25
2,705 2,8242,425 2,452
1,735 1,610 1,528
642772
1,239
1,408 1,365 1,144
624
1,735
2,874
3,018 3,2073,000
1,2381,143 1,004
1,249649
605770
1,0701,152871
267
151
631
366
667
744
815
2.7%
11.8%
13.1% 13.0%
8.5%
12.7%
7.6%
6.2%
Asset quality improving with further decline in NPLs to 5.7%
Dao Heng BankDBS Thai Danu BankRegional 5 CountriesOthersSingaporeNBk NPLs / NBk Loans (%)
5.7%
1,112
3,907
7,086
8,121 8,1497,666
4,4114,834
4,512
Dec 97 Jun 98 Dec 98 Jun 99 Dec 99 Jun 00 Dec 00 Jun 01 Dec 01
(S$ million)
97
26
Provision coverage improved from 52% to 60%
801
1,115
1,294
1,191
1,174
2,558
2,804
2,032
3,095
1,237
179
948
1,463 1,658
1,049
1,180
946
1,061
General Provisions (GP)Specific Provisions (SP)
SP+GP / NPLs (SEC) (%)SP+GP / Unsec NPLs (%)
SP+GP / NPLs (%)
980
1,894
3,147
3,852
4,286
3,978
2,286
2,643 2,719
Dec 97 Jun 98 Dec 98 Jun 99 Dec 99 Jun 00 Dec 00 Jun 01 Dec 01
146.5%
164.6%
119.6%
102.7%
110.6%118.4%
114.8%129.9%
54.7%51.8%51.9%52.6%47.4%44.4%48.5%
88.1%
59.9%55.3% 63.0% 60.8% 61.4%
142.5%
64.1%
60.2%
(S$ million)
Post Dao Heng consolidation
27
906(20.1%)
2,144(28.0%)
844(17.5%)
546(12.4%)
2,576(31.6%)
358(8.1%)
621(7.6%) 579
(7.6%)
520(11.5%)
435(9.0%)
3,508(79.5%)
4,943(64.5%)
4,952(60.8%)
3,086(68.4%)
3,554(73.5%)
13.0%12.7%
7.6% 6.2%5.7%
-800
200
1200
2200
3200
4200
5200
6200
7200
8200
Dec 99 Jun 00 Dec 00 Jun 01 Dec 01
NPLs down but migrating to doubtful and loss categories
Loss
Doubtful
(S$ million) Substandard
8,1497,666
4,4114,834
4,512
NPLs / Loans (%)
Post Dao Heng consolidation
28
Provision charge up but disproportionately to loan growth
Provisions / RWA (%)
379
54
1,063996
496
850.44%
0.08%
1.59%1.53%
0
400
800
1200
1996 1997 1998 1999 2000 2001
(S$
mill
ion
)(S
$ m
illio
n)
NPLs (%)
Provisions (S$ million)
5.7%
7.6%
13.0%11.8%
Basis P
oin
t Ch
ang
e Per Y
ear (%)
8
10
12
14
2
1
~~
29
Tier I8.5
Tier I12.2
Tier I14.4
- 0.4
Tier II5.6
Tier II5.2
Tier II4.5
1.2
1.71.3
1.82.6
-2.1
-7.5
0
5
10
15
20
25
30
35Efficient capital management
DBS Group Holdings Consolidated Capital Adequacy Ratio(%)(%)
Dec2000 Dec
2000
HybridTier 1
HybridTier 1
PreferenceShares
PreferenceShares
Tier 2Sub-debt
Tier 2Sub-debt
2001Net
Income
2001Net
Income
Adjustmentsfor
Dao Heng/Other
Adjustmentsfor
Dao Heng/Other
Dec2001Dec2001
Equity Issue
Equity Issue
March March MayMay MayMay NovNov
18.917.4
14.1
Dec 2001Proforma for
Dao Heng2nd tranche
Dec 2001Proforma for
Dao Heng2nd tranche
DividendsDividends
RWAExpansion
RWAExpansion
30
Maintaining dividend rate for shareholders
9 9 914 14
9 916
16 16
15
32%31%
22%
128%
23%
0
10
20
30
40
50
1997 1998 1999 2000 2001
0
70
140
Interim dividends Final dividends
Special dividends Payout (%)
(Cents) (%)
31
A Year of Transformation
Implementing the strategy
Resilient operating profit
Building three core businesses
Improving the geographical balance
Strong asset quality and capitalisation
2001 - A Year of TransformationFebruary 18, 2002
DBS Group HoldingsFY2001 Financial Results
Presentation to Media and Analysts