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Building an Asian Transaction Banking Franchise
Tom McCabe Global Head, GTS
19 March 2012
2 2
Financial Performance: Broad based revenue growth & increased profitability.
Market opportunity: Participating in large & rapidly growing profit pools.
New Products capturing large, high value, revenues streams with a strong element of annuity earnings.
Sustainability: Reducing risks through product structuring, customer due diligence & portfolio management.
Investment in new capabilities is creating revenue opportunities across Asia.
Executive Summary
2
3 3 3
GTS: Strong Revenue Growth & Operating Leverage
3
Source: 2011 Financials
+46%
+24% +66%
-16%
Revenue
740M
344M
Expenses
426M 396M
657M
Profit before allowance
39%
Cost to income
1.08B
47%
2011
2010 28%
34%
9%
81%
Ex SG&HK
Diversified revenues across Asia; higher income growth from ex-SG & HK
Ex SG&HK
% of GTS Income Income Growth Rate
4 4
GTS: 7 Consecutive Quarters of Growth
4
165
318 Income (S$m)
(S$b)
Trade
Cash
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11
Deposits
Loans 14
52
20
65
45
81
Source: 2011 Financials
Earnings Momentum Across All Markets and Products
Strong customer deposit and loan growth
5 5 5
GTS growing contribution to institutional banking and Bank results
5
Source : 2011 Financials
Other Businesses
Institutional Bkg (excl
GTS)
GTS
2010 2011
$7.1b $7.6b
9
9
73
Revenues Profit before allowance
14.2%
2010 2011
$4.1b
42.2%
48.2%
$4.3b
73
9.6%
37.8%
47.0%
15.2%
38.4%
47.5%
50.3%
39.2%
10.5%
6
2011
2012-2013
Our Journey towards becoming a leading Regional GTS Bank
• Assessment of Capabilities & Gaps
• Strategy Development
• Future Focused Organization
• Key Product Priorities
• Deploy Technology Investments
• Resource allocation to high ROE
Revenue Pools
• 10,000+ New Sales Calls
• Alignment with RM Organization
• Commodity Trade Finance Team
• Focus on Materiality
• Talent Recruitment/Development
New Product Launches
- Suite of RMB Services
- Supply Chain
- Sub Acct Structure, (Cash Mgt)
- Bulk Payments
- USD Mini Max Acct
- e-Advising
- AR Purchasing
- Distributor Financing
Geographic Expansion
Regional Sales Team
Expanded FI Business
ERP Systems Capability
Trade Asset Distribution Desk
Performance Mgt Tools
Talent Development
2010 IDEAL 3.0 – Redefining Internet Banking
New Products
- Interest Reallocation Structures
- Pan Asia Sweeping Capabilities
- Bundled Product Sets
- Expanded Payment Capabilities
Commercialization of new technology
- STP, Scale, Capacity
Decision Analytics
Automated Risk Tools
Record Marketing Spend
ROE Balance Sheet Strategies
Deepen Wallet Penetrations
Talent Development
7
Asia Wholesale Banking Revenue Pools by Product
Source: McKinsey Global Banking Pools
2
Post Risk Revenues; USD Bn1
1 At constant 2010 exchange rates 2 Capital Markets and Investment Banking
CAGR, %
12
12
11
12
8 8
Fundamentals driving Asia's Trade Growth
4
8
12
16
20
24
Jan-0
1
Jan-0
2
Jan-0
3
Jan-0
4
Jan-0
5
Jan-0
6
Jan-0
7
Jan-0
8
Jan-0
9
Jan-1
0
Jan-1
1
Jan-1
2
% share of total exports, 3mma
To China
To USA
Asia 8 – Domestic Exports to China and US Asia - Exports to China & USA
50 100 150 200 250 300 350 400 450 500 550 600 650 700 750
01 02 03 04 05 06 07 08 09 10 11 12
US$ terms, Jan02=100, seas adj, DX for HK, SG
Asia
Asia X
Real Global Consumption
96
100
104
108
112
116
120
124
128
132
136
Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12
3Q08=100, seas adj
Asia-10
US, EU17 JP
The growth that came "from nowhere"
Consumption Growth Since 3Q08
258.24
40.11 49.79
5.92 4.37
-25
0
25
50
75
100
125
150
175
200
225
250
275
Asia-10 Asia-10 (ex-CH, IN, ID)
USA Japan EU-17
USD bn, 3Q08 - 3Q10, seas adj
Source: DBS Research
9 9 9
Country
2010 GDP
(USD Bn)
2010 ARP Turnover (USD Bn)
2010 ARP Turnover as a % of GDP
(%)
Hong Kong 225 19.1 8.5
China 5,878 205.4 3.5
Taiwan 431 89.0 20.7
South Korea 1,007 6.7 0.7
Japan 5,459 130.8 2.4
Singapore 222 7.7 3.5
Indonesia (1) 707 - -
Thailand 319 2.8 0.9
Malaysia 238 1.4 0.6
India 1,538 3.7 0.3
Source: CIA World Factbook and FCI (1) Indonesia not included in FCI Research
Opportunity for growth in both mature and emerging markets.
Large & Growing Open Account Trade Opportunity
10
10
World 8%
Asia 27%
Core 39%
DBS well positioned to tap into Open Acct Trade Opportunity
10
2010 (US$2,325 bn)
Source : 2007 & 2010 FCI Annual Statistics
Asia 502.0 22%
Europe 1,475.3
63%
Australasia 64.3
3%
Africa 23.6
1% Americas
261.7
11%
2007 (US$1,835 bn)
Asia 246.0 13%
Australasia 47.7
3%
Africa 15.1
1% Americas
211.3
11%
Europe 1,316.0
72%
CAGR
11
Company as Buyer - Payables + Inventory
Purchase
Order
Issued
Goods
Rec’vd
Acquisition
Fixed
Assets
Expansion
CapEx
Goods
Shipped
Paym’t
Made
Request
For
Quote
Inventory/
WIP
Receive
PO
Goods
Arrive Goods
Shipped Paym’t
Rec’vd
Finished
Goods
Ready
Profit
Generation
/ Surplus
Company as Seller - Distribution - Receivables
Doc Prep Shipping Manufacturing Doc Prep Shipping Buyer & Distributor Mgmt
Receivables Management
Doc
Prep LC
Acceptance
Term
Lending
Fxd Asset
Financing
LC
Issuance
Bonds /
Guarantees
Vendor
Financing
FX Fwd
FX Spot
Payment Svc
Cash Mgmt
FX Fwd
FX Spot
Cash /
Credit Card
Collections
Cash Mgmt
Receivables
Securitisation
Fxd Depo
Liab Mgmt
Va
lue
to
DB
S
LC
Confirmations
Bonds / Gtee
LC
Nego
Distributor Financing Financing via Term Loans / Overdraft
Inventory Financing
Pre-Ship Fin Post-Ship Fin
Va
lue
to
Cli
en
t
Improve
Info flow Stretch Payables Shortening
Order cycle
Reduce,
manage
& finance
Inventory
Stocks / Inventory Management
Strengthen
Distribution
Network
Reduce
Collection
Costs and outsource for
increased efficiency
(Channels)
Finance
(incl. Non-
recourse) for
Receivables
(timing and
B/Sheet)
Selling into the Working Capital Cycle
12 12
Managing risk for profitability & sustainability – Trade Finance Products
12
Self-liquidating and short tenors.
Working Capital Loans are the life blood of organization.
Provide more secure sources of repayment & quicker insight to potential risks.
Ownership of underlying goods.
Network of Trade Eco System: Surveyors, International Maritime Bureau, Bonded Warehouses, Insurers, Shippers/Logistic Companies, etc.
DBS’s Governance, Compliance Procedures, Risk Policies, KYC.
Expertise to structure solutions mitigates risk for DBS.
DBS’s depth of staff with trade “DNA” across sales, risk, & operations.
Trade loans carry less risk relative to other bank products
13 13
IDEAL 3.0 – Redefining internet banking…
13
May’12 NORTH ASIA
China, Hong Kong, Taiwan
Jun/ Jul ’12 SOUTH ASIA
Singapore, India, Indonesia
Jul ’12 onwards REGIONAL
Full scale launch events and marketing
activities
General Availability Official Launch
14 14
Marquee Awards
A Leadership Position in Global Transaction Services
14
Best Trade Finance
Bank - Singapore
Best Treasury & Cash
Management Bank,
Foreign in China
Best Cash
Management Bank -
Singapore
Top 5
Cash Management
Bank in Asia
Best MNC/Large Corps
Bank in Treasury &
Working Capital
Singapore, China
and Indonesia
Best Cash
Management Bank
in Singapore
Best Sub-Custodian
Bank in Singapore
Best Trade Finance
Provider - Singapore
15 15
The Asset Triple A Transaction Banking Awards 2012
Leadership across Asia, MNC’s, Large Asia Corporates, SME’s
15
Best Cash
Management Solution
- China
Host to host and
entrustment loan
solution
Best Cash
Management Solution
- Singapore
Bill collections, lockbox
and migration of direct
debit authorizations
Best Trade Finance
Solution - Singapore
Supplier financing
programme
Best
Cash Management
Solution – Indonesia
Payments integration
and workflow
management
Best Bank for
Emerging
Corporates in Asia
Best Trade Finance
Solution in India - Idia
US$60 million pre-
export structured trade
advance facility
Best Structured
Trade Deal - Hong
Kong
US$100 million back-
to-back and front-to-
back trade credit
issuance structure
Best Trade Finance
Solution - Indonesia
US$100 million
financing facility
16 16
Acquiring new customers Delivering high ROE revenues
Future Focus - The Foundation for Sustained Growth
16
Flight to quality – new US & European clients
Increased need for Pan Asia services
Materiality of mid market names
DBS’s strong balance sheet
Willingness to lend
Broad range of RMB trade & cash products
Supply chain & open acct programs
Innovative USD deposit account
Liquidity mgt structures
Ideal 3.0: Redefining internet banking
Multi geographic deals
Higher credit quality names
Larger deals…..less operating costs
Multi product deals: Trade, Cash, & FX
Positive operating leverage
Over 30,000 sales calls per annum
Working capital approach to building solutions
RM team over 1,400 strong
Increased spend on marketing and brand
Creating new product revenues Expanded Sales Capacity Across Asia
17 17 17
Q & A