DBS Group Holdings Ltd · SGX:D05
DBS — FY2004 Earnings Presentation
33 slides from DBS's earnings presentation, Feb 18, 2005
Slide 1: Stronger customer earnings underpin record 2004 results
Stronger customer earnings underpin record 2004 results 18 February 2005 DBS Group Holdings 2004 Financial Results Presentation to Media and Analysts This presentation is available at www.dbs.com/investor Disclaimer: The information contained in this document is intended only for use during the pres
Slide 2: Stronger customer earnings underpin record 2004 results
Stronger customer earnings underpin record 2004 results T 4Q performance caps a record year T Regional operations continue to expand T Strong asset quality supports 2005 business expansion T Significant accounting changes for DBS in 2005 2
Slide 3: 2004 recurrent earnings up 48% to a record
2004 recurrent earnings up 48% to a record (S$m) % a 2004 2003 change Net interest income 2,566 2,375 8 Non-interest income 1,865 1,823 2 Operating income 4,431 4,198 6 Staff costs 970 865 12 Other operating expenses 1,036 976 6 Operating expenses 2,006 1,841 9 Operating profit 2,425 2,357 3 Goodwil
Slide 4: 4Q up 10% from a year ago
4Q up 10% from a year ago (S$m) 4Q 4Q % 3Q % 2004 2003 change 2004 change Net interest income 636 628 1 645 (1) Non-interest income 386 425 (9) 442 (13) Operating income 1,022 1,053 (3) 1,087 (6) Staff costs 253 217 17 241 5 Other operating expenses 277 265 5 250 11 Operating expenses 530 482 10 491
Slide 5: Most full-year operating ratios improve
Most full-year operating ratios improve 4Q 3Q 4Q 2004 a 2003 (%) 2004 2004 2003 Net interest margin 1.75 1.83 1.81 1.79 1.78 Non-interest income/total income 38 41 40 42 43 Cost/income 52 45 46 45 44 ROE 10.5 11.7 10.9 12.7 10.0 Loans/deposits 62 63 60 62 60 Loan + non-trading debt securities/ 82 84
Slide 6: 4Q margins of 1.75% result in stable full-year margins at 1.79%
4Q margins of 1.75% result in stable full-year margins at 1.79% (S$m) Net interest margin (%) 2,645 2,566 2,375 1.99 1.78 1.79 1.87 1.83 1.68 1.81 1.79 1.79 1.75 1.72 599 588 628 634 651 645 636 560 2002 2003 2004 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2003 2004 6
Slide 7: 4Q customer loans up 4% on quarter, bringing full-year growth to 13%
4Q customer loans up 4% on quarter, bringing full-year growth to 13% (S$m) DTDB loans 4% 3% 3,275 4% 2,915 69,664 2,915 2% 67,221 65,053 62,429 61,420 Dec 2003 Mar 2004 Jun 2004 Sep 2004 Dec 2004 7
Slide 8: 2004 fee income up 15%, treasury income lower
2004 fee income up 15%, treasury income lower b 1,865 Fee income (S$m) 1,823 Dividend & rental Other income Non-interest income / a total income (%) 1500 1,405 1,013 884 58 1200 797 50 47 43 43 43 48 40 41 36 42 b 900 87 38 3 a b 35 105 38 632 600 60 525 b 448 424 277 405 442 425 386 852 259 747 160
Slide 9: Wealth management sales consolidate after doubling each year since 1999
Wealth management sales consolidate after doubling each year since 1999 (S$m) Hong Kong Singapore 8,806 8,812 4,824 5,337 4,434 1,396 2,438 2,739 2,481 2,218 2,065 2,059 1,822 1,796 3,982 1,403 1,515 3,039 3,475 1,004 1,370 1,047 1,168 1,508 1,146 1,061 1,068 1,078 1,224 891 775 710 650 2002 2003 20
Slide 10: Wealth management fees rise 47% in 2004 from higher unit trust and bancassurance sales
Wealth management fees rise 47% in 2004 from higher unit trust and bancassurance sales (S$m) Structured deposits 9,242 Bancassurance 9,006 Unit trusts 7,227 5,908 429 2,512 2,766 2,545 2,468 2,175 2,093 1,851 1,979 1,732 1,838 200 2,141 1,526 2,905 1,703 1,405 27 1,685 964 1,578 29 110 327 41 30 31
Slide 11: Reduced year-end activity dampens 4Q treasury non-interest income
Reduced year-end activity dampens 4Q treasury non-interest income T Seasonal factors dampen 4Q treasury contributions T Market uncertainty and reduced customer flows result in lower 2004 performance T Fall in DEaR at 31 December reflects slower year-end markets Average DEaR 1 Jan 2004 to 1 Oct 2003
Slide 12: Full-year revenues rise for all customer businesses
Full-year revenues rise for all customer businesses Revenues (S$m) 4Q 2004 4Q 2003 Change 2004 2003 Change Consumer Banking 401 391 10 1,566 1,441 125 Enterprise Banking 186 173 13 735 631 104 Investment Banking 162 167 (5) 703 668 35 Treasury & Markets 98 149 (51) 740 828 (88) Central Operations a
Slide 13: Full-year operating costs increase 9%
Full-year operating costs increase 9% (S$m) Cost/Income (%) 2,006 1,851 1,841 b a 47 46 52 46 44 b 46 45 45 42 41 40 45 41 31 482 503 482 491 530 442 459 458 2002 2003 2004 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2003 2004 Annualised cost / average assets (%) 1.22 1.17 1.20 1.16 1.17 1.15 1.21 1.20 1.12 1.18 1.24 H
Slide 14: Stronger customer earnings underpin record 2004 results
Stronger customer earnings underpin record 2004 results T 4Q performance caps a record year T Regional operations continue to expand T Strong asset quality supports 2005 business expansion T Significant accounting changes for DBS in 2005 14
Slide 15: DBS Hong Kong's 2004 net profit up 27%
DBS Hong Kong’s 2004 net profit up 27% (S$m) % 2004 2003 change Net interest income 804 767 5 Non-interest income 380 368 3 Operating income 1,184 1,135 4 Operating expenses 498 463 8 Operating profit 686 672 2 Provisions 91 172 (47) Net profit after tax 534 422 27 Exchange rate at HK$1 to S$0.21006
Slide 16: DBS Hong Kong's 4Q net profit down 10%
DBS Hong Kong’s 4Q net profit down 10% (S$m) 4Q 4Q % 3Q % 2004 2003 change 2004 change Net interest income 194 203 (4) 197 (2) Non-interest income 91 101 (10) 92 (1) Operating income 285 304 (6) 289 (1) Operating expenses 133 121 10 126 6 Operating profit 152 183 (17) 163 (7) Provisions 19 25 (24) 2
Slide 17: DBS HK's ratios remain better than group average
DBS HK’s ratios remain better than group average 4Q 3Q 4Q 2004 2003 (%) 2004 2004 2003 Net interest margin 2.16 2.28 2.45 2.34 2.38 Non-interest income/total income 32 32 33 32 32 Cost/income 47 44 40 42 41 ROE 13.1 13.8 17.0 14.8 12.8 ROA 1.33 1.39 1.59 1.47 1.25 Loans/deposits 80 81 76 80 76 NPL r
Slide 18: Regional revenues grow at faster pace
Regional revenues grow at faster pace Amount (S$m) YoY 2003 2004 change (%) Revenues Region and rest of world a 199 227 14 Hong Kong b 1,337 1,361 2 Singapore c 2,520 2,773 10 Total 4,056 4,361 8 Cash profit Region and rest of world a 64 79 23 Hong Kong b 486 625 29 Singapore c 863 1,231 43 Total 1,
Slide 19: Stronger customer earnings underpin record 2004 results
Stronger customer earnings underpin record 2004 results T 4Q performance caps a record year T Regional operations continue to grow T Strong asset quality supports 2005 business expansion T Significant accounting changes for DBS in 2005 19
Slide 20: NPL rate falls to 2.5%
NPL rate falls to 2.5% Substandard (S$m) Doubtful Loss NPL rate (%) 7500 5.7 6.1 5.2 4.6 2.5 3.0 2.6 2.5 5000 4,512 4,224 3,780 3,359 2,182 2500 76% 74% 1,934 1,919 1,919 75% 73% 71% 72% 70% 6% 71% 6% 5% 9% 6% 9% 9% 9% 0 18% 20% 22% 20% 19% 19% 21% 20% 2001 2002 2003 2004 Mar Jun Sep Dec 2004 20
Slide 21: Non-performing loans stable as additions offset recoveries and write-offs
Non-performing loans stable as additions offset recoveries and write-offs (S$m) 4Q 2004 3Q 2004 4Q 2003 NPLs at start of period 1,934 2,182 4,143 New NPLs 325 114 240 Net recoveries of existing NPLs (261) (283) (299) Write-offs (79) (79) (304) NPLs at end of period 1,919 1,934 3,780 21
Slide 22: 4Q specific provision charges rise on quarter but below year ago
4Q specific provision charges rise on quarter but below year ago (S$m) 4Q 2004 3Q 2004 4Q 2003 Add charges for New NPLs 74 46 64 Existing NPLs 41 28 73 115 74 137 Subtract charges for Upgrading 2 3 9 Settlements 64 67 41 Recoveries 13 7 9 79 77 59 Total SP charges 36 (3) 78 22
Slide 23: Provision coverage stands at 89%
Provision coverage stands at 89% GP (S$m) 5000 SP 4000 3000 2,719 2,500 2,387 2,271 1,061 1,819 2000 989 1,064 1,701 1,752 1,701 1,072 1,015 1,025 1,037 1,015 1000 1,658 1,511 1,323 1,199 686 794 715 686 0 2001 2002 2003 2004 Mar Jun Sep Dec Coverage ratios (%) 2004 SP+GP / Unsec NPAs 143 121 124 18
Slide 24: Tier-1 CAR trimmed as RWA expands in 4Q; tier-2 boosted by new sub-debt
Tier-1 CAR trimmed as RWA expands in 4Q; tier-2 boosted by inclusion of new sub-debt Tier-2 CAR (%) 28 Tier-1 CAR 24 20 17.4 15.8 15.6 15.8 15.5 15.1 14.5 15.4 16 5.2 5.2 4.5 4.0 3.6 4.5 4.6 4.1 12 8 12.2 11.3 11.6 11.8 11.3 10.3 10.5 10.4 4 0 2001 2002 2003 2004 Mar Jun Sep Dec 2004 (S$bn) Tier-1 c
Slide 25: Dividend rate up 33% to 40 cents
Dividend rate up 33% to 40 cents Final (Cents) Interim 50 40 40 30 30 30 30 22 20 16 16 16 10 18 14 14 14 0 2001 2002 2003 2004 25
Slide 26: Stronger customer earnings underpin record 2004 results
Stronger customer earnings underpin record 2004 results T 4Q performance caps a record year T Regional operations continue to grow T Strong asset quality supports 2005 business expansion T Significant accounting changes for DBS in 2005 26
Slide 27: Significant accounting changes for DBS in 2005
Significant accounting changes for DBS in 2005 FRS 39 Financial Instruments: Recognition and Measurement FRS 102 Share-based Payments FRS 103 Business Combinations 27
Slide 28: FRS 39: Investment securities
FRS 39 Investment securities Most non-trading securities will be re-classified as AFS and be marked to market Unrealised changes in fair value for AFS securities will be taken against equity No change to recognition of interest and dividend income Proportion of debt securities as at 1 January 2005 –
Slide 29: FRS 39: Investment securities – impact on capital
FRS 39 Investment securities – impact on capital AFS debt securities – unrealised gains or losses have no impact on tier-1 AFS equity securities – unrealised losses to be deducted against tier-1 on portfolio basis – 45% of revaluation gains on qualifying securities can be counted as tier-2 29
Slide 30: FRS 39: Derivatives
FRS 39 Derivatives All derivatives will be marked to market Apply hedge accounting to minimise profit and loss volatility Hedge ineffectiveness taken to profit and loss Transitional adjustment to equity Net impact of FRS 39 changes on 1 January adds $150m to shareholders’ funds 30
Slide 31: FRS 102
FRS 102 Fair value of share options granted after 22 November 2002 and unvested on 1 January 2005 will be expensed over vested period Fair value to be determined by valuation models Estimated options expense not expected to exceed $25m in 2005 31
Slide 32: FRS 103
FRS 103 Goodwill amortisation, amounting to $440m in 2004, will no longer be incurred As at 31 December 2004, we had outstanding goodwill of $6.9bn for DBS (Hong Kong) and DBS Vickers Impairment test carried out at least annually and when impairment indicators arise to determine if carrying amount e
Slide 33: Stronger customer earnings underpin record 2004 results
Stronger customer earnings underpin record 2004 results T 4Q performance caps a record year T Regional operations continue to grow T Strong asset quality supports 2005 business expansion T Significant accounting changes for DBS in 2005 33