DBS Group Holdings 1H 2002 Financial Results Presentation to Media and Analysts
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Transcript of DBS Group Holdings 1H 2002 Financial Results Presentation to Media and Analysts
DBS Group Holdings1H 2002 Financial ResultsPresentation to Media and Analysts
This presentation is available at www.dbs.com
Better execution despite weak markets
Disclaimer: The material that follows is a presentation of general background information about the Bank’s activities current at the date of the presentation. It is information given in summary form and does not purport to be complete. It is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. These factors should be considered, with or without professional advice, when deciding if an investment is appropriate. DBS accepts no liability whatsoever with respect to the use of this document or its contents.
July 22, 2002
2
Delivering more disciplined financial results
Strategy intact, focus is now on execution
Better execution despite weak markets
3
YoY operating profit up 41%
Net interest income 1,321 1,295 2 962 37Fee income 403 388 4 251 61
Non-interest income 698 722 (3) 567 23Operating income 2,020 2,017 - 1,528 32
Staff costs 462 476 (3) 389 19Other operating expenses 457 516 (11) 360 27
Operating expenses 920 993 (7) 749 23Operating profit 1,100 1,024 7 779 41Goodwill 136 131 4 - nmProvisions 201 332 (40) 46 332Net profit 531 370 44 629 (16)Cash net profit (a) 668 501 33 629 6(a) Net profit before goodwill amortization
(S$ million) 1H 2002 2H 2001 % Change 1H 2001 %
Change
1st Half
20022Q 1Q
2nd Half
20014Q 3Q
1st Half
20012Q 1Q
4
(a) Excludes goodwill(b) Net profit before goodwill amortization
` Total operating income $2,020m $1,528m 32%
Non-interest income $698m $567m 23%
Net interest income $1,321m $962m 37%
Operating expenses $920m $749m 23%
Operating profit (a) $1,100m $779m 41%
Fee income $403m $251m 61%
Cash net profit (b) $668m $629m 6%
1H 2002 1H 2001Comparison of vs.
1st Half
20022Q 1Q
2nd Half
20014Q 3Q
1st Half
20012Q 1Q
5
1H 2002 1H 2001Comparison of vs.
Cash ROA (b) 0.88% 1.08%
Net interest margin 1.99% 1.78%
Cash ROE (b) 9.71% 11.36%
Non-interest inc. / operating inc. 34.6% 37.1%
(a) Excludes goodwill(b) Annualized(c) Earnings per share before goodwill amortization, annualized
NPLs 5.9% 6.2%
Loan-to-deposit 62.7% 60.6%
Cash EPS ($) (c) 0.91 1.02
Cost-to-income (a) 45.5% 49.0%
1st Half
20022Q 1Q
2nd Half
20014Q 3Q
1st Half
20012Q 1Q
6
Net interest income 1,321 1,295 2 962 37Fee income 403 388 4 251 61
Non-interest income 698 722 (3) 567 23Operating income 2,020 2,017 - 1,528 32
Staff costs 462 476 (3) 389 19Other operating expenses 457 516 (11) 360 27
Operating expenses 920 993 (7) 749 23Operating profit 1,100 1,024 7 779 41Goodwill 136 131 4 - nmProvisions 201 332 (40) 46 332Net profit 531 370 44 629 (16)Cash net profit (a) 668 501 33 629 6(a) Net profit before goodwill amortization
(S$ million) 1H 2002 2H 2001 % Change 1H2001 %
Change
HoH operating profit up 7%1st Half
20022Q 1Q
2nd Half
20014Q 3Q
1st Half
20012Q 1Q
7
Quarterly operating profit up 51%
(S$ million) 2Q 2002 1Q 2002 % Change 2Q 2001 %
Change Net interest income 651 670 (3) 472 38
Fee income 210 193 9 133 58Non-interest income 344 354 (3) 248 39Operating income 995 1,024 (3) 720 38
Operating expenses 460 459 - 366 26
Operating profit 535 565 (5) 354 51
Goodwill 69 68 1 - nmProvisions 105 96 10 9 1088
Net profit 253 278 (9) 308 (18)
Cash net profit (a) 322 346 (7) 308 5
(a) Net profit before goodwill amortization
1st Half
20022Q 1Q
2nd Half
20014Q 3Q
1st Half
20012Q 1Q1Q
8
` Total operating income $995m $1,024m 3%
Non-interest income $344m $354m 3%
Net interest income $651m $670m 3%
Operating expenses $460m $459m no change
Operating profit (a) $535m $565m 5%
(a) Excludes goodwill(b) Net profit before goodwill amortization
Fee income $210m $193m 9%
Cash net profit (b) $322m $346m 7%
2Q 2002 1Q 2002Comparison of vs.
1st Half
20022Q 1Q
2nd Half
20014Q 3Q
1st Half
20012Q 1Q1Q
9
2Q 2002 1Q 2002Comparison of vs.
Cash ROA (b) 0.84% 0.91%
Net interest margin 1.96% 2.02%
Cash ROE (b) 9.22% 10.12%
Non-interest inc. / operating inc. 34.5% 34.6%
(a) Excludes goodwill(b) Annualized(c) Earnings per share before goodwill amortization, annualized
NPLs 5.9% 5.9%
Loan-to-deposit 62.7% 60.5%
Cash EPS ($) (c) 0.88 0.94
Cost-to-income (a) 46.3% 44.8%
1st Half
20022Q 1Q
2nd Half
20014Q 3Q
1st Half
20012Q 1Q1Q
10
(S$ million)
962
1,321
9931,0461,046989
1,295
1.99%1.94%1.78%1.97%2.07%2.04%2.00%
1H 1999 2H 1999 1H 2000 2H 2000 1H 2001 2H 2001 1H 2002
Net interest incomeNet interest margin
Interest margins improving
11
Non-interest income holding well at mid 30% range
(%) Non-interest income to Operating income (a)
2429 30
36 35
1998 1999 2000 2001 1H 2002
(a) Excludes extraordinary items
12
Fee income now 20% of revenues
Trade finance 55 61 (11) 35 56
Deposit-related 54 57 (5) 43 24
Credit card 48 53 (8) 16 197
Loan-related 57 67 (15) 43 33
Investment banking 33 33 - 39 (15)
Stockbroking 83 49 68 24 251
Fund management 43 37 16 35 24
Others 30 31 (3) 16 87
Total 403 388 4 251 61
Fee-to-income ratio (%) 20 19 16
(S$ million) 1H 2002 2H 2001 % Change 1H 2001 %
Change
13
Core expenses tracking well below previous target
DBSH (exclude DHB & DBSV) (a)
Staff costs 335 339 (1) 374 (10)Occupancy expenses 74 93 (20) 73 2Technology-related expenses 83 90 (8) 83 -Revenue-related expenses 31 26 20 21 44Others (include administration and 123 133 (8) 161 (24)
advertising expenses)Total (exclude DHB & DBSV) 645 680 (5) 712 (9)
DHB 178 218 (18) - nmDBSV / DBS Securities Group 86 54 61 37 134Restructuring costs 10 40 (76) - nmTotal 920 993 (7) 749 23
Cost-to-income ratio (%) 45.5 49.2 49.0
(a) Dao Heng Bank (“DHB”), DBS Vickers (“DBSV”)
(S$ million) 1H 2002 2H 2001 % Change 1H 2001 %
Change
14
680
90
93
339
645
83
74
335
0 400 800
Managing our costs and investments with discipline
Total operating expenses
(excl. DHB & DBSV)5%
Occupancy expenses20%
Staff costs1%2H 20011H 2002(S$ million)
IT-relatedexpenses8%
15
1H 2001 2H 2001 1H 2002
Focusing on cost containment
(a) Normalized expenses excludes goodwill, restructuring costs and impact of acquisitions
Period expenses (a)(S$ million)
680712645
16
Singapore, Hong Kong are our twin hubs
Rest of the world
3.6%Hong Kong31.5%
Total assets S$152 billion
Assets 1H 2002 Regional countries
3.1%
Singapore 61.8%
Operating income1H 2002
Rest of the world
1.8%Hong Kong28.2%
Total operating income S$2,020 million
Regional countries
3.9%
Singapore 66.1%
17
Net interest income 309 321 (4)
Non-interest income 106 139 (24)
Operating income 414 459 (10)
Operating expenses 182 237 (23)
Operating profit 233 222 5
Provisions 104 22 371
Net profit before tax 132 203 (35)
Dao Heng Bank operating profit up
(S$ million) (a)DHB
1H 2002%
ChangeDHB
2H 2001
(a) Based on Singapore GAAP
18
Achieved1H 2002 2002 Target
Synergies achieved - focus now on revenue opportunities in Greater China
Key Revenue Initiatives: Launch of new funds (knowledge sharing) ALCO Liquidity Management Cross-selling opportunities (eg, T&M, Private
banking, Equipment finance, Credit cards and other existing products)
Revenue synergies
Select Cost Initiatives: Accelerated implementation of branch closures Active capacity management largely through
vacancies and attrition Back office and IT centralizationCost synergies
Total synergies
HK$296 m HK$450 m (a)
60%
(a) 60% of synergy target is expected for 2002 of a total of HK$750 million
Distribution (%)
100%
481684
147
15
123
11149
16%5%
28%
50%
5%
41%
4%50% 40%
19
DBS Thai Danu Bank operating profit up
Net interest income 48 45 7 46 5
Fee income 11 6 74 9 21Non-interest income 18 17 7 15 18
Operating income 66 62 7 61 8
Operating expenses 46 44 5 44 6
Operating profit 20 18 11 17 15
Non-operating expenses 4 5 (11) 4 -
Provisions 10 10 4 9 9
Net profit after tax 6 4 35 3 79
(a) Assume exchange rate of 1 baht to S$0.042. Based on Thai GAAP
(S$ million) 1H 2002 2H 2001 % Change 1H 2001 %
Change
20
Deepening DBS franchise in three core businesses(S$ million)
Investment banking
420
Consumer banking846
Treasury 375
Central operations
(113)
Operating income 1H 2001
Investment banking
345
Consumer banking1,230
Treasury 424
Central operations
20
Operating income 1H 2002
Total operating income S$1,528 million
Total operating income S$2,020 million
55%
27%
25% 61%
17%
21%1%
21
Sales Volume
314558
322615
938
1,717
222
180
189
235
15
0
500
1000
1500
2000
2500
2H 1999 1H 2000 2H 2000 1H 2001 2H 2001 1H 2002
314573 544
7951,127
(S$ million)Wealth management continues to grow
(a) Unit trusts include Horizon, Ei8ht, Up! and other DBSAM programmes while treasury investment products include Growth, Surf and structured notes
1,952
Unit trusts / Treasury investment products (a)
Insurance / asset plan
22
Expanding credit card franchise in twin hubs
SingaporeCards in issue (‘000)Receivables outstanding
(S$ million)Market position
Hong KongCards in issue (‘000)Receivables outstanding
(S$ million)Market position
501466
#2
1H 2002 2001 2000
8501,300
#3
450424
#2
359326
#3
9141,187
#3
--
-
23
delivers impressive results in 8 months
Singapore - launched in 4Q 2001Customers (‘000)Receivables outstanding
(S$ million)Market share
85191
18%
Launch to 1H 2002 1H 2001
00
0
24
Seizing opportunities in Investment Banking
Equity capital markets 11.8 37%
Debt capital markets 5.3 7%
Syndicated loans 16.3 105%
Mergers & acquisitions 5.6 113%
(S$ million)% Change
vs 2H 2001 Fee income
1H 2002
25
Improving Treasury & Markets’ depth, geographic diversity
Hong Kong8%Singapore
89%Others
3%
Operating income 1H 2001
Hong Kong28%Singapore
70%
Others2%
Operating income 1H 2002
Accolades “2nd Place: Top Forex & Derivatives Bank in Singapore” - Asia Money, 2002 “Best Foreign Exchange Bank in SE Asia (Regional & Singapore)” - Global Finance
Ranking, 2002 “1st Place: FX Products - Singapore” - Asia Risk, 2001 “2nd Place: Interest Rate Products - Hong Kong” - Asia Risk, 2001
(a) Excludes Dao Heng
(a)
Treasury revenues better diversified
26
649
2,705 2,4251,735 1,730 1,610 1,486 1,528 1,478 1,518
1,152
770 723
1,239
1,365
667 661 624 606 632 768 738
2,874
3,207
1,238 1,1911,143 1,101 1,004 995 972
815 777 744 699
552642 563605607
267
366
580
5.9%5.9%5.7%6.0%6.2%7.3%7.6%
13.0%11.8%
2.7%
Dec 97 Dec 98 Dec 99 Dec 00 Mar 01 Jun 01 Sep 01 Dec 01 Mar 02 Jun 02
Quantum of NPLs continues to decline Dao Heng BankDBS Thai Danu BankRegional 5 CountriesOthersSingaporeNBk NPLs / NBk Loans (%)
1,112
4,503
(S$ million)
7,086
8,149
4,834 4,5774,411 4,305 4,512 4,360
27
NPLs improving at major subsidiaries (a)
(S$ million)
9729951,0041,1011,1431,1911,238
27.8%28.7%29.8%
35.2%38.0%40.3%42.7%
Dec 00 Mar 01 Jun 01 Sep 01 Dec 01 Mar 02 Jun 02
(a) Based on MAS guidelines
DBS Thai DanuDBS Hong Kong
8791,011
1,0851,1501,238
494541
3.7%4.1%4.3%4.9%5.2%
7.1%8.3%
Dec 00 Mar 01 Jun 01 Sep 01 Dec 01 Mar 02 Jun 02
28
Provision coverage remains healthy
1,115
1,191
2,032
3,095
1,237 1,464 1,658 1,602
1,048 1,0311,0611,179
129.2142.5146.5129.9118.4
102.7
60.460.354.751.852.644.4
Dec 98 Dec 99 Dec 00 Jun 01 Dec 01 Jun 02
General Provisions (GP)Specific Provisions (SP)
SP+GP / NPLs (%)SP+GP / Unsec NPLs (%)
2,286
(S$ million)
2,643 2,719 2,633
4,286
3,147
29
2,576 415
4,952
3,086 3,094 3,003
942546 921906
621
358 520 488
3,508
5.9%5.9%5.7%7.6%
13.0%
-800
200
1200
2200
3200
4200
5200
6200
7200
8200
Dec 99 Dec 00 Dec 01 Mar 02 Jun 02
Percentage of doubtful and loss NPLs stable
LossDoubtful
(S$ million) Substandard
8,149
4,411 4,512
NPLs / Loans (%)
(61%)
(8%)
(32%)
(80%)
(12%)
(8%)
(68%)
(12%)
(20%)
(69%)
(11%)
(20%)
4,503
(69%)
(9%)
(22%)
4,360
30
15.7 14.4 12.28.5
12.69.2
4.55.2
5.6
4.95.2
3.5
0
4
8
12
16
20
24
Dec 99 Dec 00 Dec 01 Jun 02 Jun 02Proforma for
Dao Heng2nd tranche
Proforma Tier 1 approaching target cushion
DBS Group Holdings Consolidated Capital Adequacy Ratio(%)
17.418.919.2
17.6
14.414.1
Dec 01Proforma for
Dao Heng2nd tranche
31
Maintaining dividend rate for shareholders
914 14 14
1616 16
15
32%33%31%
22%
0
10
20
30
40
50
1999 2000 2001 1H 20020
20
40
Interim dividends Final dividendsSpecial dividends Payout rate (%)
(Cents) (%)
32
Delivering more disciplined financial results
Strategy intact, focus is now on execution
Better execution despite weak markets
33
New DBS management team
Jackson Tai : Vice Chairman & CEONg Kee Choe : Vice Chairman, DBS Bank Frank Wong : Chairman, DBS Hong Kong
Jackson Tai
Corporate Office
S Dhanabalan : Chairman
Ng Kee Choe Frank Wong Oon Kum Loon(CFO)
Overall Singapore Hong Kong Greater China
Geography
Products & Services
Consumer Banking Group
Enterprise Banking
Support units
Risk Management
Credit Management
Information Technology
Processing & Servicing
Treasury & Markets
Investment Banking
DBS Vickers
Finance Shared Services
34
Strategy intact, now focussed on execution Build coherent Pan-Asian financial franchise, with early focus on
Singapore, Hong Kong and Greater China Leverage dominant market position and retail distribution in
Singapore and Hong Kong Differentiate with Treasury & Markets, Capital Markets, Wealth
Management, Risk Management and Credit Management Become lower cost producer through scale, integrated up-to-date
information technology and straight-through processing Intermediate regional capital flows between issuers and investors
Recalibrate investments and resources to changed market conditions
35
Focused on delivery
Jun 2002 Dec 2000 % change
Branches
– Singapore 93 114
18%
– Hong Kong 81 101
20%
Group head count 12,337 >14,200
13%
(a)
(a) Approximate combined head count number because Dao Heng was only consolidated starting June 29, 2001
36
Management depth for the next phaseArea of focus ExperienceManagement
Corporate OfficeS. Dhanabalan Chairman > 42 yearsJackson Tai Vice Chairman & CEO > 28 yearsNg Kee Choe Vice Chairman, DBS Bank > 35 yearsFrank Wong Chairman, DBS Hong Kong > 36 years
Policy CommitteeEric Ang Investment banking > 23 yearsChan Tak Kin Consumer banking, Hong Kong > 30 yearsChong Kie Cheong Investment banking - institutional & corporate clients > 30 yearsElsie Foh Personal banking & private banking > 30 yearsHong Tuck Kun Enterprise banking > 26 yearsSteve Ingram Information technology > 19 yearsEdmund Koh Consumer banking, Singapore > 18 yearsDavid Lau Treasury & markets > 19 yearsOon Kum Loon Finance > 28 yearsRajan Raju Processing & servicing > 12 years Seck Wai Kwong Wealth management > 20 yearsGreg Seow Securities > 25 yearsRandy Sullivan Hong Kong > 31 yearsPornsanong Tuchinda Thailand > 16 yearsWong Ban Suan Central treasury > 20 years
DBS Group Holdings1H 2002 Financial ResultsPresentation to Media and Analysts
This presentation is available at www.dbs.com
Better execution despite weak markets
Disclaimer: The material that follows is a presentation of general background information about the Bank’s activities current at the date of the presentation. It is information given in summary form and does not purport to be complete. It is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. These factors should be considered, with or without professional advice, when deciding if an investment is appropriate. DBS accepts no liability whatsoever with respect to the use of this document or its contents.
July 22, 2002