Click here to go back to the DBS Bank home page

DBS Bank Annual Report 1998

Performance at a Glance

Financial Highlights

Letter to Shareholders

Corporate Governance

Operations Review

Financial Report



Letter to Shareholders 

Challenges and Progress

Under difficult conditions, DBS achieved an increase in operating profit of 13.0 percent over 1997, including the impact of newly-consolidated assets from the acquisition of POSBank in Singapore and Thai Danu Bank (TDB) in Thailand. At S$996.4 million, provisions were significantly higher than last year, as we added S$827.0 million to specific provisions for non- performing loans (NPLs) and S$157.8 million in special general provisions for regional exposures. The result was a 49.0 percent decline in Group attributable profit to S$222.7 million. Excluding the impact of POSBank and TDB, the decline would have been 7.6 percent.

At year end, Group NPLs amounted to S$7.1 billion, or 8.2 percent of DBS Groupâs total loans globally. We continue to monitor and manage asset quality intensively and have put in place tighter standards and more rigorous mechanisms for dealing with troubled credits. Cumulative provisions amounted to S$3.1 billion as we addressed head-on the deteriorating asset quality of TDB, our newly-acquired subsidiary, following an extensive review of its exposures with our external auditors. The Groupâs accounts reflect cumulative specific provisions of Bt25 billion against TDBâs NPLs as Singapore provisioning standards require us to provide in full the related specific provisions once a loan becomes non-performing. With these provisions, which as a percentage of NPLs are higher than the Thai bank average, the full extent of the NPL position as at 31 December 1998 has been recognised in DBSâ financial statements. Efforts are under way to recapitalise TDB to prepare for what we believe is a new banking environment in Thailand, in which we seek to be active participants.

DBS continues to maintain a strong financial position with a Group capital adequacy ratio of 15.6 percent, calculated under BIS standards. Our track record, financial strength and the skills, experience and enthusiasm of our staff, together with the conservative approach to bank supervision which has always been a hallmark of the Authorities in Singapore, position DBS as one of the strongest financial institutions in Asia today.

Our overriding confidence in the region encourages us to invest in locations, people and technology at this time to bring DBS closer to customers in the future. We are confident that DBS, and the region, will grow at high levels once the recession ends. Windows of opportunity open and close rapidly and this requires a dynamic rather than static approach to positioning the Bank for the next century ö anticipating rather than reacting to opportunities to operate more efficiently, selectively making acquisitions and forming strategic alliances with experienced practitioners.

Despite economic conditions, our overriding confidence in the region encourages us to invest in locations, people and technology that will bring DBS closer to customers. We believe DBS, along with the region, will grow at high levels once the recession ends.

In Singapore, we acquired the assets of POSBank in November 1998. The addition of POSBank to our local franchise makes DBS the largest retail bank in Singapore with more than 4.4 million customers, the largest ATM network and the premier position in the Singapore dollar deposit and home mortgage markets. The acquisition presents significant growth opportunities for DBS banking services and products.

We have provided a one-time restructuring charge of S$60 million for POSBank. The annual cost saving from the acquisition is estimated at S$30 million per year.

In the region, we increased our stake in TDB to 50.3 percent. In retrospect, the timing was early in an evolving crisis, but it is not always possible to time an acquisition at the low point and, in any case, we take a long-term view in making acquisitions. We also acquired the Bank of Southeast Asia in the Philippines and prior to the end of the year agreed to take a 65 percent stake in Kwong On Bank in Hong Kong. Each of these moves provides DBS with a stronger platform from which to launch banking operations in the region.

Critical to the success of these initiatives is our ability to integrate an acquisition into the DBS system: creating a seamless, unified, customer-focused regional organisation is central to our strategy of delivering affordable, value-added products and services to a growing customer base. We are pleased to report that significant progress is being made in the integration of our enlarged presence across Asia.

Towards the end of 1998, we also established a strategic alliance to market a wide range of managed investment products with The Frank Russell Company, a 60-year old investment house with a worldwide reputation for outstanding investment performance and customer service that manages over US$1.3 trillion worldwide.

In Singapore, the Government moved ahead with financial sector initiatives designed to strengthen the nationâs position as a leading global financial centre. DBS is preparing for an era of more intensive competition as the market liberalises. We have already begun to exploit new opportunities in capital markets. For example, last year, we introduced the first exchangeable bond, the first asset securitisation as well as distributed the first covered warrant issue to retail investors.

Organisational Effectiveness