Performance Summary

DBS Group Performance for the First Half of 1999 (1H99)

1. A summary of the DBS Group's performance appears in Table 1 below.

   Table 1 : Summary of The DBS Group's Performance
   
   
   

2. Group operating profit rose by 92.9% to S$1,004.4 million in 1H99. The strong growth was attributable mainly to:
   
   (a) the acquisitions of POSBank and KOB;
   
   (b) higher net interest income due to higher net interest margins (1H99: 2.00%; 1H98: 1.69%);
   
   (c) higher proprietary trading profits on bonds and shares; and
   
   (d) exceptional profit from the divestment of the Bank's stake in SPC ($117.1 million).
   
   Excluding the consolidation of POSBank and KOB, and the profit on sale of SPC shares, Group operating profit would have increased by approximately 29.7% yoy.
   
   
3. Total provisions made in 1H99 amounted to S$335.8 million. This included specific provisions of S$258.8 million for DBS Thai Danu Bank's loans (DTDB), S$39.1 million for loans to the Regional Countries (excluding DTDB) and S$57.8 million for loans in Singapore and to borrowers in other countries. The provisions made in 1H99 were lower than the second half of 1998 as the rate of increase in NPLs moderated. Details of provisions by period appear in Table 2 below.
   
   Table 2 : Total Provisions For DBS Group
   
   
   
   
4. KOB's results were consolidated in the Group's results from May 1999. Following the acquisition of KOB, a more in-depth review of the bank's loan book was conducted in conjunction with our external auditors, PricewaterhouseCoopers. Loan grading and provisioning policies, which are in conformity with DBS' standards and are more stringent, were adopted. In addition, DBS Group has built up additional general provisions amounting to HK$648 million (DBS' 87.27% share amounted to HK$566 million) for contingency purposes (see paragraph 5 below). This brings cumulative specific and general provisions at end-June 1999 to HK$1.51 billion, or 158% of unsecured NPLs. KOB's non-performing loans (NPLs) at end-June 1999 amounted to HK$2,479 million (S$543 million or 13.3% of total loans) compared to HK$2,007 million (S$440 million or 10.8% of total loans) based on guidelines prescribed by the Hong Kong Monetary Authority.
   
   
5. The total investment cost of DBS' 87.27% effective interest in KOB amounted to HK$3,010 million.^5/ After taking in the additional provisions to be made by KOB in accordance with DBS' policies, DBS' share of the adjusted net tangible asset value of KOB at the date of acquisition was HK$3,576 million. As a matter of prudence, the excess of the net tangible asset value over the investment cost amounting to HK$566 million was set aside as a general provision reserve to provide for the potential contingent payment for KOB shares ^5/ or additional provisions for loan losses which may arise on or prior to 30 June 2000.
   
   
6. Group net profit attributable to members increased by 301.2% to S$655.0 million in 1H99. Excluding the impact of POSBank and KOB, and profit from sale of SPC shares, net profit would have grown by 138.7% yoy.
   ________________
   ^5/ This excludes the potential contingent payment on 269,136,453 KOB shares where the consideration for the acquisition is HK$9.00 per share plus a contingent unit. The value of the contingent unit ranges from 0 to HK$2.50 per share, depending on the loss ratio of KOB's assets as at 30 June 2000.
   
   
7. Group non-performing loans (NPLs) increased from S$7.1 billion at end-December 1998 (December 1997: S$1.1 billion) to S$8.1 billion at end-June 1999. Of the total NPLs of S$8.1 billion,
   • S$ 2.2 billion (27%) were non-defaulting but graded substandard;
   • S$ 4.6 billion (57%) were in the substandard category; and
   • S$ 4.6 billion (57%) were secured by collateral.
   
   
8. • Total cumulative specific and general provisions at end-June 1999 amounted to 111% of unsecured NPLs.
     

     Details of NPLs and provisions made appear in the charts that follow.
     Group NPLs at end-June 1999 amounted to S$8,121.1 million. Of this amount, non-bank NPLs amounted to S$8,089.0m, representing 13.1% of total non-bank loans, compared to 11.8% at end-December 1998.

     
     
     
     
   • Unsecured NPLs were fully covered by cumulative specific and general provisions at end-June 1999.
     
     
     
     
   • 88% (S$2.5 billion) of the Singapore NPLs are in the substandard category of which 62% (S$1.6 billion) were non-defaulting but classified due to assessed weakness in borrowers' financial strength or loan restructuring. Singapore NPLs were spread across various industry sectors.
     
     
     
     
     
9. DTDB's NPLs increased from S$2.87 billion (49.1% of total loans) at end-December 1998 to S$3.02 billion (57.5% of total loans) at end-June 1999. Cumulative specific and general provisions increased from S$1.17 billion to S$1.43 billion (107% of unsecured NPLs) for the same period. Loan grading and provisioning policies are in compliance with MAS' guidelines. DTDB has made progress in restructuring its NPLs with about 15 billion baht of its NPLs successfully restructured to date. However, in accordance with MAS' guidelines, restructured NPLs may not be upgraded to performing loans until debt servicing has occurred according to plan for at least one year following the restructuring.
   
   
10. Group total assets increased by S$39.5 billion or 55.0% to S$111.4 billion due mainly to the consolidation of POSBank's and KOB's assets amounting to S$31.1 billion and S$5.8 billion, respectively. Group customer loans increased by S$14.1 billion or 32.4% to S$57.8 billion (of which POSBank and KOB accounted for S$12.8 billion and S$3.9 billion, respectively). Group customer deposits increased by S$41.4 billion or 99.1% to S$83.1 billion due mainly to the consolidation of POSBank's and KOB's customer deposits amounting to S$29.8 billion and S$4.8 billion, respectively.