8 DBS Annual Report 2008 STAYING THE COURSE IN ASIA Letter to Shareholders

“ The market landscape has changed drastically and we want to do our best to stand by our customers during this diffi cult period. DBS pledges to stand by our loyal customers, in particular, those who have used DBS as their primary banker, in good times and bad.”

2008 was a watershed year; one steepest drop since 1931. In all, STRENGTH IN THE FACE marked by unprecedented change USD 7 trillion has been wiped off the OF ADVERSITY which has altered the global fi nancial world’s stock markets. In spite of the economic turbulence and and economic landscape. While markets record-setting market volatility, DBS showed resilience in the fi rst half, The implosion of Wall Street had achieved earnings of SGD 2.06 billion by September, the credit market far-reaching effects; spreading slower excluding one-time items, 17% below dislocations which emerged in 2007 growth to the rest of the developed the previous year. had ballooned into Wall Street’s biggest world and all the way to Asia. From crisis since the Great Depression. Britain to China, national governments Full-year net interest income increased are pump-priming their economies to 5% to SGD 4.3 billion. Customer loans In the United States, the severity of jumpstart growth. rose 17% to SGD 126.5 billion as the credit crunch led to the demise of DBS continued to be supportive of once-venerable investment , all and Hong Kong – DBS’ two customers’ fi nancing needs during of which have either converted to largest markets – are in recession. In the year. holding companies or folded into 2008, Singapore’s benchmark Straits commercial banks. The collapse of Times Index is down 49%, the biggest Net fee income declined primarily Lehman Brothers, a 158-year old blue annual fall in its 42-year history. Hong as a consequence of a slowdown in chip fi rm, was the largest bankruptcy in Kong’s Hang Seng Index also dropped markets-related activities. US history. In 2008, the Dow Jones 48% in 2008, its worst performance Industrial Index plunged 34%, its since 1974. DBS Annual Report 2008 9

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1 CEO Richard Stanley addressing staff in DBS Hong Kong

The cost-to-income ratio was 43%, As a bank that lives and breathes Asia, • In China, where DBS has been broadly in line with that in 2007. DBS is committed to better serve our operating for the last 15 years, Costs continue to be closely managed. customers in this region. While some we are committed to offering a fi nancial institutions are scaling back, comprehensive suite of services to While the ratio of non-performing loans DBS continues to invest in expanding better serve the needs of corporate rose from 1.1% in 2007 to 1.5%, our footprint across key markets in Asia. and individual customers. In allowance coverage remains high at November, DBS Bank (China) 114%, putting DBS in a strong position • Greater China is an integral part of offi cially opened a branch in Tianjin. to weather asset quality risks ahead. DBS’ ambition to become a leading In addition, we launched our fi rst bank in Asia. Last year, we reinforced sub-branch, which includes a DBS Credit costs are expected to rise in 2009. our Greater China strategy by Treasures priority banking centre, DBS continues to vigilantly monitor strengthening our presence in Taiwan, in Beijing. Today, DBS China has credit trends in our loan portfolio. the fourth-largest economy in Asia seven branches in Beijing, Shanghai, Careful management of credit, market ex-Japan. With the acquisition of Guangzhou, Shenzhen, Suzhou, and operational risks has maintained the the “good bank assets” of Bowa Tianjin and Nanning; and six sub- strength of the balance sheet. Commercial Bank, completed in May, branches in Beijing, Shanghai, DBS now has 40 branches across Suzhou and Guangzhou. RESILIENT IN ASIA Taiwan serving small medium While Asia is not immune from the enterprises (SMEs) and mass affl uent • DBS has been in a high-growth phase fi nancial crisis, the region remains customers. We intend to fully leverage in Indonesia, and is investing in staff, resilient. In recent years, the centre our extensive footprint in Hong Kong, branches and products to meet the of economic power has been shifting and our growing presence in China, needs of corporations and consumers. towards Asia, and market expectations to intermediate the trade and Today, DBS Indonesia has 37 branches are that economies in Asia ex-Japan will investment fl ows between Taiwan, and sub-branches in 11 major cities continue to outperform those in the rest Hong Kong and China. in Indonesia, half of them opened of the world. in 2008. 10 DBS Annual Report 2008 STAYING THE COURSE IN ASIA

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• In addition to our two branches in 2 DBS China continues to Delhi and Mumbai, the Reserve expand its footprint in China, serving customers through its has given DBS Bank comprehensive suite of India approval to set up eight new fi nancial services branches in Bangalore, Chennai, 3 We strengthened our presence in Taiwan through Kolkata, Moradabad, Nasik, Pune, the acquisition of the “good Salem and Surat. Six of these bank assets” of Bowa Commercial Bank branches have been opened, and the 3 remaining two are expected to be ready by March 2009. This will increase DBS India’s presence to a total of 10 branches in key cities across the country. services. IB Asia’s combination of Shariah (AIIMAN). AIIMAN, which is 51% owned expertise, banking capabilities, and twin by DBSAM, will offer Shariah investment • In March 2008, DBS received a licence networks of clients in Asia and the management activities at a time from the State Bank of Vietnam to set Middle East, has enabled it to play a when the appeal of Islamic products up a representative offi ce in Hanoi. prominent role in the USD 400 billion has widened. This is the fi rst of many steps towards Islamic banking market. building a business in Indo-China, STANDING BY OUR CUSTOMERS an area of interest to our customers In its inaugural year of business, The market landscape has changed from Singapore, Hong Kong and IB Asia closed over 20 signifi cant drastically and we want to do our best elsewhere in Asia. cross-border capital markets transactions to stand by our customers during this worth more than half a billion USD. It diffi cult period. DBS pledges to stand by DBS’ involvement in global Islamic has also set up a representative offi ce in our loyal customers, in particular, those fi nance, launched with the formation Bahrain, and has turned profi table. who have used DBS as their primary of The Islamic Bank of Asia (IB Asia), banker, in good times and bad. is progressing well. In November, DBS Asset Management (DBSAM) and Hwang-DBS Malaysia In October, to thank customers for their IB Asia was set up in May 2007 to launched a global Islamic investment loyalty and support through the years, provide wholesale commercial banking, management entity called Asian Islamic POSB created “50+ Tuesdays” at all 49 corporate fi nance and capital markets Investment Management Sdn Bhd POSB branches. This initiative celebrates DBS Annual Report 2008 11

4 DBS Indonesia opened a total of 18 branches and sub-branches in 2008 4 5 The Islamic Bank of Asia progressed well in its fi rst 5 year of business, closing cross-border deals worth more than half a billion USD 6 DBS set up a representative offi ce in Hanoi, Vietnam, the fi rst of many steps towards building a business in Indo-China

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and rewards customers who are age Furthermore, we continue to stand by Drydocks, Khazanah and YTL to 50 and above by offering them a our large corporate customers, using our the Singapore dollar market…and unique banking experience and balance sheet to provide fi nancing for instilled confi dence in the highly customised products. key projects. volatile market”.

DBS is also helping to ease the burden In 2008, despite the meltdown in While DBS has a robust balance sheet of cash-strapped home owners, by fi nancial markets, Singapore had a characterised by strong liquidity, capital giving them the option of paying record year in syndicated loans, with adequacy ratios and asset quality, interest only on their mortgage for volumes doubling from the previous we embarked on two capital-raising a period of up to 18 months. year. DBS was involved in four out of exercises last year. As a result, fi ve high-profi le transactions, including DBS is able to further entrench our In November, DBS launched the World fi nancing Singapore’s two integrated market position in key Asian markets, Business Card, a premium credit card for resorts and a gamut of real estate, better support our customers, and SME owners and business leaders. DBS power, technology and shipping deals. confi dently weather the economic is also the fi rst in the industry to offer a In naming DBS as “Singapore Loan uncertainties ahead. banking package specially tailored to House of the Year”, IFR Asia said the social enterprises in Singapore. bank “greatly contributed to the Underlining the confi dence investors market’s growth by attracting non- have in DBS, our SGD 1.5 billion Hybrid Singaporean entities such as Dubai Tier 1 issue launched in May, was 12 DBS Annual Report 2008 STAYING THE COURSE IN ASIA

“ DBS is well-placed to face the challenges ahead; our balance sheet is strong and given the can-do spirit of our people, I know that we will stay the course in Asia and emerge from this economic crisis, fi tter and stronger.”

oversubscribed within six hours and GIVING BACK TO THE COMMUNITY fondly known as the ”People’s Bank”, triple the original book size. Not only DBS was formed in 1968 as a is part of the fabric of Singapore as it did the transaction set new benchmarks development bank, and over the years, recognises everyday individuals and for the Singapore debt market, it also we have grown into a full-fl edged organisations that have consistently ushered in a slew of billion-dollar bank universal bank. We proudly celebrated gone beyond the call of duty to help capital raisings. Recognising the our 40th anniversary last year by others enjoy a sporting lifestyle and signifi cance of this transaction, IFR Asia recognising our role in the community grow through sports. named it “Singapore Capital Markets and supporting children and learning, Deal of the Year”. as we believe they represent the future ACKNOWLEDGEMENTS of Asia. DBS indicated during the rights issue In December, DBS launched a SGD that we would pay the same absolute 4 billion one-for-two rights issue. The The bank actively encourages staff cash dividend for the fourth quarter as proactive capital-raising addresses to give of their time and effort to make market expectations for banks to have a difference in the lives of children higher core capital levels. It also provides in Asia. As a result, in 2008, DBS DBS with the fl exibility to seize growth employees touched 20,000 young lives opportunities and strengthen our in Asia through our community efforts. franchise. The rights issue was well- received by investors globally, and was In October, POSB, together with 118.8% subscribed. the Singapore Sports Council, launched the POSB Everyday Champions Award. This award demonstrates how POSB,

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we would have done had there not I also welcome Bart Broadman and has to take a leave of absence from been a rights issue. Accordingly, Euleen Goh, who joined the DBS Boards, the bank to undergo treatment. While with the rights shares having been in December. Both Bart and Euleen are he is away, I will take on a more active issued on 30 January 2009, the Board is highly respected for their fi nancial management oversight role, and my recommending a one-tier tax-exempt acumen and experience, and we will colleagues and I look forward to his dividend of 14 cents per share for greatly benefi t from their advice as recovery and return to work. the fourth quarter over the enlarged the bank navigates through these share base. challenging times. 2009 will be a diffi cult year, but I am quietly confi dent about the future in I would like to express my gratitude Crises can make or break organisations. spite of the problems plaguing the to my fellow board members for I am proud to say that under the fi nancial sector worldwide. Banks in Asia their wise counsel and invaluable leadership of Richard Stanley, who are not affected to the same extent and contributions throughout the year. joined DBS as Chief Executive Offi cer in I believe that there will be opportunities Special thanks goes to Goh Geok Ling, May, the bank stepped up to the plate in adversity. N R Narayana Murthy, Frank Wong and and faced the many challenges of 2008. Peter Ong, who stepped down as board DBS is well-placed to face the challenges directors last year. We are grateful for In January 2009, we were all saddened ahead; our balance sheet is strong and their insights and contributions to and shocked when Richard was given the can-do spirit of our people, the bank. diagnosed with leukemia. His form I know that we will stay the course in of leukemia is treatable and Richard Asia and emerge from this economic crisis, fi tter and stronger.

Koh Boon Hwee Chairman, DBS Group Holdings

7 We celebrated our 40th anniversary across the region by saluting the passion and creativity of our staff