DBS Group Performance

DBS Group Performance for First Half 1998

PERFORMANCE

1 The DBS Group achieved operating profit of S$544.2m in the first half of 1998, a 8.5% increase over the first half of 1997.

2 Total provisions for the first half of 1998 was S$315.5m compared to S$52.4m in the first half of 1997. Of the total provisions of S$315.5m, exceptional general provisions amounted to S$110.7m which were set aside to meet contingencies which may arise from the Group’s regional exposure.

3 Consequently, Group after-tax profit attributable to members for the first half of 1998 was S$178.6m. This compares with the S$358.3m achieved in the pre-Asian crisis period of first half 1997.

4 Compared to the second half of 1997, Group operating profit grew by 5.1% and after-tax profit increased by 128.7%. A summary of DBS Group’s performance is in Table 1.

TABLE 1 : SUMMARY OF DBS GROUP’S PERFORMANCE

5 The accounts of Thai Danu Bank (TDB) have been consolidated into the DBS Group’s accounts following the completion of the Bank’s acquisition of its 50.27% stake in March 1998. In anticipation of the worsening economic situation in Thailand, we reviewed and wrotedown, at the time of acquisition, the value of our investment in TDB from its book net tangible asset value (NTA) of 27.8 baht per share to its par value of 10 baht per share. This writedown reflects a provision level of 13.5 billion baht compared to 8.5 billion baht taken up in TDB’s 30 June 1998’s accounts. The loss of 5.044 billion baht reported by TDB for the first half of 1998, which brings its NTA to 19.2 baht per share, has therefore no impact on the DBS Group’s results. The cost of our investment in TDB is 20.7 baht per share. The difference between our cost and written down value is written off against the DBS Group’s capital reserves.

REGIONAL EXPOSURE

6 As at 30 June 1998, DBS Group’s exposure to the regional countries (Malaysia, Indonesia, Thailand, Korea and Philippines), which comprises both cross border and local exposures, amounted to S$9,772m. This included TDB’s exposure of S$5,708m. The changes in the Group’s exposure are set out in Table 2 below.

TABLE 2 : CHANGES IN DBS GROUP EXPOSURE TO THE REGIONAL COUNTRIES

Note : Exposure excludes loans to and investments in financial subsidiaries and overseas branches.

7 Details of the Group’s exposure to the regional countries (RC) as at 30 June 1998 are reflected in Table 3. The Group’s regional exposure amounted to 13.8% of total assets, of which TDB accounted for 8.0%.

TABLE 3 : DBS GROUP EXPOSURE TO RC AS AT 30 JUNE 98 S$’m

^a Non-bank loans include loans to governments and quasi-government entities.
# Insignificant

NON-PERFORMING LOANS

8 The Group’s non-performing loans (NPL) were as follows:-

TABLE 4: DETAILS OF NON-PERFORMING LOANS

9 Compared to 31 December 1997, the increase in NPL was due to:-

(i) more stringent criteria adopted for classifying NPL, as advised by MAS. Loans are automatically classified as NPL once the principal or interest payments on these loans are 3 months or more in arrears, in line with the practice that has increasingly been adopted internationally. This was stricter than the 6-month criteria used in the past for automatic NPL classification. In addition, as in the past, all loans to borrowers with weak financials are classified as NPL, regardless of whether they are in arrears;

(ii) continuing weakness in the regional economies which has also impacted the Singapore economy; and

(iii) consolidation of TDB’s NPL, details of which are as follows:-

TABLE 4A : TDB’S NON-PERFORMING LOANS AS AT 30 JUNE 98

10 The bulk of the Group’s NPL are in the substandard category. Full specific provisions have been made for all NPL in accordance with existing guidelines as follows: at least 10% for unsecured substandard loans; 50% for doubtful loans and 100% for bad loans. The Group’s cumulative general provisions amounted to 2.1% of the Group’s non-bank loans. Details of specific and general provisions are in Table 5.

TABLE 5: DETAILS OF PROVISIONS

^* TDB’s provisions were netted against its book NTA and the difference between the Bank’s cost of investment in TDB and its written down value  was debited to the Group’s capital reserves (see para 5).

11 Details of TDB’s provisions are as follows:-

TABLE 5A : TDB’S PROVISIONS AS AT 30 JUNE 98

GROUP SHAREHOLDERS’ FUNDS, UNREALISED VALUATION SURPLUSES AND CAPITAL ADEQUACY RATIO

12 The Bank’s capital has been further strengthened by approximately S$1b raised from its recent 1-for-5 Rights Issue. As at end-June 1998, shareholders’ funds of the DBS Group stood at S$8.2b and total capital adequacy ratio at 16.8% measured under BIS guidelines. In addition, unrealised valuation surpluses in DBS Group’s investments and properties amounted to S$1.3b.

13 The Board of Directors of DBS Bank is pleased to declare an Interim Dividend on ordinary shares of 9 cents per S$1.00 ordinary share, maintaining the same dividend rate as the previous year, on an enlarged ordinary share capital following the 1-for-10 Bonus Issue and 1-for-5 Rights Issue this year.