DBS Thai Danu Bank Back in the Black

* * *

Reports Modest Operating Profit, Up From Bt 600.4 Million First-Half Loss in 1999

* * *

JUMP IN NET INTEREST INCOME, LOWER OPERATING EXPENSE MAKE THE DIFFERENCE

BANGKOK, JULY 18- DBS Thai Danu Bank today reported an operating profit for the first time since the start of the economic crisis in July 1997, another sign that the aggressive re-building plan at the Thailand bank is bringing positive results.

The Bank, a subsidiary of DBS Bank of Singapore, reported an improvement in operating income for the first six months of 2000, to Bt 7.0 million, compared to a Bt 600.4 million loss reported for the same period a year ago. On a consolidated basis, the Bank continued to report an operating loss mainly due to results at DBS Thai Danu Securities. The loss, however, has been reduced from Bt 615.5 million for the first half of 1999 to Bt 30.3 million.

Bank officials attributed the half-year improvement at the Bank level to an increase in net interest income, and lower operating expenses which declined by 18.4% to Bt 1,147 million. Fee and commission income and other income showed improvement for the period.

DBS Thai Danu Bank did not add to provisions for non-performing loans (NPLs). The Bank's loan loss provisions are now Bt 14.9 billion or 81.2% of total requirement, above the 80% level required by the Bank of Thailand (BOT) for 30 June. The Bank did, however, provide Bt 87.8 million for possible losses on its foreclosed properties.

On a net profit basis, the Bank reported a six-month net loss of Bt 399.5 million, compared to a net loss of Bt 9,978 million for the first six months of last year.

Major factors in the Bank's improved half-year performance were higher net interest income due to a lower level of NPLs and lower funding costs, as well as its ability to control operating costs, which showed a reduction both from first quarter to second quarter and on a year-to-year basis. Year-on-year, the Bank's non-interest expenses declined 18.4% from Bt 1,407 million reported for the year-earlier period to Bt 1,147 million.

Overall, total assets remained stable at Bt 106.8 billion compared with the Bt 107.7 billion reported for year-end 1999.

Total loans fell from Bt 98.9 billion at 31 December 1999 to Bt 92.8 billion at 30 June 2000 mainly due to resolution of non-performing loans.

Non-bank customer deposits were managed down from Bt 89.3 billion at year-end 1999 to Bt 73.0 billion on 30 June. Total liabilities, at the same time, fell from Bt 103.9 billion at 31 December, 1999 to Bt 90.8 billion at the end of the first half of 2000. The loan-to-deposit ratio rose to 127.18% at 30 June from 110.75% at year-end 1999.

Pornsanong Tuchinda, President of DBS Thai Danu Bank, said the half-year results clearly indicated that the steps the Bank had taken to move the Bank back to profitability were the right ones.

"This has been an extraordinarily difficult period for us. We took many unpopular decisions, including reducing the number of branches by a third and our staff by nearly 40%. Coupled with other actions to build business and control costs, these moves have brought us back to operating profitability sooner than we had expected.

"We take some satisfaction with the results, but recognize at the same time that the job is not done.

"Our successful recapitalization, completed recently, and the operational changes we have made, puts DBS Thai Danu Bank in better shape financially and operationally than it has been for several years. The fresh capital will enable us to sell or write-down a significant portion of our NPLs and clean up our balance sheet.

"The steps we are taking to proactively restructure and manage-down our NPLs will result in DBS Thai Danu Bank being better positioned than other banks in Thailand, in taking advantage of stabilizing economies in Thailand and the rest of Asia.

"We have embarked on three initiatives to build sustainable revenues and drive improved performance. We have formed a separate Enterprise Banking Group to enhance focus on small and medium sized businesses, we are transforming our branches into more effective sales and distribution channels and lastly, we have launched a Transformation Team to spearhead changes in work practices.

"Without question, further progress needs to be made. But we are now firmly focused on the future and no longer trapped by the past, and we intend to make the most of it," Tuchinda said.

ABOUT DBS

DBS Group Holdings is the holding company for the largest banking group in Southeast Asia. Its flagship DBS Bank in Singapore is ranked among the top banks in Asia, the 70th largest in the world, a recognised leader in internet banking and e-commerce and the market leader in Singapore-dollar loans and deposits. Beyond Singapore, the DBS Group serves corporate, institutional and retail customers through subsidiaries in Hong Kong, The Philippines, Indonesia and Thailand, and international banking services through a network of overseas branches and offices. For more information, check out our website at http://www.dbs.com.

DBS THAI DANU BANK UNAUDITED FINANCIAL PERFORMANCE FOR THE SIX-MONTH ENDED 30 JUNE 2000 FINANCIAL HIGHLIGHTS

Baht million

DBS Thai Danu Bank's unaudited financial performance for the six months ended 30 June 2000 improved over the six months ended 30 June 1999.

The Bank achieved an operating profit of Bt 7.0 million for the period, against a Bt 600.4 million loss in 1H1999. This is the first half-year operating profit since 1H1997. The turnaround was due to higher net interest income and lower non-interest expenses. On a consolidated basis, the Bank continued to report an operating loss mainly due to results at DBS Thai Danu Securities.

The Bank posted an operating profit of Bt 42.6 million in 2Q2000, as compared to an operating loss of Bt 35.6 million in 1Q2000 (see Appendix 1). The repositioning programme announced in December 1999 and implemented during 1Q2000 has contributed greatly towards the turnaround, as has the continued progress in resolving non-performing loans.

Net interest and dividend income rose 71.1% to Bt 779.6 million from Bt 455.7 million year-on-year on a decline in interest expenses due to lower interest rates in 2000 vis-à-vis 1999 and lower levels of non-performing loans (NPLs), reducing interest drag.

Overall, the Bank reduced its costs. Non-interest expenses declined 18.4% from Bt 1,407 million to Bt 1,147 million year-on-year. Major contributing factors were a decline in personnel costs and other cost-control measures. The Bank provided Bt 87.8 million for possible losses on its foreclosed properties.

The Bank adopted the equity method of accounting for its investments in subsidiary companies from 1 January 2000. In accordance with the equity method, the Bank expensed Bt 19.2 million being principally its share of DBS Thai Danu Securities' loss for the period.

Total loans fell from Bt 98.9 billion at 31 December 1999 to Bt 92.8 billion at 30 June 2000 due to resolution of non-performing loans. Overall, total assets remained stable at Bt 106.8 billion compared with Bt 107.7 billion at 31 December 1999.

Non-bank customer deposits were managed down from Bt 89.3 billion at 31 December 1999 to Bt 73.0 billion at 30 June 2000. Total liabilities, at the same time, fell from Bt 103.9 billion at 31 December 1999 to Bt 90.8 billion at 30 June 2000. The loan to deposit ratio rose to 127.2% at 30 June 2000 from 110.8% at 31 December 1999.

Capital Adequacy

The Bank completed its recapitalisation exercise in June 2000 and raised a total of Bt 13.5 billion through a rights issue and a private placement of shares, with the Bank's parent company, DBS Bank, taking up unsubscribed shares as non-redeemable Capital Securities.

DBS Bank's shareholding in the Bank is 51.8%. Assuming full conversion of existing preference shares, Capital Securities and warrants it holds into ordinary shares, DBS Bank's shareholding in the Bank would rise to 73.4%.

Following the recapitalisation, the Bank's capital adequacy ratio rose to 26.11%. However, total capital will decline on the sale or write-down of a significant portion of non-performing loans (see below).

NPLs and Provisions

NPLs on a account basis have fallen to Bt 32,734 million (34.1%) from a peak of Bt 53,800 million as at 1Q1999. The table below compares the Bank's NPL position as at 30 June 2000, 31 March 2000 and 31 December 1999.

Total loan loss provisions required as per BOT guidelines fell from Bt 21,745 million at 31 December 1999 to Bt 20,990 million at 31 March 2000 and further to Bt 18,416 million at 30 June 2000. With existing provisions for loan losses of Bt 14,957 million, the Bank has met 81.2% of the total requirement. This complies with the BOT's requirement of 80% provisioning by 1H2000.

The Bank is currently exploring the sale or write-down of a significant portion of its non-performing loan portfolio. NPL sales or write-down would enable the Bank to improve its overall balance sheet position and free substantial resources from NPL monitoring and resolution. The Bank expects to apply a substantial part of the capital raised in 2Q2000 to absorbing capital losses as a result of asset sales or write-downs.

Recent Developments

The Bank took several steps in 2Q2000 to prepare itself to participate in new opportunities as the Thai economy improves.

The Bank established a separate Enterprise Banking Group to enhance focus on the Bank's traditional strength in small and medium enterprise lending. The Bank has also initiated a Branch Improvement Project to reengineer branch processes to improve service and product availability to its customers.

Recognising the need to transform the Bank from within to meet present challenges, a "Transformation Team" comprising middle managers and led by senior management has been tasked to drive improvements in internal culture and work practices.

Integration activities with the DBS Group continue with significant benefits expected to accrue in 2H2000 and 2001.

Appendix 1: DBS Thai Danu Bank Unaudited Financial Performance
for First and Second Quarters of 2000

Baht million