DBS Thai Danu Bank announces Bt 2,320 million net loss for nine months of 2003

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Net loss was driven by the Bank of Thailand's qualitative loan provisioning of Bt 2,700.0 million booked in the third quarter

Third quarter operating profit increased 27.5% to Bt 275.3 million; year-on-year operating profit improved 1.1% to Bt 809.6 million

BANGKOK, OCTOBER 16, 2003 - DBS Thai Danu Bank, a subsidiary of DBS Bank Ltd, today announced an unaudited net loss of Bt 2,504.7 million for the third quarter of 2003 (3Q03). The net loss was driven by the inclusion of the Bank of Thailand's (BOT) Bt 2,700.0 million qualitative loan provisioning which was announced on 25 August 2003. As a result of the 3Q03 loss, the Bank's net loss for the nine months of 2003 (9M03) was Bt 2,320.4 million.

The operating profit for 3Q03 was Bt 275.3 million, up 27.5% from 2Q03. The improved operating profit is attributable to a 44.8% improvement in non-interest income, largely from higher gains from sale of investments and derivatives trading. Net interest and dividend income declined 3.0% to Bt 586.3 million following stiff pricing competition and overall excess liquidity in the market. Quarterly operating expenses increased marginally by 0.1% to Bt 564.3 million.

As a result, the 9M03 operating profit grew 1.1% to Bt 809.6 million. Year-on-year net interest and dividend income grew 2.3% to Bt 1,795.6 million on the back of a 3.5% increase in non-bank loans. For the same period, non-interest income improved 1.3% to Bt 718.3 million and operating expenses increased 2.5% to Bt 1,704.3 million.

As at 30 September 2003, the Bank's non-bank customer loans increased 0.6% to Bt 80,063.4 million from end-2Q03. Non-performing loan (NPL) to total loan ratio was 10.3%, an improvement from the 10.5% recorded at end-2Q03. Non-bank deposits as at 30 September 2003 declined 2.4% to Bt 84,232.6 million as the Bank actively managed its funding base.

President and CEO Pornsanong Tuchinda said, "The Bank's profitability for this year was weighed-down by the Bank of Thailand's qualitative loan provisioning. At the operating level, however, the Bank grew marginally. We are seeing stronger business momentum in recent months and expect to step up our loan growth rates and overall profitability."

DBS Thai Danu Bank, a subsidiary of DBS Bank of Singapore, is a commercial bank headquartered in Bangkok, Thailand. With 62 branches, the Bank offers a full range of banking services in Thailand including consumer, SME, and corporate lending as well as a treasury function.

DBS Thai Danu Bank reported today a net loss of Bt 2,504.7 million for the third quarter of 2003 (3Q03) compared to a net profit of Bt 86.0 million in 2Q03. The net loss was attributable to the booking of the Bank of Thailand's (BOT) qualitative loan provisioning of Bt 2,700.0 million as announced on 25 August 2003. As a consequence of the 3Q03 net loss, the Bank's net loss for the nine months of 2003 (9M03) was Bt 2,320.4 million.

At the operating profit level, the Bank achieved a 27.5% growth to Bt 275.3 million in 3Q02 compared to 2Q03. Total income in 3Q03 increased 2.0% to Bt 2,513.9 million primarily from higher non-interest income that rose 44.8% to Bt 253.3 million which offset a 3.0% decline in net interest and dividend income. Non-interest income was higher due mainly to larger gains from sale of investments and treasury income while the decline in quarterly net interest and dividend income was attributable to lower margins arising from stiff competition as well as excess market liquidity. Operating expenses remained relatively flat at about Bt 564.3 million compared to Bt 563.5 million in the previous quarter.

For 9M03, the Bank recorded an operating profit growth of 1.1% to Bt 809.6 million from Bt 800.8 million achieved in 9M02. The improved operating profit was the result of a 2.3% increase in net interest and dividend income to Bt 1,795.6 million arising from a 3.5% growth in non-bank loan volume as well as a 1.3% growth in non-interest income Bt 718.3 million. For the same period, operating expenses grew 2.5% to Bt 1,704.3 million as the Bank continued its investments in IT-related infrastructure and projects. Contributions to the Financial Institutions Development Fund (FIDF), which is a function of the Bank's deposits base, also contributed to the increase in operating expenses.

As at 30 September 2003, non-bank customer loans of Bt 80,063.4 million was 0.6% higher than end-2Q03 while non-bank deposits of Bt 84,232.6 million was a 2.4% reduction from end-2Q03 as the Bank continues to actively manage its funding requirements. The loan-to-deposit ratio was 95.1% as at 30 September 2003.

Capital Adequacy

As at 30 September 2003, the Bank's capital adequacy ratio (CAR) stood at 13.3%, above the BOT's 8.5% minimum requirement. Under the BOT's CAR computational methodology, the Bank's net loss is only transferred to the capital fund account at the end of each audited period (i.e. at 30 June and 31 December). If the Bank's 9M03 net loss had been transferred to the capital fund account on 30 September 2003, the CAR ratio would have been 10.5% (Tier 1 = 7.2%).

Table 1: DBS Thai Danu Bank's Capital Adequacy Ratio

NPLs and Provisions

The Bank's NPLs classified under account basis were Bt 8,278.0 million as at end-September 2003. NPL as a percentage to total loans was 10.3%.

Table 2: DBS Thai Danu Bank's NPL

The Bank announced on 25 August 2003 that the BOT required the Bank to make qualitative loan provisions of Bt 2,700.0 million. While the BOT gave the Bank until end-2003 to make this qualitative provision, the Bank booked these provisions in 3Q03. This resulted in a total loan provision charge of Bt 2,780.0 million for the 3Q03. As at end-September 2003, the Bank's total loan provision to NPL ratio is 87.9%.