DBS, Thai Military Bank, DBS Thai Danu Agree To Merge TMB And DTDB

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Merger Will Create 6th Largest Bank In Thailand With Total Assets Of Bt 480 Billion

BANGKOK/SINGAPORE, January 28, 2004 - Thai Military Bank PCL (TMB), DBS Bank Ltd (DBS) and DBS Thai Danu Bank PCL (DTDB) today announced they have signed a Memorandum of Understanding (MoU) to combine TMB and DTDB in a strategic merger to create the 6th largest banking group in Thailand by assets. The MoU signifies the parties' agreement on broad merger parameters, and sets out, among others, the principles and structure of the merger, management and areas of governance and business cooperation.

The proposed merged entity will have combined assets of Bt480 billion (S$21 billion), close to 4 million customers, 426 branches and 953 ATMs across Thailand. The pro-forma NPL ratio of 10% and LLR/NPL ratio of 89% will be one of the strongest amongst banks in Thailand in terms of asset quality and adequacy of provisions. The merger is in line with the latest Bank of Thailand's financial sector masterplan to encourage the formation of larger and more competitive financial institutions.

The proposed structure is a tender offer by TMB for all the shares of DTDB in consideration for new TMB shares. In addition, the MCAPS securities of DTDB will be exchanged for new TMB shares as part of the tender offer. This will be followed by a transfer of assets and liabilities of DTDB to TMB pursuant to Section 38 quarter of the Commercial Banking Act of Thailand, and the delisting and subsequent liquidation of DTDB.

Through the merger, TMB will benefit from DBS' expertise in financial product development, risk management, and advanced technology and operations infrastructure. In turn, TMB's nation-wide distribution network will allow the merged bank to reach a wider retail and SME customer base. As a result, the combined bank will benefit from greater revenue growth on top of the expected cost savings and efficiency gains arising from the merger.

As a strategic partner to the merged bank, DBS will provide its expertise and resources through "technical services agreements" in these key areas: Credit, Market and Operational Risk Management, Treasury & Markets, Consumer Banking, Corporate and Institutional Banking, SME Banking, and Technology & Operations.

In addition, the parties have agreed to explore incorporating The Industrial Finance Corporation of Thailand (IFCT) in a three-way merger to create Thailand's 5th largest bank. Following the signing of the MoU, the parties will take steps to work towards definitive agreements to finalise the details of the proposed merger, including the share exchange ratio, in light of the IFCT inclusion.

The proposed merger is subject to approvals from the Thai Minister of Finance, the Bank of Thailand, the Stock Exchange of Thailand, the Securities and Exchange Commission of Thailand, the Thai Ministry of Commerce, the Monetary Authority of Singapore and the shareholders of TMB and DTDB.

Sommai Phasee, Chairman of the Board of TMB, will continue to serve as Chairman of the Board of Directors of the merged bank; Subhak Siwaraksa, President and CEO of TMB, will continue to serve as Chief Executive Officer. DBS will have proportionate representation on the Board subject to a minimum of two nominees and the right to nominate an independent director.

An integration committee headed by K. Subhak and Michael Hague, senior manager from DBS, will be set up to facilitate integration.

Sommai Phasee, Deputy Permanent Secretary at the Ministry of Finance and Chairman of the Executive Board of TMB, said: "This landmark transaction will create one of Thailand's most forward-looking banks - a powerful enterprise harnessing the established distribution network and customer franchise of Thai Military Bank with the experience and expertise of DBS.

"We will have a Bt480 billion asset base, one of the broadest and deepest product mixes in Thailand, and a dynamic, talented management team that brings together senior managers from DBS as well as existing TMB and DTDB staff.

"My colleagues and I look forward to working with the DBS team to bring the unique benefits of this merger to all our constituencies."

Jackson Tai, Vice Chairman and Chief Executive Officer of DBS, said: "This transaction is consistent with our belief that banking is about harnessing scale, distribution, and customer access.

"The newly merged bank will have the resources and regional support to supply new capital, particularly to TMB's growing consumer and SME customer segments. Moreover, we will be able to bring our customers new asset and liability options when we combine TMB's distribution platform with DBS' product development and risk management capabilities.

"Although DBS will not be purchasing any additional shares in TMB at this juncture, we have expressed our desire to increase our stake over time."

Pong Sarasin, Chairman of DTDB, said: "The merger of DBS Thai Danu Bank and Thai Military Bank is strategically good for both banks. It will bring enhanced revenue opportunities, operational efficiencies, and ensure a strong competitive edge - all this is good for our customers, employees and shareholders.

"The proposed merger takes the development of both banks to the next level and will create a competitive platform for growth."

About TMB

TMB is currently the 7th largest bank in Thailand by assets, and provides a full range of banking and financial services. TMB offers corporate and personal lending, retail and wholesale banking, international trade financing and investment banking services to customers throughout Thailand. TMB also has branches in Hong Kong, Laos, and the Cayman Islands. More information about TMB can be found on our website www.tmb.co.th.

About DBS

Headquartered in Singapore, DBS is one of the largest financial services groups in Asia. The largest bank in Singapore and one of the top five in Hong Kong as measured by assets, DBS has dominant positions in consumer banking, treasury and markets, securities brokerage, equity and debt fund raising. Beyond the anchor markets of Singapore and Hong Kong, DBS serves corporate, institutional and retail customers through its operations in Thailand, The Philippines, and Indonesia. In China, the bank has branches and representative offices in Shanghai, Beijing, Shenzhen, Fuzhou and Tianjin. The Bank's credit ratings are among the highest in the Asia-Pacific region. More information about DBS Group Holdings and DBS Bank can be obtained from our website www.dbs.com.

About DTDB

DTDB, a subsidiary of DBS Bank in 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, corporate lending as well as treasury and markets.

Key Financial Statistics (PDF 56K)