DBS THAI DANU BANK - UNAUDITED FINANCIAL RESULTS FOR THE NINE MONTHS ENDED 30 SEPTEMBER 1999

SECTOR OVERVIEW
The real economy showed some signs of improvement growing by 3.5% during the period under review. However, credit demand remained weak despite abundant liquidity in the banking sector. Considerable progress was made by Thai banks in the restructuring of non-performing loans (NPLs), though the overall level of NPLs stayed relatively high.

FINANCIAL HIGHLIGHTS

Performance Summary
A summary of the performance of DBS Thai Danu Bank (the Bank) is shown in the following table:

SUMMARY OF DBS THAI DANU BANK PERFORMANCE(Baht' Million)

Operating under a difficult environment, the Bank incurred a loss of Baht 1.7 billion at the operating level. The Bank's operating performance was affected by :

(i) the non-accrual of interest on NPLs;
(ii) the negative margins on deployment of the Bank's excess liquidity; and
(iii) the loss on sale and revaluation loss of foreclosed properties.

After provisions and tax, the loss was Baht 11.3 billion, compared to a loss of Baht 5.8 billion for the same period in 1998.

No adjustment to the Bank's provisions was made in the third quarter. The Bank currently has provisions of Baht 18.4 billion computed in accordance with guidelines of Bank of Thailand (BOT). This is equivalent to around 75% of total requirements which is greater than the 60% required by end 99 under BOT guidelines.

Deposits and Loans

The Bank actively managed down its deposit base to reduce its excess liquidity. Compared to the earlier period, customer deposits decreased by Baht 22.9 billion to Baht 92.0 billion. Reflecting the lack of lending opportunities and the Bank's prudent approach to lending, customer loans amounted to Baht 101.7 billion, a reduction of Baht 9.3 billion.

ASSET QUALITY AND CAPITAL ADEQUACY

Asset Quality

The Bank has been actively recovering and restructuring its NPLs, and progress has been made. After peaking in first quarter of 1999 at Baht 67.0 billion, NPLs, based on BOT guidelines and classified on a customer basis, were brought down to Baht 61.4 billion end June and Baht 55.9 billion end September as a result of further debt restructuring. The NPL ratio as at end September was 50.3%. At the same date, restructured loans still classified as NPLs totalled Baht 5.7 billion. These loans will be upgraded to performing loans when they meet the three months monitoring period stipulated by BOT. (Based on BOT's latest directive to classify NPLs on an account basis, and to upgrade NPLs to performing loans once they are restructured, the NPL ratio as at end September was 42.4%).

In addition to its debt restructuring program, the Bank continues to review other solutions to resolve its NPL portfolio. From time to time, the Bank will meet with institutional investors who may be interested in examining the Bank's NPLs or a sample of NPLs, with the view of providing the Bank with market-based valuation of its NPL portfolio. The review of solutions is ongoing and the Bank may or may not proceed with any of these proposals.

Capital Adequacy

The Bank successfully completed its recapitalization exercise raising a total of Baht 13.7 billion in May 1999. The Bank's capital adequacy ratio now stood at 13.1%, higher than the 8.5% minimum imposed by BOT.

CONCLUSION

The Bank strives to take advantage of the eventual full economic recovery in Thailand. With DBS Bank's support, integration and rationalisation efforts are continuing apace, while the transfer of technology and best practices is advancing smoothly. At the same time, initiatives are taken to expand the Bank's customer base selectively and to widen the range of products and services.