S&P Affirms AApi Rating on DBS Bank.

MELBOURNE--(BUSINESS WIRE)--Standard & Poor's CreditWire 7/27/98-- Standard & Poor's today affirmed its double-'Api' public information rating on The Development Bank of Singapore Ltd. (DBS Bank) following the announcement of its acquisition of the business undertakings of The Post Office Savings Bank of Singapore and Credit POSB Pte. Ltd. (collectively POSBank) from the Singapore government. The acquisition should strengthen the DBS Bank group's business profile, despite some uncertainty regarding DBS Bank's ability to completely retain POSBank's customer franchise, and the slight weakening in DBS Bank's capitalization.

The acquisition, expected to be completed by Nov. 30, 1998, should reinforce the DBS Bank group's position as a strong price maker in domestic banking through its sheer size and significant representation in key market segments. The enlarged DBS Bank group's assets of Singapore dollar (S$) 93.4 billion (or US$55.6 billion) implies a 32.3% market share of total domestic commercial banking assets, an increase from 22.5%. This dwarfs the 19.8% share of its nearest competitor, Oversea-Chinese Banking Corp. Ltd.

The POSBank franchise rounds out DBS Bank's domestic market position. While generally represented in all market segments, DBS Bank's major strength has been in wholesale and corporate markets-reflecting its historic links with the government and manufacturing sectors. In comparison, POSBank is very strong in consumer and retail banking, a franchise built up mainly through its unique advantage of offering tax-exempt saving deposits.

The increased net cash inflow from DBS Bank's enlarged domestic operations will serve as a platform for its continuing regional expansion strategy. DBS Bank recently acquired stakes in Thai Danu Bank in Thailand and Bank of South-East Asia in the Philippines. A steady and sufficient cash flow from domestic operations, the base franchise, is a common prerequisite for any bank to successfully withstand the initial low profitability period of breaking into new markets.

While Standard & Poor's has some concern about DBS Bank's ability to completely retain POSBank's customer base, it recognizes that DBS Bank has a relatively long lead time (that is, six years) to entrench its POSBank franchise position. DBS Bank intends to pay competitive rates and take other measures to retain POSBank customers. The Singapore government is carrying out a six-year phase out of the tax exemption status of interest paid to POSBank's saving account depositors. This tax exempt status had given POSBank a distinct cost advantage by allowing it to offer lower saving deposit interest rates and, in turn, lower home mortgage rates. DBS Bank intends to phase in higher interest rates for POSBank home mortgage customers over a three-year period from Dec. 31, 1999. Removal of the tax exemption may undermine POSBank's relative competitive position in its key retail consumer niche. In contrast, the post-sale withdrawal of the Singapore government's guarantee on all POSBank deposits is unlikely to lead to depositor dissatisfaction, given the high public confidence in local banks.

DBS Bank's capitalization, as measured on an equity-to-assets basis, should decline post-acquistion to a pro-forma 8.9% from 11.0% at year-end 1997 (DBS Bank's new shareholders' funds is computed based on the bank's 1997 equity level plus the issuance of convertible preference shares less goodwill for the acquisition). The bank's S$1.0 billion rights issue, proposed in early 1998, which would raise pro-forma equity-to-assets to about 10.0%, still is high by international standards, however, Standard & Poor's said.---CreditWire

CONTACT: Terry Chan, Singapore (65) 239-6360

Alison Murray, Melbourne (61) 3-9250-4534

Ernest D Napier, New York (1) 212-208-1556

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