Building an Asian Powerhouse: Strengthening Our Home Base · Source: Company filings, press...
Transcript of Building an Asian Powerhouse: Strengthening Our Home Base · Source: Company filings, press...
Building an Asian Powerhouse:Strengthening Our Home Base
June 2001
1
Disclaimer and Responsibility Statement
� The Directors of DBS (including any who may have delegated detailed supervision of this presentation) have taken all reasonable care to ensure that the facts and estimates in this presentation are fair and accurate and no material facts are omitted from this presentation
� Where information contained in this presentation has been derived from publicly available sources, including forecasts of the analyst community, the sole responsibility of the Directors of DBS has been to ensure through reasonable enquiries that such information is accurately extracted from such sources or, as the case may be, reflected or reproduced in this presentation
� Neither Goldman Sachs, nor any of its affiliates or staff vouch for the accuracy of the information contained herein and nothing in this document should be construed as a warranty or representation in regard to the assumptions, facts, estimates or conclusions contained herein
� You would appreciate that DBS is subject to various laws, rules and regulations as a listed company and in the context of the current general offer, which may restrict its ability to provide certain information or to respond to certain queries
2
Building Even Greater Strength: Summary of Offer
� 0.61 DBS shares for every OUB share
� S$1.14 in cash for every OUB share
� 36.6% over 60 day average
� 11.1% over close of market on 21st June, 2001 price
� Acceptance greater than 50%
� Regulatory and shareholder approvals
ConsiderationConsideration
PremiumPremium
ConditionsConditions
3
Delivering Value Quickly
Offer AnnouncementOffer Announcement
Notice of Takeover Notice of Takeover Offer and Part B Offer and Part B
StatementStatement
Launch of OfferLaunch of Offer
Offer PeriodOffer Period
22 June 200122 June 2001
Within 14 days of Within 14 days of Offer announcementOffer announcement
Between 14 and 28 Between 14 and 28 days after offer days after offer announcementannouncement
At least 21 daysAt least 21 days
4
Strategic Rationale
Complete Domestic Leadership and Extend into New Markets
Financial Rationale
Enhance Shareholder Value Through Growth Opportunities and Synergies
Transaction Summary Build Even Greater Strength
Building an Asian Powerhouse:Strengthening Our Home Base
Superior Equity Story Manage for Growth and Value
5
Continuing History of Growth
(a) ….. Proforma for Dao Heng Bank(b) ….. Proforma for OUB
Total AssetsTotal Assets Acquisition Track Record of DBSAcquisition Track Record of DBS
111.2106.5100.0
66.055.749.2
0
20
40
60
80
100
120
140
160
180
200
1995 1996 1997 1998 1999 2000 (a)(b)
� Thai Danu Bank
� Kwong On Bank, Hong Kong
� POSBank, Singapore
� Bank of Philippine Islands (strategic stake)
� Vickers Ballas, Singapore
� Dao Heng Bank, Hong Kong
� Joint venture with TD Waterhouse for regional online financial services alliance
� Offer for OUB
1997
1998
1999
2001
194.2
147.6
(S$ bn)
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Putting the Strategy Together Positioning for the Future
Integrated Wealth
Management Strategy
� Cost Synergies� Scale� Market Share
Vickers Ballas
TD Waterhouse
Vickers Vickers BallasBallas
TD WaterhouseTD WaterhouseOUBOUBOUB
Dao Heng BankDaoDao HengHeng BankBank
Hybrid Tier I Subordinated Debt
PreferenceShares
Hybrid Tier I Hybrid Tier I Subordinated Debt Subordinated Debt
PreferencePreferenceSharesShares
Optimal Capital Structure
� Regionalization� Growth� Top 5 in Hong Kong
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Compelling Strategic Rationale
Consolidate domestic franchise
Gain presence in Malaysia and enhance regional footprint
Broaden shareholder ownership and increase liquidity
#1
#2
#3
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A Comparative Snapshot
Total Assets 147,555 46,603
Total Advances 66,570 28,101
Total Customer Deposits 105,433 26,899
Shareholders’ Funds 10,495 5,161
Operating expenses 1,626 486
Profit Attributable to Shareholders 1,824 545
Branches(b) 115(c) 33
ATMs(b) 930(c) 140
Employees 10,800(c) 3,100
DBS DBS (a)(a) OUBOUB(in S$ millions)
Source: Company Reports for FY 2000(a) DBS financials pro forma for acquisition of Dao Heng Bank, ignoring the effects of financing, synergies and any potential discrepancies in accounting standards(b) Only Singapore (c) Excluding Dao Heng
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31.0%S$131 bnDBS
21.2%
OUB9.7%
Others69.1%
#1
Strengthening Retail Banking Market Leadership in Singapore
Domestic Customer DepositsDomestic Customer Deposits(a)(b)(a)(b) Credit CardsCredit Cards(c)(c)
Domestic AssetsDomestic Assets(a)(a) Domestic Gross Customer LoansDomestic Gross Customer Loans(a)(a)
Source: MAS, Company Reports for FY 2000 and GS Equity Research(a) System wide market share of domestic assets, domestic gross customer loans and domestic customer deposits is based on share of respective banks of the aggregate financials of the
commercial banks, merchant banks and finance companies in Singapore (includes foreign banks)(b) No geographical breakdown of customer deposits available for the local banks. Domestic customer deposits derived based on the proportion of domestic assets and overseas assets of
these banks(c) System wide market share for credit card is based on the number of cards issued by respective banks as a % of total issued credit cards in Singapore (includes foreign banks)
32.8%S$63 bnDBS
21.3%
OUB11.5%
Others67.2%
43.1%S$89 bnDBS
31.6%
OUB11.5%
Others56.9%
25.3%600,000 Cards
DBS14.8%
OUB10.5%
Others74.7%
#1 #1
#1
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Extending Investment Banking Leadership in Singapore
Debt UnderwritingDebt Underwriting(a)(a)
IPOIPO(a)(a) Equity UnderwritingEquity Underwriting(a)(a)
59.3%S$2,255 mm
DBS35.9%
OUB23.4%
Others40.7% 58.4%
S$3,380 mm
DBS37.2%
OUB21.2%
Others41.6%
39.3%S$6,587 mm
DBS33.7%
OUB5.6%
Others60.7%
Source: Bondware, 1998 – 2000(a) Market share is based on share of respective banks of the total capital issuance in Singapore (including foreign banks)
#1 #1
#1
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Widening the Regional Footprint
Total Loans: S$69,980 mm Total Loans: S$99,721 mm
Singapore58.4%
Hong Kong31.4%
Thailand3.9%
Others5.4%
Malaysia0.8% Others
6.8%
Singapore63.1%
Hong Kong23.9%
Thailand2.8%
Malaysia3.5%
(a) Assuming S$1 = HK$4.33 – Proforma 2000
DBS + DaoDBS + Dao HengHeng BankBank(a)(a) DBS + DaoDBS + Dao HengHeng Bank + OUBBank + OUB
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263337
57
8690
111121124124
226
HSBC Kookmin+ H&CB
NAB CBA DBS+ Dao Heng
+ OUB
Westpac ANZ Stanchart UOB OCBC OUB
Widening the Regional Footprint
(US$ bn)
(a) Asia Pacific assets onlySource: Annual reports 2000, Interim Reports 2000Note: Excludes Chinese banks
(a) (a) (a) (a) (a) (a)
UK Korea Australia Australia Singapore Australia Australia UK Singapore Singapore Singapore
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Broadening Shareholder Ownership and Increasing Liquidity
Post TransactionPost Transaction
Share Ownership in DBSShare Ownership in DBS
PrePre--TransactionTransaction
Market ImplicationsMarket Implications
Index ImplicationsIndex Implications
MSCI � �
DBS50 � �
STI Index � �
OUBOUBDBSDBS
63%Other
Shareholders
37%Government
Note: Assuming all OUB shares tendered; Fully diluted(a) Source: Bloomberg
75%Other
Shareholders
25%Government
LiquidityLiquidity
LTM Daily Trading ValueLTM Daily Trading Value(a)(a)
DBS S$47.9 mm
OUB S$18.5 mm
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Strategic Rationale
Complete Domestic Leadership and Extend into New Markets
Financial Rationale
Enhance Shareholder Value Through Growth Opportunities and Synergies
Transaction Summary Build Even Greater Strength
Superior Equity Story Manage for Growth and Value
Building an Asian Powerhouse:Strengthening Our Home Base
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Compelling Financial Rationale
� Enhanced operating measures
� Attractive synergy potential
� Enhanced balance sheet
� Bolstered Tier I and Total Capital Ratios
� Disciplined approach to value maximisation of non-core assets
#3
#4
#1
#2
#5
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Enhanced Operating MeasuresDec 2000
Net Interest Margin 2.02% 2.51% 2.34%
Cost Income Ratio 42.5% 40.2% 38.1%
Loan Deposit Ratio 63.2% 62.9% 104.5%
DBSDBS DaoDao HengHengBankBank OUBOUB CombinedCombined
EntityEntity
The pro forma consolidated financial information contained herein is provided for illustrative purposes only. Such information does not purport to represent what the actual results of operations or financial position of DBS or the combined entity would have been had the acquisition been completed as of the relevant date. Nor is such information necessarily indicative of the future results of operations or financial position of DBS or the combined entity.
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Important Realizable Synergies
� Eliminate duplicative expenses
� Reconfigure branch network
� Rationalize IT systems
� Consolidate back office operations
� Improve productivity
� Scale of e-business investment
All Shareholders will Benefit from Sustainable Synergies of Transaction
Note: Full synergies expected to be realized within two years after the completion of the offer
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Synergies Expected to be in Line with Other In-Market Mergers
AcquirorAcquiror TargetTarget Announced Synergies % of Announced Synergies % of Target Operating Cost BaseTarget Operating Cost Base
Source: Company filings, press releases and investor presentations and Securities Data CorporationNote: Announced synergies are not necessarily indicative of actual synergies achieved
37%
36%
23%
29%
49%
CountryCountry
Fortis Generale de Banque Belgium Jun 1998
Credito Italiano Unicredito Italy Apr 1998
UBS SBC Switzerland Dec 1997
Barclays Woolwich UK Aug 2000
Santander BCH Spain Jan 1999
Ann. DateAnn. Date
Range of in-market mergers 23% - 49%
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Bolstering Capital Ratios
Standard & Poors
AgencyAgency RatingRating CommentComment
Moody’s
� A+ Senior ratings reaffirmed
� Removed from CreditwatchNegative
“The acquisition of Overseas Union Bank will solidify DBS’ position as the market leader in Singapore, controlling about one-third of the domestic banking assets…”
“…strong likelihood that additional equity of appropriate quality and quantity will be injected into DBS Bank, aside from the further equity that may be issued under the proposed OUB acquisition.” That would allay the rating company’s concerns about the bank’s capital structure.
� Aa2 Senior ratings reaffirmed “Like most in-market combinations, the acquisition of OUB would be beneficial”
“Moody’s is positive about the long-term synergies and fortification of DBS Bank’s franchise that would result from a successful offer for OUB…”
“Furthermore, the offer which is comprised 88% of shares, will bring DBS Group Holdings a timely infusion of common equity”
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Strategic Rationale
Complete Domestic Leadership and Extend into New Markets
Financial Rationale
Enhance Shareholder Value Through Growth Opportunities and Synergies
Transaction Summary Build Even Greater Strength
Building an Asian Powerhouse:Strengthening Our Home Base
Superior Equity Story Manage for Growth and Value
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Managing for Growth and Value
� Tier 2
� Hybrid Tier 1
� Tier 1 Preference Shares issue
� DBS Land
� Singapore Petroleum
� DBS Tampines Centre
� Hong Kong
� Philippines
� Thailand
DBSDBS OUBOUB
Capital Capital ManagementManagement
NonNon--Core Core Asset Asset
DivestituresDivestitures
Regional Regional DiversificationDiversification
InitiativesInitiatives
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Applying Disciplined Approach to Value Maximization of Non-Core Assets
� We believe a number of OUB’s assets to be non-core and will carefully examine their value to DBS. These include:
� OUE (Market Capitalization(a): S$1.6 billion)
� OUL (Private)
� Hotel properties (Private)
� OUB Insurance (Private)
(a) As at June 22, 2001. Source: Bloomberg
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Managing for ScaleLong Term Asset Growth
Asset GrowthAsset Growth
OUB 39%
OCBC 16%
DBS + Dao Heng
163%
DBS 100%
UOB45%
19961996 20002000
S$55.7 bn
S$55.7 bn
S$51.5 bn
S$33.6 bn
S$45.8 bn
S$111.2 bn
S$146.3 bn
S$59.7 bn
S$46.6 bn
S$66.3 bn
Source: Company reports
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Managing for ReturnsLong Term Return to Shareholders
ROE GrowthROE Growth
OCBC(17)%
UOB(10)%
OUB9%
DBS25%
19961996 20002000
10.3% 12.9%
12.8% 10.7%
10.1% 11.0%
15.6% 14.1%
Source: Company reports
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Restructuring for Value DBS Thai Danu Bank
NPL Ratio 49.0 % 7.4 % (85) %
Branches 95 61 (36) %
Personnel 3,450 1,850 (46) %
Operating Costs 676.9 mm Baht 515.5 mm Baht (24) %
Net Income Margin 0.9 % 2.6 % 189 %
Net Income (347.3) mm Baht 33.0 mm Baht NM
1Q 19991Q 1999 1Q 20011Q 2001 Change %Change %
Source: DBS Bank
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Growing for Value DBS Kwong On Bank
Net Interest Margin 2.79 % 2.95 % 6 %
Customer Loans S$3.6 bn S$4.6 bn 26 %
Customer Deposits S$4.8 bn S$5.7 bn 18 %
NPL Ratio 15.3 % 5.6 % (63) %
Net Profit after Minority S$60.2 mm S$73.7 mm 22 %
Dec 1999Dec 1999(a)(a) Dec 2000Dec 2000 Change %Change %
(a) Consolidated from May 1999Source: DBS
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Integrating for ValueDBS and POSBank
Branches 173 115 (34) %
Deposits S$65.8 bn S$69.1 bn 5 %
Operating Profits(a) S$1.1 bn S$1.6 bn 45 %
19981998 20002000 ChangeChange
Source: DBS prospectus – DBS Bank data 1998 vs. 2000(a) DBS Bank solo earnings. POSB consolidated from May I 1998. Excludes one time gains form sale of DBS Land and other units
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Commitment to Value
Jackson TaiJackson TaiPresident and COOPresident and COO
Philippe Philippe PaillartPaillartCEOCEO
OUBOUBIntegration TeamIntegration Team
Edmund KohManaging Director
Chong Kie CheongFinance Director
Oon Kum LoonManaging Director
Dao Dao HengHeng Bank Bank Integration TeamIntegration Team
Randolph Sullivan(Dao Heng Bank)
Managing Director & Alternate CEO of Dao Heng
Bank
Chan Tak KinManaging Director
Rajan RajuManaging Director
Greg SeowManaging Director
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Deep Integration Teams: Dao Heng
NameName Experience (Years)Experience (Years)
Consumer and Consumer and Enterprise BankingEnterprise Banking
Corporate, Corporate, Investment Banking Investment Banking
and Treasuryand Treasury
Finance, IT and Finance, IT and InfrastructureInfrastructure
William HonTed LingTK ChanR Strickland
S F WongPS Tam
Rajan RajuJennifer LynnDavid FaulknerKendy Wong
23272928
11162620
Dao Dao Heng Heng Personnel Personnel
TotalTotal
Randy Sullivan, CEO DesignateMichael ChanSunny CheungDavid TsuiSteve Wong
2825263426
367 Years
2622
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Deep Integration Teams: OUB
NameName Experience (Years)Experience (Years)
Consumer and Consumer and Enterprise Enterprise BankingBanking
Corporate, Corporate, Investment Investment
Banking and Banking and TreasuryTreasury
Finance, IT and Finance, IT and InfrastructureInfrastructure
Greg Seow
Edmund Koh
Hong Tuck Kun
Craig Townend
Oon Kum Loon
Seck Wai Kwong
Wong Ban Suan
Chong Kie Cheong
Tom Vainius
Chua Bee Choo
Andy Chan
22
17
26
33
27
21
21
30
21
26
21
TotalTotal 265 Years
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Best Positioned to Create Value
� Unparalleled record in Singapore
� Experienced management team
� Sophisticated user of capital management
� Existing infrastructure
� Investments in technology
� Renewed focus on cost management
32
Strategic Rationale
Complete Domestic Leadership and Extend into New Markets
Financial Rationale
Enhance Shareholder Value Through Growth Opportunities and Synergies
Transaction Summary Build Even Greater Strength
Superior Equity Story Manage for Growth and Value
Building an Asian Powerhouse:Strengthening Our Home Base